Innovative credit scheme in Burkina Faso
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CTA. 1995. Innovative credit scheme in Burkina Faso. Spore 59. CTA, Wageningen, The Netherlands.
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Since the droughts of earlier decades there have been great changes in Burkina Faso. Many arable and livestock farmers have had to take up other activities. However, since they have had no resources, they have been unable to support themselves and...
Since the droughts of earlier decades there have been great changes in Burkina Faso. Many arable and livestock farmers have had to take up other activities. However, since they have had no resources, they have been unable to support themselves and their families and were therefore not eligible for the usual types of credit. Now a small rural credit scheme employing simple procedures is enabling them to obtain loans. The scheme has been so successful that it has been extended. In North Yatenga the constant droughts have had a profound effect on the organization of the people, their activities and their production methods. As a result many of the farmers in the region are becoming poorer. During these drought years many of them have lost everything: their livestock, savings, implements and tools. For them the limiting factor now is available capital. It therefore appears essential to provide them with credit if the region is to be developed. Several attempts have been made at providing rural credit in the region but most have failed. Because of the low rate of repayment, the Caisse Nationale de Crédit Agricole (CNCA), which instituted the credit schemes, has had to terminate them. Credit for the poor An initiative of producers in Yatenga has led to a new credit scheme. Using the Grameen Bank type of mutual aid credit system which has been so successful in Bangladesh (see box), this scheme has been put set up by Sahel-Action, a Burkina Faso association, with CIRAD assistance in designing the scheme and seeking sources of funds. Currently the scheme is financed by the Caisse Francaise de Développement through the National Fund for Agricultural Cooperation (CNCA). The aim of the new scheme is to devise and institute a new form of credit suited to the economic situation in the region. A group of five people must first constitute a mutual aid fund which acts as collateral to enable its members to be granted loans. The scheme only collects voluntary deposits from its customers, which are entered in individual or community savings books, as well as individual contributions (5% of loan received). These community fund contributions enable funds to be constituted for the beneficiaries and the latter to participate in the banking system capital. In a few years the customers will hold all the capital and will be able to influence the loan policy. The customers themselves choose the activities they wish to finance, e.g. crops, livestock, crafts and small retailing, and loans are granted provided that the activities are expected to be profitable. The methods of repayment depend on the production system. Consequently, there are many weekly instalments but these constitute only about 2% of the overall sum. The guarantee for repayment is assured by the sense of community solidarity, which is very strong in an African context. The fear of social rejection and family disgrace is an incentive which is ultimately more reliable than a material guarantee, and the frequent low repayments are well-suited to the rather modest but regular incomes of the customers. Every month each group member in rotation has the right to a loan. Management is simplified as far as possible in order to reduce operating costs and to enable borrowers to manage the system themselves. A computer programme has been developed to enable the village officials responsible for managing the loans to follow all fund movements easily; they only intervene when a repayment has not been made. Organization of credit is based on the traditional organization of the district and the village and local banks form the partner of these village organizations. A satisfactory experiment Between July 1988 and July 1992 some 6,500 loans of 5,000 to 50,000 CFA francs were granted among over 70 villages. The loans were initially very small but they have gradually increased with the growing confidence resulting from a better understanding of the scheme. The repayment rate has been 98%. Many farmers say that they were only able to survive in the region because of being able to engage in activities which required credit. Without this income they would have had to leave. The women, who are very much affected by the scheme, say that credit enables them to become involved in the economy in the same way as the men. Some women have formed groups to take responsibility for the supply of cereals. Since 1991 the scheme has been extended to three other provinces in Burkina Faso and now similar schemes are being proposed in Niger, Indonesia and Madagascar.
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