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Credit Outreach Organisations
In the 1980s, the outreach of credit throughout Africa was affected by poor project planning and the lack of identification of constraints in the delivery organisations. This was manifested by over-optimistic expectations of the capabilities of local development banks, or their actual interest in providing multiple small loans. The main problem was in actually reaching the intended target groups and being able to provide adequate support services, at reasonable and sustainable costs. In general this problem is now being addressed by the more realistic inclusion in project designs of intermediate credit distributors or the development of village based savings and credit organisations.
In Botswana (076-BT), although there was considerable interest amongst farmers in credit, the credit component was unilaterally abandoned by the government shortly after the project started, simply because the delivery organisations (the National Bank and the Botswana Co-operative Bank) neither had the staff nor the structure to deal with a large number of small-scale loans. This was despite allowances in the project for the strengthening of these organisations. In Lesotho (055-LE) the credit component accounted for 58% of the project base costs, and was intended for small farm operators, mostly women. However, the credit had been planned without a credit demand survey or a proper appreciation of the social and cultural restrictions which applied locally (e.g. land tenure rights were not available to women, even though 75% of farmers were women). The institution which was identified to deliver the credit (the Lesotho Agricultural Bank) did not have the capacity for the programme, and had no branches outside of the capital. The result was that loans went to the better off farmers, and did not reach the target group.
In Tanzania (SO24-TZ, 242-TZ, 324-TZ) IFAD credit components tended to be directed through existing banks, which were government owned and had little experience of rural micro-finance. Also the banking system was itself subject to major change as a result of restructuring. When it was recognised that this approach was not effective, the credit was re-directed through the Savings and Credit Co-operatives (SACCOs). These locally owned organisations were successful in this regard and have gradually come to prominence as the preferred method for credit delivery.
The Country Portfolio for Ghana found that the credit components of most of the projects reviewed were usually unsatisfactory. This seemed to have arisen from the instability of the groups formed, many of which were only for credit, and the lack of interest and capacity in the banks. The MTE for one project (198-GH) concluded that banks were not suitable partners in credit programme for the poor. In The Gambia, IFAD has been supporting Village Savings and Credit Associations (VISACAs) since the mid 1980s; to date these seem to offer good prospects for sustainability.
- The mandates of traditional banks rarely permit them to be efficient direct suppliers of rural credit, especially for the poorest target groups. Project designers need to define the role for central financing organisations in terms of a conduit through which funds can pass and from which services can be provided.
- Rural credit arrangements need to be sensitive to local traditions and the practicalities of reaching the designated target groups. Where possible project activities should be based on a complete analysis of experience in credit supply, or, where experience is inadequate, should use a pilot approach.
References:
1. Botswana - Arable Lands Development Project, 076-BT% R076BTBE, Interim Evaluation, 1992.
2. Ghana - Country Portfolio Evaluation, CPE96%CESGH96E, IFAD, 1996.
3. Ghana - Smallholder Rehabilitation and Development Programme, 198-GH%R198GHAE, Mid-Term Evaluation, 1990.
4. Lesotho - Agricultural Marketing and Credit Project, 055-LE% R055LECE, Completion Evaluation, 1991.
5. Tanzania - Smallholder Development Project for Marginal Areas, SRS-O24-TZ%S024TZBE, Interim Evaluation, 1998.
6. Tanzania - Smallholder Support Project in Zanzibar, 242-TZ%R242TZBE, Interim Evaluation, 1998.
7. Tanzania - Southern Highlands Extension and Rural Financial Services Project, 324-TZ%R324TZBE, Interim Evaluation, 1998.
