The Rural Outreach & Innovation Action Group of the European Microfinance Platform (e-MFP) met today as part of a full day of Action Group meetings at European Microfinance Week, which is being hosted in Luxembourg by e-MFP, a 130-member NGO. Michael Tarazi, a senior financial sector specialist at CGAP (Consultative Group to Assist the Poor) argued against pushing lending products on new rural clients, instead proposing a multi-stage approach. For example, farmers can be offered mobile phones for free, with the promise of receiving information such as crop management suggestions via SMS (text message). Then crop buyers can purchase access to the farmers’ phones, such as to request the preparation of a wholesale load of crops from a group of the farmers at a given price. This can increase the income of the farmers, putting them in a better position to repay future loans for improvements to their processes. As Mr Tarazi put it, “Finance comes at the end; first you develop the digital ecosystem with other valued services such as information.”
Arguing for spending the time to observe clients and talk with them as they use services designed by outsiders, Mr Tarazi cited the example of a user of Kenyan mobile money service M-Pesa who used his phone to repay his loans, but saved no other money in the M-Pesa account. His reason was that he lived in a rural area with few options for spending cash, whereas money in an M-Pesa account could be spent on many things – and requested by relatives.
Joost de la Rive Box, the Secretary of the Board of Directors of the Netherlands’ Nedworc Foundation, argued that rural finance solutions are context sensitive and require time to get buy-in from the stakeholders. While many lenders have figured out that a bullet payment at harvest time works better for farmers than weekly or monthly repayments, Mr de la Rive Box argues that the buyers of the crops need financing too, in order for farmers to be paid promptly.
Mr de la Rive Box also cited several needs, including model training materials in multiple languages and donor money for capacity building of producer organizations.
In response to a question from the group, Mr de la Rive Box cited the challenges between spouses that can derail loans. He cited a trend of men taking out loans for agricultural efforts but leaving their wives to repay the loans from their trading work. As a result, some lenders ask both spouses to sign loan documents, but the women sometimes refuse because they don’t want to be stuck with the debt.
This post is one of a series covering the proceedings of European Microfinance Week, which is taking place in Luxembourg from November 12 to November 14. MicroCapital is reporting on the sessions onsite throughout this time under a sponsorship from e-MFP.
Additional Resources:
European Microfinance Platform (e-MFP) to Host European Microfinance Week, November 12-14, 2014, With On-site Reporting by MicroCapital
More coverage of European Microfinance Week and the Action Groups of the European Microfinance Platform (e-MFP)
Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month?
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