ICCO Terrafina Microfinance and Rabobank Foundation work on increasing access to Financial Services in rural areas Ethiopia

29 April, 2015

During a Seminar on SACCOs and Cooperatives, ICCO Terrafina Microfinance, the Rabobank Foundation and the Church of Sweden explain how the project they funded creates access to financial services in the rural Amhara region, Ethiopia.

The seminar took place in Addis Ababa (Ethiopia), on April 29th, 2015.

ICCO Terrafina Microfinance, the Rabobank Foundation and the Church of Sweden have funded a project to strengthen cooperatives in Ethiopia. For the project, which takes place in the Amhara region, the member base of the 6 Unions - both Multi-Purpose Cooperatives (MPCs) and Savings and Credit Co-operatives (SACCOs) - have been trained by ICCO Terrafina Microfinance. After being assessed with a special cooperative assessment tool, the MPCs receive loans from the Union to purchase the produce of the farmers. A high scoring on the tool resulted in a lower interest rate for the marketing unions. In this project, solidarity loans were introduced at SACCO level. These loans do not require collateral. Instead, the members of the group guarantee each other. 

Overall, the project has increased access to finance in the area enormously. And the Unions became more sustainable. However, liquidity to upscale this kind of projects in order to increase access to financial services, remains a challenge. One of the reasons for this is that international investments in the financial sector are not allowed. ICCO Terrafina Microfinance and the Rabobank Foundation have therefore developed a guarantee scheme, whereby a local bank provides a loan to the Union with an international guarantee. By clicking on Ethiopia in the funding figures/activities of Dutch investors (NpM members) in 2013, one notices that guarantees take in the lion's share. 

The outcomes of the project were presented during the seminar and recommendations have been shared with the present donor agencies and the Ethiopian Cooperation Promotion Agency. Mrs. Mariel Mensink of ICCO Terrafina Microfinance indicates that “it is so rewarding to see what we have accomplished with so little means. By organising strong Unions that support farmers’ organisations which coordinate the marketing and sales of the produce, farmers will be better off because they generate higher production and get better prices for their produce.” The government institutions that are involved in transforming the agricultural sector have been actively participating today and have indicated that due to the success of this project, they will incorporate the lessons learned in their policies and strategies.

One farmer, a member of a cooperative in the Amhara region, shared his experience

"In my SACCO group there are four people, all men. Before we raised savings and some could take the loan and some of us had to wait. We decide ourselves on who will get the loan. All of us have taken a loan”.

“When the solidarity loans were introduced, all four of us could take a loan at the same time. The loans were for growing teff and in this new group we were with 18 members. We learned about the solidarity loans because it was promoted by government employees.”

“In my area, 63 new members joined as a result of the introduction of these loans. We don’t think there are negative side effects; if one of us cannot pay back, we can support each other.” However, Mr.  Amogne Mengistu argues that “even though I think the interest rate is very high, we make a profit and we share this as a kind of dividend”.

ICCO Terrafina Microfinance is happy with this result, but would still like to see more women involved in the cooperative structures. 

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