 |
|
|
|
Increasing agricultural productivity is the main objective of a number of projects in West Africa. Access to credit has been considered one way to achieve this objective, as has the provision of inputs and equipment and the introduction of better agricultural technology. Credit lines have been opened for projects or development banks to finance loans. Goods, which are in fact provided on credit in kind, have been determined at project design. Under this system, extension agents, representing the project, sell inputs and equipment on credit to farmers. With few exceptions (such as credit for motorized pumps in the Komadougou Valley, Niger), this approach usually leads to repayment rates of less than 80%, and sometimes as low as 50%. Inevitably, this reduces the level of the project revolving fund for the provision of credit. Furthermore, institutional commitment to continued provision of credit is seldom guaranteed once the project cycle is complete (including the Komadougou project), since banks are not involved in the field extension of credit, but only in the management of the project credit line. In Mali, around the lake zone (SRS 004 ML), the Banque Nationale de Dèveloppement Agricole (BNDA) pulls out of its funding commitment once the rate of unrecovered loans reaches 518. In Burkina Faso (SRS 011 BF), the Caisse Nationale de Crédit Agricole (CNCA) pulled out of its operations in the Central Plateau after making only a timid attempt to establish itself.
During project implementation, priority is given to meeting predetermined targets for input and equipment supply; and the provision of goods to farmers on credit enables project personnel to meet these targets. However, lack of a sustainable credit system is a major hindrance for meeting long term development objectives for IFAD projects. Agricultural development sparked off by the availability of credit will lose momentum once the project ends and credit supplies dry up. Loss of confidence because of failed project credit components, could affect future credit systems, as a result of non-repayment of previous loans and the ineligibility of farmers groups with outstanding debts to obtain new credit. In the case of the M'bour Louga project in Senegal (026 SE), the Société de Développement et de Vulgarisation Agricole (SODEVA) has recovered only 77% of its loans after four years, with 800 farmers groups still indebted and ineligible for credit from a recently established CNCAS branch in their zone.
For
credit to be a viable development tool in a region, project credit components
must be formulated within the context of promoting sustainable rural financial
institutions.
- The objective of establishing sustainable financial systems should override any attempt to quickly provide pre-determined amounts of inputs and equipment. Each loan application should be examined rigorously and independently by a financial institution.
- If investments which are critical to the attainment of project objectives cannot be through a rigorously managed credit (insufficient expected cash flow of the client, unacceptable levels of risk), then other means of financing should be investigated (subsidies, counterpart funding and lease-hire schemes).
Select any of the following related project profiles for background information: 056 GU, 101 BE, 103 ML, 187 CG, 198 GH, SRS-011 BF, SRS-012 GU.
