Farmer representation in an evolving agricultural microfinance institution: the Executive Boards in the CECAMs of Madagascar
When a microfinance institution created by the agricultural world develops and institutionalizes, it is quickly faced with the question of diversification of its portfolio towards non-agricultural activities. This portfolio diversification is needed to meet the various financing needs in the rural zones, as well as to limit the risk taken by the MFI. However, it also involves risks: diversification of financial activities leads to diversification in the membership, opening up to non-agricultural socio-professional categories; financing non-agricultural activities often proves more profitable, with faster capital turnover; the capacity to influence merchants, public servants and entrepreneurs is often greater than with farmers; and the balances between the activities and the social groups participating in managing the MFI could be profoundly changed and the agricultural potential could be weakened or even threatened.
The Madagascar CECAMs, created in 1991 by a farmer organization, Association pour le progrès des paysans (FIFATA), to finance agriculture, are facing this problem. The need to make the financing functions autonomous in order to allow for growth of the institution was acknowledged very early on by FIFATA, and in 1994 the CECAMs were formed into financial institutions independent of the parent farmer organization. The institutionalization process engaged in by the CECAMs seeks to reconcile agricultural potential and financial development approaches. However, the network is highly dependent on outside resources, at high cost. To reduce this dependency, an effort has been made to mobilize savings. As rural savings are difficult to mobilize, the network turned to the towns, where the savings capacities are higher. This step (about a dozen urban funds so far) is a risk to the agricultural potential of the network if control passes to non-agricultural socio-professional categories, with economic and financial interests in non-agricultural activities. The elected and salaried managers of the network are aware of this risk and are testing procedures that seek to limit it. FIFATA remains the guarantor of the network’s policy orientation, and network governance is provided by socio-professional councils of administrators.
The CECAMs are organized into regional unions. In each union, the FIFATA directors are entitled to hold three seats out of 15 on the executive board of each union.
The CECAM members are organized into three socio-professional councils:
- Council A is for farmers, with at least 50% of the revenue coming from agricultural activities (including livestock and fisheries).
- Council B is for individuals other than farmers (merchants, craftspeople, public servants, small-scale business owners).
- Council C is for legal entities: groups of farmers in marketing cooperatives, or purchasing cooperatives for agricultural inputs.
Each council elects its representatives to the directing bodies of the CECAMs. Council A has a majority share of representatives in the executive boards.
The chairpersons of the local CECAM management committees and of the
executive boards must be farmers by profession, belonging to Council A.
