CTA-AFRACACTA-AFRACARevolutionizing finance for agri-chain Revolutionizing finance for agri-chain
14-18 July 201414-18 July 2014Nairobi , KenyaNairobi , Kenya
Successful Models in Agricultural Microfinance Sponsored by the Central Bank of Sudan,
(CBoS).
Prof. Badr El Din A. Ibrahim ,President ,
Microfinance Unit,Central Bank of Sudan
badr_el_dinbadr_el_din@@hotmail.comhotmail.com
..
Contents
Introduction Connecting Farmers to Markets The Agricultural Bank of Sudan
Microfinance Initiative, )ABSUMI( MASARA, Rural Productive Family Project,
North Kordofan Women Associations- Gedarif (Eastern
Sudan) Hibiscus (Karkadi) - Value Chain Model
Lessons to be learned.
Introduction The Sudanese central bank-led, Islamic, gap-filling, full-fledged & nationally-integrated microfinance regulatory & supervisory model is described by the World Bank's Consultative Group to Assist the Poor
(CGAP) as :
”A laboratory for Islamic microfinance delivery where developments could shed light on effective Islamic microfinance
practices". "Trends in Sharia-Compliant Financial Inclusion", Consultative Group to Help the Poor, CGAP, The World Bank,
Focus Note, No. 84, March, 2013“
The IMF Sudan Article of Consultation, Sep. 2013, Stated that: “The microfinance sector is small but growing rapidly…. The results of
this push have been impressive to date… In terms of active clients, Sudan & Bangladesh are easily the global leaders in
Islamic finance microfinance, with Sudan likely to take top spot given current growth rates”
The IDB highly appraised the outcome and the vision of the US$ 60-Millions MF Partnership with the Central Bank of Sudan & declared its replication in
other member countries. (IDB conference on employment, Riyad, March 2014).
The microfinance in Sudan is led by the Microfinance Unit of the Central bank of Sudan (CBOS).
Microfinance Unit/CBO overlook the microfinance sector. The Unit is a national microfinance legislative and regulatory body providing: licensing of MFIs, wholesale lending to MFIs & specialized banks, sharing in MFIs’ capital, HR up-grading & technical & institutional assistance to all institutions working in microfinance sector, coordinate with stakeholders via networking, provision of awareness programs, & design & sponsoring of pioneering national micro agricultural projects, to set a good example for further extensions by banks & MFIs.
This presentation come under this last objective of MFU.
Connecting Farmers to Markets Program
ObjectiveThe Model Achieve financial inclusion of rural farmers to consolidate value chain and to enable small-scale farmers to get out of the cycle of underproduction & poverty, become self-sufficient & produce for surplus.
Create a commercially-viable program (with no donors financial support) for all stakeholders (farmers, banks, insurance Cos., extension and food procurement Cos.)
linking farmers in traditional agricultural rain-fed states to all markets (crop market, crop insurance market, extension services - seed selection, fertilizer usage, harvesting techniques
etc.) .
Stakeholders & Roles
Federal Ministry of Agriculture (FMA) . Together with WFP,
select farmers through association, provide extension training
services to beneficiaries (training on micro-
credit, micro-insurance, management of
personal finances . Jointly with CBoS, provide technical
extension training on seed selection, fertilizer,
crop & water mgt, weeding, harvesting etc.
United Nations World Food
Program (WFP):
Selection of farmers &
provision of food
for farmers.
Banks: Select the ‘credit worthy’
farmers from within WFP list & provide finance
loans disbursement & repayments, &
periodical reporting .
•Shiekan Insurance Company : provide Islamic insurance covering finance, assets & physical disability or death.
The Central Bank of Sudan (CBoS).
Together FMA, & Banks
support assessment of farmers’
credit viability, & provide financial
support for training
services, take coordination leadership to
provide
reporting .
The Strategic Reserve
Corporation of the
government act as a buyer of last resort and the WFP also buys the
surplus product for its own program of
schools & for food for work .
6
)Source: CBOS/MFU(
Connecting Farmers to Markets Program - cont.
First experimentFinancingIn 2011 the target was 100000 rural farmers WFP-targeted farmers (with 5-10 feddans -1.038 acres - each) in nine States via four commercial & MF banks (Agricultural Bank of Sudan, Saving & Social Development Bank, Family Bank & Khartoum Bank).
Finance from Aman (portfolio of a consortium of private sector
banks & Zakat fund) .
Other stakeholders: Shiekan insurance Co. provide micro-insurance + State Ministry of Finance (extension) +CBoS (finance) & WFP (food for work).
Repayment: 86%, in some case repayment is low.
(Source: CBOS/MFU)
Connecting Farmers to Markets Prog.- Cont.
Problems identifiedThe new version, 2013Lower repayment , weak coordination among stakeholders, no special training course for the target group, late finance, small number of agricultural advisers, loose time table of training and financing, weak selection of the target group, no precise determination of av. finance .• Recommendations: add other stakeholders (e.g. FAO to provide improved seeds, tools & training), concentrate on basic agricultural products, independent body for supervision, introduction of livestock & non-agricultural activities, precise reporting & analysis, revision of WFP food coupons to match with the food culture , awareness program.
The creation of a model with no constraints (including lower repayment) are made in 2013 version (No results so far).• In 2013, 16000 rural farmers (135000 in small rural agriculture and 25000 animal raising) were targeted in 7 States . Finance was made via SMDF (SDG 36 mill., app. US$ 6.3 Mill.) (SMDF is a company shared by the CBoS & the MONE & other donors), Khartoum Bank (SDG 20 millions, app. US$ 3.5 mill.), other banks (ABS, Commercial Farmers Bank, Saving & Social Development Bank SDG 18.3 mill, app. US$ 3.2 mill.). • 4 MFIs were used to extend financing. Other stakeholders are the same, but The National Insurance company replaces Shiekan Co. (via the Comprehensive Insurance Document , CID. (Source: CBOS/MFU
Connecting Farmers to Markets Prog. – Cont.
2013 version
StateTargeted clientsTotal
Agri.Livestock
North Darfur20,0005,00025,000
South Darfur20,0005,00025,000
West Darfur20,000zero20,000
Kassala20,0005,00025,000
Gezira10,000zero10,000
Blue Nile15,000zero15,000
North Kordofan30,00010,00040,000
Total 135,00025,000160,000
Connecting Farmers to Markets Program:
The Comprehensive Insurance Document, CID:introduce
“microtakaful in micro-
lending”.
use micro-takaful to enhance
microfinance outreach”, mainly via
portfolios (portfolio of linking small farmers to
market, and other microfinance projects).
build a “dual-functioning microtakaful model” as an insurance and a guarantee for finance
“cover three microtakaful necessary for
microfinance ” (money lend, assets &
Takaful- physical disability or death).
The Agricultural Bank of Sudan Microfinance Initiative, ABSUMI.
ObjectiveThe model Extensions
Started 2010 to cover up to 2013 based on small loans of around US$ 130 to rural farmers given on Murabaha & Musharaka (Islamic partnership) to perform agricultural activities (mainly livestock fattening , small agricultural activities & income generating activities).
A target of 1 million family in 10 years is underway.
The pilot project reached 510 Saving groups (small saving mobilization) composed of more than 9 thousands women members in 90 villages via total lending of more than millions SDG (app. US$. 175,000 equally shared between the CBOS/ABS.• Results of the trail phase shared a zero risk & a 100% repayment rate.• The extension is largely due to the success of the pilot project and the enthusiasm of the stakeholders to expand to fill in the gap between demand and supply of microfinance services in rural areas.
In 2013 cover 40000 families were covered, divided in 5000 clients in 8 localities in Kordofan (western Sudan) & two white Nile State (central Sudan), & Kassala State (eastern Sudan).
)Source: Central ABSUMI Unit.(
MASARA Rural Productive Family Project, North Kordofan.
ObjectiveThe model Impact & challenges
This is a self food-dependency & poverty alleviation project among poor women (760) in North Kordofan State (western Sudan).
It is also a capacity-building in rural small agriculture and microfinance awareness project in rural areas.
Finance agriculture & livestock in addition to training & groupings of women in associations (15).
Started in 2011 with finance from the CBoS/MFU, (3.8 SDG millions, app. US$ 6.7 millions) through Saving & Social Development Bank.
The average finance is 2 millions (App. US$ 3.5 millions & the repayment is 100%.
The project targeting 50000 women in 100 villages in all localities of Kordofan State.
There is positive socio-economic impact (improved heath conditions, education for children ). Challenges: seasonal rain and marketing.
)Source: CBOS/MFU(
Women Associations- Gedarif (Eastern Sudan)
Objective
The model
Help women in groups to be self-sufficient in sorghum & peanuts.
Finance of women groups in agricultural projects via Mudaraba mode of finance (agency profit & loss joint venture/limited partnership) of 1 SDG mill. from the CBOS to the ABS (average loan size SDG 400, app. US$ 70), & the mode of finance is Salam mode of finance (the buyer pays the full negotiated price of the agricultural product that the seller promises to deliver at a future date).
The groups: (100; 25-30 members each) administer & follow -up repayments.
Commercial companies provide storage facilities & agricultural tools.
Islamic Takaful (Islamic micro-insurance) is used
Guarantees : through sheikhs & personal guarantees
Repayment 98%, net profit is 75 thousands, rate of return is (7.5%)
Extension: preparation underway for 4 times extension
)Source: CBOS/MFU(
Hibiscus (Karkadi) - Value Chain Model
ObjectiveThe model
Hibiscus Kerkadi : Due to cultural practices & believes hibiscus is a female crop & monopolized by local & town traders to the farmers’ disadvantages. Hibiscus vale chain provides a good opportunity to empower poor female farmers in rural areas to produce on a large-scale & increase productivity and open export marketing opportunities , as hibiscus is one of the most important crop for the poor, and it resists drought & bests. Moreover, it is labor intensive.
Increase the production & productivity of Hibiscus Kerkadi , & the share of farmers via market study & training, consolidation of production associations, improvement of quality & increase farmers’ income, provision of improved seeds from local market, storage & packing & market links, & provision of finance.
Pilot project of 27 thousands clients in 3 western states (South Kordofan, North Kordofan & South Darfur), including 60 villages.
(Source: CBOS/MFU
Lessons to be learned Rural-based small agricultural microfinance
projects are both successful & wide in term of clients coverage.
Islamic (agricultural-related) modes of finance (slam mode) prove to generate high repayment.
Moreover, other reasons for high repayments are: dedicated & honest productive rural farmers , use of Islamic micro-insurance (Takaful) as a guarantee .
A multiple & coordinated stakeholders providing different services, close supervision & following up via independent body are ingredients for successful projects.
Extensions of these model at different rural locations are required.
