October 31, 2016

Ecobank & RCB Bucobank

When Financing Flows through Tiered Banks, Women’s Agricultural Enterprise Grows

Incentive Grants unleash funds from universal to community banks, stimulating growth for crop aggregators in Ghana

Agnes Atayila and the other members of Yineme, an all-women’s maize and rice aggregation group, were fed up with each member only procuring 500 kilograms of product every harvesting season. Based in Bolgatanga in Ghana’s Upper East Region, these women desperately wanted to expand their aggregation business, but lacked the money to buy more crops and pay for storage. Financial institutions (FIs) required clients to have collateral to access loans, a stipulation that prevented the group from increasing volume and earning more income.

The advent of the USAID-FinGAP grant incentive program changed Yineme’s course of business when they procured a working capital loan of $4,535 from Builsa Community Bank (Bucobank).

With the loan, the 13-member group increased the volume of maize and rice aggregated from 6.5 metric tons in 2014 to 18.4 metric tons in 2015, almost tripling their supply. Buying such a large amount at low prices at harvest time and storing the crops to sell later when prices appreciated yielded Yineme a gross margin of about 37%.

“Women in northern Ghana do not own land,” Atayila, the group’s leader, said. “So we have to engage in value chain activities like grain aggregation to earn income to feed our families and meet personal needs.”

The USAID Financing Ghanaian Agriculture Project (USAID-FinGAP) is a five-year project established to facilitate financing and investment for agribusinesses operating in the maize, rice, and soy (MRS) value chains in the north of Ghana. Access to over $108 million in finance by smallholder actors such as Yineme and other small, medium, including large enterprises (SMiLEs) has been facilitated through interventions like the pay-for-performance grant incentive program introduced in December 2014. The program, now in its second phase, has 33 FIs including Bucobank as part of its participatory financial institutions (PFIs) grantee network, committed to disbursing financing into the target value chains in return for grant payments, which in turn support the banks’ agricultural lending businesses.

USAID-FinGAP also has a network of business advisory services (BAS) providers who deliver consulting services to help any size business working along the MRS supply chain access affordable options for financing agricultural investments. Nunyuie Brothers Company Limited (NBL), a USAID-FinGAP BAS provider, worked with Yineme, assisting them to prepare their loan application to Bucobank. NBL also trained the group in basic record keeping and business management to enable the group to track their sales and income for timely loan repayment.

The group shared their experience at the Third Annual Ghana Agribusiness Investment Summit held by USAID-FinGAP in Accra this April in hopes of encouraging others to take advantage of the newly available financing stimulated by USAID-FinGAP’s efforts. Atayila explained that the financial training support and access to funds helped their business.

“The loan from Bucobank has been very helpful to us. We were able to turn the loan around quickly and make repayment within the six-month loan period. This made it possible for us to access a second loan to aggregate more produce in the 2016 season.”

– Agnes Atayila, member of Yineme, an all-women’s maize and rice aggregation group

However, even Rural Community Banks (RCBs) such as Bucobank itself have trouble with financing. At the start of the 2015 production season when Bucobank prepared to lend critical funds to farmer-based organizations (FBOs) in the target value chains, its major source of financing for on-lending fell through, leaving the bank with limited funds for loan disbursement. NBL stepped in to help Bucobank prepare documentation to successfully access $300,000 in financing from Ecobank Ghana to on-lend to SMiLEs, including farmer-based organizations (FBOs) and women’s groups.

“The financing from Ecobank helped us to beef-up liquidity to support various SMiLEs and FBOs within our catchment area to expand their capacities and improve on their livelihoods,” Awudu Hayatudeen, General Manager of Bucobank, said. “We achieved a 98% loan repayment rate. We are grateful to USAID-FinGAP for the grant program and for creating linkages amongst financial institutions.”

As a USAID-FinGAP grantee, Ecobank’s financing of Bucobank for on-lending supports the bank’s commitment to meeting the financing needs of smallholder farmers in the agriculture sector through RCBs and micro-finance institutions (MFIs).

“Working through rural RCBs and MFIs reduces risks, helps in loan administration and monitoring, and meets our goal of reaching the poor in society, Wilhelmina Dodd, Credit Analyst at Ecobank stated.

Ecobank’s loan to Bucobank which then loaned to Yineme did just that.