An alliance between CTA and the Rabobank Foundation, the foundation of a large Dutch food and agriculture bank, is helping to extend credit to small-scale producers in Uganda. The partnership is driving adoption rates of an innovative ICT4Ag scheme pioneered by CTA, steering it towards its goal of financial sustainability in the process.
Ugandan maize farmer Lydia Kiwuka had never bought fertiliser before she was selected to receive a loan as part of the Market-led, User-owned ICT4Ag-enabled Information Service (MUIIS) initiative. Although she had been made aware of the potential benefits to crop yields through the MUIIS service, the cost was beyond her means. Nor did she have the money to buy pesticide to combat the army worm pest that ripped through her farm last year.
"Last season I used cow dung and urine to fertilise my maize because I could not afford to buy fertiliser,” she said. “With this loan I have paid off the fertiliser needed for the whole season. I have even bought some preventive pesticide in case the army worm comes back to my farm."
Kiwuka is one of nearly 2,000 small-scale producers who have been able to access valuable inputs for their crops as a result of loans extended as part of the CTA-led initiative to link Ugandan farmers to satellite-based services. Following an agreement between CTA and the Netherlands-based Rabobank Foundation, a loan was made available to farmers during the first agricultural season of 2018, in the form of agricultural input loans to pay for advisory services, seeds, fertiliser and other inputs.
The move has helped to ratchet the MUIIS scheme up to the next level, boosting adoption of the bundled service by farmers and increasing sustainability of the proposition, and with it prospects that the initiative will be able to continue once funding, from the Dutch Ministry of Foreign Affairs through the Geodata for Agriculture and Water (G4AW) Facility of the Netherlands Space Office, has ended.
Input credit for better yields
Targeting maize, soybean, bean and sesame farmers, the innovative MUIIS programme offers a package of weather alerts, farming tips and index-based drought insurance, drawn from satellite data. The aim is to address the current agricultural information gap in Uganda, positioning farmers to increase their yields, build climate resilience and strengthen food security as a result.
In this latest addition to the initiative, loans extended to selected farmers have been made available by the Rabobank Foundation, which is committed to supporting small-scale farmers and their cooperatives in developing countries through (high-risk) credit. The loans – €44 per acre up to a maximum of 5 acres – have been granted to farmers profiled in the MUIIS database who have agreed to sign up for the paid bundle of services. Farmer cooperatives and organisations played an important role in identifying suitable farmers, with interest against market rates and repayments due at the end of July, following the June harvest. The involvement of Rabobank Foundation follows an alliance with the Netherlands Space Office to connect financial services to Geodata projects in the G4AW portfolio. It also fits in the digitisation strategy of the foundation and is part of a growing portfolio of data driven projects.
“The MUIIS approach of using technology and data to help small-scale farmers with a combination of services to increase production and reduce risk is one that we find very interesting,” said Martine Jansen, Programme Manager for Africa at the Rabobank Foundation. “We thought that by providing a loan, we could further support the uptake of the product. We hope that this combined bundle of MUIIS services and input credit will help farmers to increase productivity and access to finance.”
High value farmer profiles
As an immediate consequence of the pilot input loan scheme, MUIIS subscription rates have increased almost tenfold, from 497 in the second season of 2017 to 5,000 in the first season of 2018. Subscriptions are taken out on a per acre basis, and to date 1,822 farmers have signed up. Demand for the credit significantly outstripped supply, and programme managers are confident that the early results from this pilot scheme bode well for the future.
“We have already received a number of promises for extra resources if we can prove that there is demand for the subscriptions,” said Dr Benjamin Kwasi Addom, Programme Manager of MUIIS at CTA. “So this kind of increase in adoption is likely to be critical in attracting more investment, which will help us to move forward until the initiative is financially sustainable. Especially important will be the loan repayment rate by farmers at the end of the season. We are optimistic that the recovery rate will be quite high, due to improved yields, which will mean low risks for financial institutions, providing incentives for local financial institutions to take up the role that Rabobank Foundation is currently playing.
From the outset, a key feature of the MUIIS design has been financial autonomy, once the three-year funding stage ends in February 2019. The strong uptake of the input loans also highlights the value of the information about farmers stored in the MUIIS database as well as the necessity to integrate geodata services with other products-in this case finance – to realise its full potential.
“This kind of farmer data is extremely valuable to banks and financial institutions who want to give credit and loans to small-scale farmers, but who also want to reduce their own risks,” said Dr Addom. “At MUIIS, we have all this information, right down to the GPS coordinates of farmers’ plots, which banks and financial institutions can basically use as a kind of collateral.”
The decision to link the loans to inputs was a strategic one, aimed at encouraging farmers to act on the information delivered in the weekly SMS delivered to farmers’ mobile phones. In some cases, the inputs have been made available in-kind, direct to farmers.
a low-income country, few Ugandan farmers can afford to buy fertiliser and
other inputs that can help to increase yields,” said Carol Kakooza, MUIIS
Coordinator in Uganda. “The MUIIS service is helping to bridge the knowledge
gap about improved crop cultivation, and giving farmers a loan ensures that
they will have money for these inputs. The idea is that they will be able to
pay back the loans with the proceeds from the higher yields they harvest.”