June 7, 2016

Strengthening trust in the Rwandan banking sector

The KABKM, a farmers’ cooperative located in the Western province of Rwanda, is one of 100 cooperatives supported by SPARK’s Cooperative Support Program (CSP). The cooperative has grown in strength and despite never having taken a bank loan before, the group has been extremely successful paying back their first installments of outstanding credit. The members are more confident with their business finances and have even directly reimbursed their last two loan installments to the bank because they are ahead in their financial planning. ‘Before SPARK linked us with lending institutions, we thought it was not typical for farmers to take a loan and were extremely nervous about working with the banks,’ said Théogène, the former president of KABKM.

Since its creation in 2010, KABKM had never received a financial loans. This was mainly due to lack of awareness of loan products offered from financial institutions and a low trust in the banking institutions in Rwanda. To overcome farmers’ perceptions, the CSP assisted KABKM to participate to a finance fair in 2014 which was organized by Agri-Pro Focus. Through this fair the cooperative was introduced to UMUTANGUHA Finance Ltd for the first time. KABKM members also participated in trainings on access to finance and financial literacy delivered by SPARK, after which saving habits were strengthened among cooperative members. The cooperative deiced to start a loan application procedure and in 2015 UMUTANGUHA Finance Ltd issued KABKM a loan which was used to invest in the production of beans. The loan of RWF 5,000,000 (around 6,500 USD) was successfully paid back ahead of time.

Besides the linkage event and trainings, KABKM received long-distance coaching services administered by SPARK Coach assigned to this cooperative whose assistance has enabled them to meet loan requirements and respect the repayment schedule. Aside from assisting the cooperative SPARK also, in partnership with ICCO-Terrafina, facilitated UMUTANGUHA Finance Ltd to develop financial loan products specific for farmers’ cooperatives and assess them using a newly developed tool: CAM (Cooperative Assessment Matrix).

Both sides, the cooperative and the MFI, appreciate the work done by SPARK in facilitating financing, capital accumulation and stronger business linkages. The current president of KABKM sees the benefits of this loan to include, ‘increased revenues through increases in quantity and quality of production, improved relations with the MFI and farmer openness to loan merits.’

Viateur, the Micro Finance Loan manager says ‘We are pleased to gain well prepared clients and we have started to use the received tools and skills to treat other farmers not enrolled in CSP program,’ With this positive experience, KABKM is planning to apply for an increased loan amount to fund its farming activities and counts again on SPARK assistance, while members have started to acquire their own individual loans.

The Cooperative, which collects beans produced by members and neighboring non-member farmers for collective marketing, has now significantly reduced their dependency on speculators. The members hope in the future to ‘be recognized by the end market and public and private partners as the voice of beans producers in their district and as a major channel for production as well,’ said Jane, KABKM president.

Currently the cooperative is producing, processing and supplying 60 tons of beans per year with an annual income of 13, 000,000 Rwandan Francs and this is due to increase with the upcoming years as they plan to expand their contracts and produce for specific segments from local and regional market.