Guaranteeing loans taken out by growers (Mali)

Garantie de prêts des producteurs (French)

Description

The loan guarantee allows producers to better manage their production costs when they first begin operating a scheme.

Guaranteeing loans enables producers to access credit. In this practice, IICEM acts as a facilitator, supporting the process through activities ranging from monitoring loan repayment to forwarding applications to banks following validation. Cooperatives and agribusinesses are developed and their activities are monitored by IICEM and its NGO partners in order to re-engage with the banks and repay awarded loans. Subsequently, supply chains are set up on the back of training delivered by marketing specialists and business development agents, which helps connect up the key players (processing companies, merchants, cooperatives, suppliers, credit services). IICEM remains responsible for maintaining this relationship by providing advice on processing (quality), trade (cost calculation) and supply (quality).
The loan guarantee allows producers to better manage their production costs when they first begin operating a scheme. The project acts as guarantor to the bank for the sum of the loan requested by producers.
The producers register their need for a loan to safeguard their crops, detailing the parameters to take into account. The loan application is then forwarded to IICEM and its NGO partners. IICEM analyses the loan application in terms of the irrigated area and the yields involved to ascertain the producer’s capacity to repay the loan and to determine whether the producer can meet the farming costs required to see through the growing season. After analysing the loan application, IICEM writes a letter of recommendation that the producers attach to their application for sending to the bank. The project acts as guarantor to the bank for an equivalent amount that it always keeps available. The bank will not access these funds without prior authorisation. Neither, however, is it obliged to award loans to producers holding a letter of recommendation from the project. Once the loan is granted, the project supervises producers to ensure loan repayments to the bank
are well managed. When loans are not repaid in full, the project provides a detailed report on the crop yield for the season in question to enable producers to take out further loans to compensate for the poor yields of that season. If the bank declines a loan extension (in the case of a default), the project then fulfils its role as guarantor, repaying any shortfall.
Producers declare their loan requirements to safeguard their crops. NGO partners act as intermediaries relaying requests, provide training and carry out monitoring. IICEM analyses loan requests and then draws up a guarantee certificate for the bank’s consideration. The bank assesses the farming organisation’s loan request.

Location

Location: Mopti, Timbuktu, Sikasso, Gao, Mali, Mali

Geo-reference of selected sites
  • n.a.

Initiation date: 2009

Year of termination: n.a.

Type of Approach

Approach aims and enabling environment

Main aims / objectives of the approach
The loan guarantee allows producers to better manage their production costs when they first begin operating a scheme.
This practice enables farming organisations to improve on how they repay their loans and, thereby, increase their creditworthiness with the banks. Besides the IICEM guarantee, projected levels of production serve as an additional guarantee for the bank.
The SLM Approach addressed the following problems: lacking access to credit
Conditions enabling the implementation of the Technology/ ies applied under the Approach
Conditions hindering the implementation of the Technology/ ies applied under the Approach
  • Availability/ access to financial resources and services: lacking access to credit Treatment through the SLM Approach: This practice enables farming organisations to improve on how they repay their loans and, thereby, increase their creditworthiness with the banks. Besides the IICEM guarantee, projected levels of production serve as an additional guarantee for the bank

Participation and roles of stakeholders involved

Stakeholders involved in the Approach and their roles
What stakeholders / implementing bodies were involved in the Approach? Specify stakeholders Describe roles of stakeholders
local land users/ local communities
NGO
private sector
local government
international organization
Involvement of local land users/ local communities in the different phases of the Approach
none
passive
external support
interactive
self-mobilization
initiation/ motivation
planning
implementation
monitoring/ evaluation
Research
Flow chart

Decision-making on the selection of SLM Technology

Decisions were taken by

  • land users alone (self-initiative)
  • mainly land users, supported by SLM specialists
  • all relevant actors, as part of a participatory approach
  • mainly SLM specialists, following consultation with land users
  • SLM specialists alone
  • politicians/ leaders

Decisions were made based on

  • evaluation of well-documented SLM knowledge (evidence-based decision-making)
  • research findings
  • personal experience and opinions (undocumented)

Technical support, capacity building, and knowledge management

The following activities or services have been part of the approach
Capacity building/ training
Training was provided to the following stakeholders
  • land users
  • field staff/ advisers
Form of training
  • on-the-job
  • farmer-to-farmer
  • demonstration areas
  • public meetings
  • courses
Subjects covered

Subsequently, supply chains are set up on the back of training delivered by marketing specialists and business development agents, which helps connect up the key players (processing companies, merchants, cooperatives, suppliers, credit services).

Advisory service
Advisory service was provided
  • on land users' fields
  • at permanent centres
Key elements: processing (quality), trade (cost calculation), supply (quality); IICEM provides advice on processing (quality), trade (cost calculation) and supply (quality).
Advisory service is quite adequate to ensure the continuation of land conservation activities
Institution strengthening
Institutions have been strengthened / established
  • no
  • yes, a little
  • yes, moderately
  • yes, greatly
at the following level
  • local
  • regional
  • national
Describe institution, roles and responsibilities, members, etc.
Type of support
  • financial
  • capacity building/ training
  • equipment
Further details
Monitoring and evaluation
economic / production aspects were regular monitored by project staff through measurements loan repayment aspects were regular monitored by project staff through observations monitor producers benefiting from loan guarantees aspects were regular monitored by project staff through observations There were no changes in the Approach as a result of monitoring and evaluation There were no changes in the Technology as a result of monitoring and evaluation
Research
Research treated the following topics
  • sociology
  • economics / marketing
  • ecology
  • technology

Financing and external material support

Annual budget in USD for the SLM component
  • < 2,000
  • 2,000-10,000
  • 10,000-100,000
  • 100,000-1,000,000
  • > 1,000,000
Precise annual budget: n.a.
The following services or incentives have been provided to land users
  • Financial/ material support provided to land users
  • Subsidies for specific inputs
  • Credit
  • Other incentives or instruments
Financial/ material support provided to land users
Credit

Impact analysis and concluding statements

Impacts of the Approach
No
Yes, little
Yes, moderately
Yes, greatly
Did the Approach help land users to implement and maintain SLM Technologies?

The loan guarantee allows producers to better manage their production costs when they first begin operating a scheme.

Did the Approach empower socially and economically disadvantaged groups?

This practice enables farming organisations to improve on how they repay their loans and, thereby, increase their creditworthiness with the banks.

Did other land users / projects adopt the Approach?

The process of facilitating loan awards is being implemented in the Mopti, Timbuktu, Sikasso and Gao regions. Ongoing since the launch of IICEM in 2009.

Main motivation of land users to implement SLM
  • increased production
  • increased profit(ability), improved cost-benefit-ratio
  • reduced land degradation
  • reduced risk of disasters
  • reduced workload
  • payments/ subsidies
  • rules and regulations (fines)/ enforcement
  • prestige, social pressure/ social cohesion
  • affiliation to movement/ project/ group/ networks
  • environmental consciousness
  • customs and beliefs, morals
  • enhanced SLM knowledge and skills
  • aesthetic improvement
  • conflict mitigation
Sustainability of Approach activities
Can the land users sustain what hat been implemented through the Approach (without external support)?
  • no
  • yes
  • uncertain

Conclusions and lessons learnt

Strengths: land user's view
Strengths: compiler’s or other key resource person’s view
  • When loans are not repaid in full, the project provides a detailed report on the crop yield for the season in question to enable producers to take out further loans to compensate for the poor yields of that season.
  • This practice enables farming organisations to improve on how they repay their loans and, thereby, increase their creditworthiness with the banks. Besides the IICEM guarantee, projected levels of production serve as an additional guarantee for the bank (How to sustain/ enhance this strength: To secure a high level of loan repayment, it is necessary to closely monitor the producers benefiting from loan guarantees)
  • Cooperatives and agribusinesses are developed and their activities are monitored by IICEM and its NGO partners in order to re-engage with the banks and repay awarded loans. Subsequently, supply chains are set up on the back of training delivered by marketing specialists and business development agents, which helps connect up the key players (processing companies, merchants, cooperatives, suppliers, credit services).
Weaknesses/ disadvantages/ risks: land user's viewhow to overcome
Weaknesses/ disadvantages/ risks: compiler’s or other key resource person’s viewhow to overcome

References

Compiler
  • Dieter Nill
Editors
Reviewer
  • Laura Ebneter
Date of documentation: Dec. 15, 2014
Last update: June 22, 2017
Resource persons
Full description in the WOCAT database
Linked SLM data
Documentation was faciliated by
Institution Project
Key references
  • Manual of Good Practices in Small Scale Irrigation in the Sahel. Experiences from Mali. Published by GIZ in 2014.: http://star-www.giz.de/starweb/giz/pub/servlet.starweb
This work is licensed under Creative Commons Attribution-NonCommercial-ShareaAlike 4.0 International