Financing Rural Credit: Experiences with Farmers in East & Southern Africa

Small financial loans (credit schemes) can be strategic to help African subsistence farmers to develop their farms and in fostering new rural micro-enterprises. Such credit can be provided and serviced by NGOs (Non-Government Organisations – often charitable). Concomitant training in financial management and entrepreneurship can be helpful. Drawing on participant observer research and experience in Southern and East Africa, the authors propose that ultimately – to be sustainable - responsibility for such financial provision must be taken by farmers themselves, both individually and communally. Initial help from outsiders (such as charitable NGOs) may be crucial in catalysing this provision and in setting up procedures for its prudent and transparent management. However, ongoing help should be confined to training in financial management and entrepreneurship, leaving farmers themselves to organise and take responsibility for their funds, interacting with the banks, or with traditional societies such as stokvels where appropriate. Evidence is provided from the experience of ACAT in South Africa over the past 33 years, of a hugely beneficial strategic switch from expensively servicing and financially monitoring Savings Clubs to encouraging their formation and management independently by farmers. Lessons are drawn from and for work in East Africa. Their application is the objective of this Paper.