Guinean family farmers are doing business thanks to micro credits
The extension of credit in Guinea appears to be a big success. Agricultural activities are the main source of income in Guinea. That is why Trias and its Guinean partner organizations provide credit specifically for agricultural activities.
© Kristiaan Vanhalle
The enthusiasm of the Guinean population is unstoppable. The amount of members of small rural banks is rapidly increasing: from 2,000 members in 2008 to 25,600 members in 2010. We can speak of an intensive development. The number of credit suppliers has grown from 7 to 37. These 37 rural banks, supported by Trias, are established by the Guinean habitants. The growth of members and country banks indicates a strong need for microfinance in Guinea.
The reason why Trias has started microfinance in Guinea is to stimulate activities which generate income. In this West-African country, agriculture is still the most important activity. That is why about 90% of the credits provided by the country banks, are meant for agriculture. With these credits, farmers can buy sowing seed and agricultural machinery (for example plough harrows and rice peeling machines).
According to literature, microfinance is rather not provided for agricultural activities, because of the high risk of crop failure. However, Trias chooses to do this anyway. "The many agricultural farmers in Guinea need the credits to make ends meet", says Bert Snoek, regional coordinator for Trias in Guinea. "Besides, the risk of crop failure is covered by an emergency found, generated from a higher renting percentage of 4% instead of 3%. We are convinced that the farmers can establish a profitable company with the right guidance and support."
This support and guidance are present during the whole business cycle, from the extension of credit to the product distribution. Partner organization Cafodec provides these credits to the country banks and helps them administer their resources and the credits provided by Trias. Furthermore, Aguidep helps the credit takers to think about their management and compose a business plan. RGTA-DI offers advice and resources for the benefit of agricultural production. Lastly, ATC supports the processing and commercialization of this production.
"Because the different partner organizations are closely involved during the whole business cycle, it is possible to audit the process at several moments", Snoek says. "This allows us to check if credits are effectively being used. Above that, the credit expenditure is made measureable by standard calculations. This is an important criterion for Trias."
A typical example:
A farming family uses one hectare rice field, which produces 1,500 kilogram rice. The family can sell this for 3,000 Guinean Frank (GNF) for one kilogram. They make a total turnover of 4,500,000 GNF.
When the family has been granted a loan of 1,000,000 GNF, they can use a bigger rice field and increase their production with help of partner organization RGTA-DI. Now, one hectare field generates 2,000 kilogram rice and the family has access to two hectares. In total the production will be 4,000 kilogram rice, which they can sell for 3,000 GNF per kilo. This results in a turnover of 12,000,000 GNF.
The turnover has increased with 7,500,000 GNF in comparison with the turnover the family made without credit and guidance. The loan of 1,000,000 GNF and the interest of 240,000 GNF (6 months x 4%) can easily be repaid.
This example proves that, despite the high-risk agricultural activities, a farmer family is able to make profit and repay their loan. Trias Guinea advocates a flexible repayment policy. Interest and repayment terms are dependent on the crop or activity. "We adapt to the needs of the farmers", expresses Bert Snoek. "They've got the possibility to repay their loan for rice after six to seven months and not immediately after harvesting. This makes it possible to sell their harvest when the demand is higher, by which the farmers can ask for higher prices."
The combination of an enthusiastic population and intensive guidance and tailoring by Trias and their partner organizations, seem to be the key to the Guinean success of microfinance.