Changing lives through access to finance

Farmers in Nkhotakota can  testify that what founding President Hastings Kamuzu Banda used to say that ‘chuma chili mthaka’ (wealth lies in the ground)  is indeed a reality as they are getting bumper yields from small pieces of land, thanks to new methods of farming and access to finance.

The farmers who have formed clubs have seen living standards in their houses change for the better as they can afford to buy livestock, send children to school and even open shops.

“I was a poor person looking for food on a daily basis but now I am rich. I have a motorcycle, a good house, a shop and I even own cattle. My seven children are all in school and there will never be a day we will sleep on an empty stomach,” says 56-year-old Aubren Nkhoma who comes from Malengachanzi in Nkhotakota.

Nkhoma is just one of the many farmers who are benefiting from Total Land Care and its financial partner Opportunity Bank to help farmers access finance.

He says he used to get low yields year in year out before the arrangement but once he learnt about the opportunity to get farm inputs on loan he joined a club which was attached to   Total Land Care.

“I got inputs totalling K80 000 and this was my turning point. With these inputs, I managed to produce 105 bags of rice and after selling last year I realized K900 000 and this is when my life changed completely. Today, I own a shop, I have motorcycle and some cattle,” says Nkhoma.

Another farmer who is also doing very well because of the programme is Damiano John Phiri who hails from Mtete Village in Traditional Authority (T/A) Mwadzama .

Phiri got farm inputs equivalent K40 000 in 2015 but he managed to harvest 36 bags of maize.

“In 2015, the prices of maize on the market were good and I got K432 000 after selling. This money gave me the impetus to invest more in agriculture and I also open a hawker which helps me get some money on a daily basis,” he says.

With the huge investment he has made into farming his yields have surged to the extent that he has harvested 200 bags of maize, 30 bags of groundnuts and 100 bags of groundnuts during this farming season.

“It is pleasing that the harvests are huge but our worry is lack of markets. This year prices of commodities have gone down to the extent that we cannot sell the produce up until such a time when the prices will pick up,” says Phiri who disclosed that he was compelled to get the loan by her wife.

Selemani Umali’s success story is also worth being told as he has also benefited from the programme and is a proud owner of three goats, a good house and chickens.

Umali has just joined the programme this year but with two bags of fertiliser worth K48 000 he has managed to produce 57 bags of maize, bought iron sheets and built a good house.

“We are highly indebted to TLC and Opportunity Bank because it is not easy to access finances especially in these tough economic times. With such soft loans lives can easily change and other institutions must follow TLC’s example,” says Umali.

How does the system work?

The programme targets experienced and committed farmers practicing conservation agriculture in a way to mitigate risks from low rainfall patterns.

These farmers must be registered under TLC programs and must have been active farmers for the past two years. The programme targets farmers with minimum land holding size ranging from 0.5 ha to 5 ha and must be willing to use inputs (especially fertilisers) for the production of other high value crops in a way to replace tobacco production. Crop diversification is very much encouraged.

According to TLC executive director Zwide Jere, the farmers conduct due diligence among themselves with assistance from area development committees (ADC), village development committee and local leaders to assess if the farmers willing to participate in the exercise have good loan track record.

“These committees assess by checking previous loan records accessed by the farmer under Madef, Finca, village savings and loans, Pass-On programme for any defaults or misconducts prior to qualification for the bank loan. The list is then shared with government extension officers for recommendations supplemented by a letter of consent from the senior local authorities,” says Jere.

He says the qualified farmers are then asked to  form groups of 6-15 members each which act as a social collateral allowing farmers to easily repay the loan, minimise default, share new farming skills and technologies.

“Prior to loan provision, the banks train farmers in group dynamics, business management and financial literacy to ensure farmers understand basic agribusiness principles. Despite the committees conducting due diligence to the clubs, the bank reserve the right to disallow a group from accessing the loan on grounds best known to themselves because they have  the final say,” adds Jere.

He explains that the loans   are in form of packages namely Mbawala, Njati, Mkango and Njovu; as the animal increases in size/power so does the package size. Most farmers prefer Mbawala which allows them access two bags of fertiliser (one urea and 1 NPK, 5 kg maize, 10 kg of Soybeans, one litre of Round-Up) whose total loan value is around K66 000 and they pay back K89 000 in 10 months.

“TLC recommended the provision of loans in form of packages to allow farmers access improved farm inputs for improved productivity for easy loan repayment and increased food reserves. To ensure farmers easily pay out the loans on time, they are linked to reputable buyers and improved markets,” says Jere.

To help farmers access markets, TLC engaged ETG an agri-business company that buys directly from farmers through collective marketing.

Further, to allow farmers have a choice of various market opportunities, TLC engaged with Agricultural Commodity Exchange (ACE) and Auction Holdings Commodity Exchange (AHCX) for farmers to trade through their platforms.

Background to financial inclusion

According to a statement from TLC, as an NGO with focus on capacity building and training of farmers in good and sustainable agricultural practices, TLC often experiences that once trained, the farmers lack the initial capital to implement the improved farming practices, and this often leaves the farmers perpetually on the subsistence level.

“To remedy the issue, TLC has for several years been providing farm inputs to farmers as a hand up in form of soft loans. However, due to the problem of providing limited inputs, farmers were unable to grow from subsistence to commercial despite having such capacity.”

Also the problem of wearing two hats and the fact that financial services lie beyond TLC’s core competencies both scale and sustainability of this exercise have been a challenge.  Also, the lending activities have removed focus and resources away from TLC’s core activities.

Therefore, TLC initiated a cooperation with FMB, FDH and OBM to provide rural lending for TLC smallholder farmers nationwide.  As the disbursement of loans to farmers must take place in farm inputs rather than cash and as this should happen in an efficient and orderly fashion, TLC engaged ETG to distribute the required inputs to the smallholder farmers.

Malawi is a largely agricultural country with 84 per cent of people living in rural areas with about 11 million engaged in smallholder subsistence farming.

Smallholder farmers contribute 75 percent of food consumed and cultivate some 5.3 million hectares of arable land.