A low cost financing option that allows farmers to stock grains awaiting competitive market prices while taking cheap loans to keep on farming has been in the offing, and now saving hundreds of farmers from middlemen exploitation, by providing ready market at a time when studies show farmers loose upto 60 percent of their income to poor prices.
Dubbed Mavuno Advance Loan, the two month old credit facility championed by SMEP, a Christian micro finance institution targets grain farmers who are likely to sell their produce at a throw away price to middlemen due to immediate financial needs facing them. According to SMEP field marketing officer Antony Mwaburi, the loan is given to grain farmers who have already or expect to harvest their crop but cannot meet financial obligations facing them. “Many times, grain farmers especially in maize producing Trans Nzoia county have sold two kilogram of maize at Sh25 to middlemen to get some cash to purchase domestic amenities. This is unfair as those middlemen end up selling them the same commodity at Sh 75 later in the year which is 300 percent,'' lamented Mwamburi.
While it complements the services of the National Cereals and Produce Board, the model is even more intense since unlike the NCPB model where farmers have to walk to locate the nearest NCPB silos, SMEP grain banks are located across the country allowing farmers’ convenience. Farmers are encouraged to form social units known as commercial villages. A commercial village is comprised of 200 farmers where each farmer brings their produce to a centralised place in the village before the micro finance agents pick it to the grain bank. SMEP then conducts a market research by comparing market prices for the grain before settling on a competitive one.
Each commercial village has its leaders who form a communication chain with the micro finance regarding prices. According to Mwamburi, this mode of marketing engages the farmer as every communication is channelled to the farmer through their representatives. ''Unlike National Cereal and Produce Board which has silos in specific regions, SMEP's grain bank can be found in all regions in the country. This not only saves farmers the burden of transporting their produce to silos, but also reaches small scale farmers who the board ignore due to their less produce.
Since its inception two months ago, 400 farmers have already subscribed to Mavuno advance loan. Mwamburi explains that a part from bringing farmers together, the initiative also provide farmers a bargaining power hence. For instance, a farmer with an ability to produce 450kg maize and decides to takes Sh. 5000 as a loan in preparation for the next planting season take their grains to a nearby SMEP grain bank where they are asked to join a commercial village of choice. After the produce has been sold by the bank, the loan is deducted plus Sh. 300 which is the equivalent of 6 percent in interest. The remaining amount is then given to the farmer without further deductions.
Interested farmers visit any SMEP office and explain their needs. The microfinance institution then accompanies the farmer to their farm to authenticate the desires. The farmer's contact and photograph is taken before loan procession is done which normally takes 24 hours. Upon harvesting of the grains, the micro finance institution has set up grain banks in its branches where the farmer takes the produce. After identifying a suitable buyer, the institution then sell the grains and hand over the amount to the farmer after deducting the loaned amount plus an interest of six percent. Mwamburi adds that the farmer has liberty to take up to a million shillings and a minimum of Sh.5000 depending on the need and the quantity of his yield.
The model has been music to the ears of grain farmers who have fallen prey to unscrupulous dealers who buy cheaply and sell exploitatively. A research conducted by African Crop Science Society (ACSS) indicates that although National Cereal and Produce Board (NCPB) and millers have provided fair prices, farmers in need of urgent cash to facilitate next production season have always fallen prey to middlemen who give them less than the market value. The research further reveals that although a farmer spends on average Sh1700 to produce 90kg bag of maize, they end up selling the same for as low as Sh1200 which represents 30 percent loss.
Besides guarding the farmer against unscrupulous middlemen and provision of ready market, SMEP which has virtually opened branches in all major towns in Kenya provide workshop and trainings for their clients hence broadening their knowledge in both farming and finance. Many co-operatives and micro- finance institutions have sprouted over agricultural zones.
Many of these have not engaged their clientèle on how to use credit, cheaper repayment schedules and benefits of saving. At the end, a farmer is heavily indebted to those money lending institutions hence courting more problems,'' explains Mwamburi assuring farmers that SMEP view them as a partner rather than a client.