Tanzania: Small-scale farmers increase productivity through targeted loans (IPS News)

| April 26, 2021

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Two types of loan systems are supporting farmers in Tanzania. Savings and Credit Cooperative Societies are distributing loans to farmers in phases, giving one portion of the loan during the planting season, the second during weeding, and the third in time for harvest. Farmers save in groups based in their village, and can receive a loan up to three times the amount of their savings. MUCOBA Bank is also supporting farmers who are members of farmer groups. The bank transfer loans via mobile money so that farmers don’t have to travel to and from urban centres with large amounts of cash in their pockets. These new loan systems are relieving some of farmers’ financial stress.

Over the past three years, crop productivity has more than doubled in Madaba and Mafinga, Tanzania. This is a result of small-scale farmers receiving small agricultural loans through their mobile phones.

Peter Lulandala is a farmer from Iringa Province in central Tanzania. He explains that before he started receiving loans, he would borrow a large sum of money, usually during planting season. But it was difficult to save the money to use at all stages of the agricultural season. 

He explains: “For most of us, it was extremely difficult to keep part of the money in our houses or on personal bank accounts just to wait for the weeding or harvesting season. As smallholder farmers in the villages, we have many urgent things that always require cash. For example, it will be very difficult to see my children go to bed for the second day in a row without food and yet I have cash under my pillow or in my personal account.”

A new lending system is helping him and other farmers in similar situations. This new system requires farmers to join a group and save some money with a designated financial institution before borrowing up to three times their savings.

The new loan system was introduced by the Alliance for a Green Revolution in Africa in collaboration with the “Small entrepreneurs loan facility” project to help small-scale farmers access agricultural finance, and to help them use the money for the intended purpose. Khassim Masengo is the manager of Mahanje Savings and Credit Co-operative Society (SACCOS) in the Madaba district, which distributes loans in this area.

Small-scale farmers are grouped by their village. The groups are then expected to save money through specific financial institutions before they are allowed to borrow an amount. But when they borrow, they can receive a loan three times that of their savings. Loans can be guaranteed by two signatures from fellow group members. Also, the success of this lending system is based on the fact that loans are made available to farmers in phases. 

Mr. Masengo explains: “We disburse it in three phases so that the farmers can only access what they need during the planting season. Then the second disbursement can only be released at the right time for weeding and top-dressing, and finally the last payment is for harvesting and post-harvest handling.”

Mr. Lulandala has benefited from this system, as have 2,847 members of the Mahanje savings groups, including nearly 900 women. These farmers have become producers of maize and beans in the last three years, and are able to export these crops to neighbouring villages.

SACCOS has since been converted into a fully-fledged bank registered by the Central Bank of Tanzania, and is offering credit and savings services specifically for farmers from the eight target villages.

Another option is MUCOBA Bank, which covers a larger area and targets small-scale farmers in distant areas without good infrastructural access to urban centres. It’s a community bank headquartered in Mafinga town in central Tanzania and supports farmers in groups of 10 to 50. It currently supports about 50 farmer groups.

Philipo Raymond is the general manager of MUCOBA bank. He told IPS: “Our bank has agents who are also our agricultural extension officers on the ground whom we use to register farmers through farmer groups, then send us information via internet.”

Qualifying farmers are then given their money through mobile phones, and once they harvest, they can repay their loans through the same digital channel.

Emanik Mgwiranga is the chair of the Nguvu Kazi Itengulinyi farmers group from Itengulinyi village, 44 kilometres from the nearest town, Mafinga. He told IPS that using mobile money to receive the loans makes it easier for farmers, as they do not have to travel to town and back home, which can be a risky venture when carrying cash in their pockets.

With both institutions, farmers have been able to borrow as little as 200,000 shillings ($86 US) or as much as 15 million shillings ($6,440 US).

With seasonal failure or when market prices for produce are low, the Mahanje SACCOS has offered a safety net. They have introduced indigenous poultry farming for additional income, which is useful in harder times.

This story is based on an article written by Isaiah Esipisu and published by the Inter Press Service, on March 31, 2021, titled “Tanzania: Farming-Specific Loans Help Tanzania’s Smallholders Increase Productivity.” To read the full story, go to: https://www.ipsnews.net/2021/03/farming-specific-loans-help-tanzanias-smallholders-increase-productivity/

Photo: A farmer sifting harvested maize in Tanzania, 2020.