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October 14, 2011

Breakout Session: Agricultural Finance: Cultivating Hope

By Emily Riemer

Senior agricultural advisor John Magnay.Magnay at the afternoon’s breakout session.With 65% of the Sub-Saharan African labor force employed in agriculture, which provides 32% of GDP growth, according to the World Bank, the importance of the sector to the economy is clear. Agriculture is recognized as the key to revitalizing Sub-Saharan Africa’s rural regions and significantly reducing the level of poverty. In this breakout session, John Magnay, Opportunity International‘s senior agricultural advisor, explains Opportunity’s innovative and holistic approach to providing small-scale African farmers with comprehensive financial tools that help them grow more crops, increase their family’s income, and feed their villages.

Presentation by John Magnay

There are one billion people in Africa, 75% of whom are involved in agriculture, yet the continent is not capable of feeding 100% of the people.

It’s most important that we finance production because that’s where we can most impact hunger in Africa.

The Rural Model

Input microfinance services such as loans, savings and insurance; infrastructure services such as communications, power, roads and water; and market information systems.

Analysis of Farmers for Agricultural Finance Services

We’ve developed an informed lending system that involves mapping of their land, crops profile and household profile. We do in-house analysis of cost of production. We also profile our clients with household demographics to find out how much labor they can access, and the accurate size of their farm with measuring and GPS mapping.

Farmers may be as much as 50 km. away from their farmer’s group, simply because that was the only way they could access finance. So we offer them a way to access financial services much closer to their farm.

Our loan officers enter farmers’ data with mobile phones when they visit them. And when they visit farmer’s groups, they use it to note who isn’t attending meetings, because those are the farmers they need to be concerned about, and need to set up an immediate meeting with them.

When we gather enough data, we will know exactly how much land and labor clients have. Then we will be able to offer either loans or suggest that farmers rent out their land, depending on the data we’ve gathered.

Short-selling Crops

When farmers cannot pay their bills, they may resort to short-selling their crops. Then the lenders will come and strip their crops, literally, off the plants, and they will have no harvest to sell. These informal financial services can be devastating for farmers.

We offer a combination of extension services with financial tools. We offer best farming practices, including good planting processes, fertilizers, and watering, as well as agricultural loans tailored with the data and client profiles gathered, as mentioned above.

Ideal Lending

  1. Well organized farmers in a group who are receiving training and extension services
  2. GIS mapped and household profiles
  3. Access to input and output market
  4. Household safety nets with weather index insurance and credit insurance
  5. Strategic partnerships to support the work

Financial Literacy Training
Already in urban areas, but we very much need this training in rural areas. Few farmers have seen a formal financial institution before our mobile banking vehicle rolls into their village. We will come to them with screens and projectors to train clients in the rural areas.

Rural Access

Challenges

  1. Cost of access to rural clients–reduced with technology
  2. Identifying strategic partners in alignment with our aims and objectives
  3. Developing commercial farmers with Good Agricultural Practices (GAP) who will also work in rural Trust Groups
  4. Impact of weather, pests and disease
  5. Access to quality, sustainable markets
  6. Inefficiencies in the value chain and the difficulty of helping farmers access markets to sell their products

A bit about John Magnay

John Magnay, Opportunity’s senior agricultural advisor, Africa, has lived and worked in Uganda since 1977. A graduate of agricultural management from Wye College, University of London, he went to Uganda on a Ugandan government project to rebuild dairy farms and industry. After the fall of Idi Amin in 1979, he remained in Uganda starting his own business in the private sector, firstly supporting the agricultural sector with inputs and processing equipment and since the mid ‘80s buying produce for sale to relief agencies and regional trade. In 2001, he was the founder and chairman of Uganda Grain Traders Ltd, a consortium of 16 grain traders that exported the Uganda surplus maize to Zambia. In 2008, he retired from his commercial businesses and began working with Opportunity International, developing smallholder rural finance in Ghana, Rwanda, Uganda, Malawi and Mozambique.