Tumu Cooperative Credit Union (TCCU) was established almost half a century ago in the Sissala district of the Upper West Region of Ghana to provide financial support to members engaged in a variety of economic enterprises. Its major source of funding was the money in members’ savings accounts, which in turn were used for collateral on loans. Never in its history were these funds enough to support the community’s growing needs, particularly those of members working in high risk, but essential farming activities.
USAID Financing Ghanaian Agriculture Project (USAID FinGAP) was established to facilitate financing in the maize, rice, and soy value chains in northern Ghana, and its pay-for-performance incentive program, launched in December 2014, offered TCCU the boost it needed to expand its lending program to actors working in maize and soy, the area’s primary economic crops.
“TCCU’s partnership with USAID FinGAP has significantly increased our loan portfolio to the MRS value chains,” Aisha Batong Hor, General Manager of TCCU, said. “Contrary to the perception that lending to the agricultural sector is risky, the performance incentives, technical assistance and capacity building training that we received from the USAID FinGAP has enabled us to realize the benefits of lending to the agricultural sector.”
As a selected pay-for-performance grantee, TCCU pledged to disburse $500,000 over 12 months to its members looking to expand their farming activities in the MRS value chains. For this commitment, USAID FinGAP granted an incentive award of $50,000. The loan program for TCCU was so successful that nine months in, the credit union adjusted its disbursement target, ultimately loaning $3.2 million for an incentive award of $86,000. At the end of 2015, the Ghana Co-operative Credit Union Association named TCCU the second best community-based credit union in the country.
The following year TCCU once again exceeded its financing goal. As of December 2017, TCCU had disbursed approximately $4.8 million to 112 agribusinesses in the MRS value chains. At the Agribusiness Investment Summit 2017, USAID FinGAP honored the financial institution (FI) for disbursing the fourth greatest amount of financing to agribusinesses supported by the Project.
The total incentive grant of $146,000 awarded to TCCU earned a return on investment of 33:1. Strategic use of the money further supported the farming community. TCCU used the initial performance grant to purchase a tractor, a maize sheller, and a truck. These acquisitions offered mechanization services to various links along the supply chain for land preparation, processing, and transportation services. The results were improved quality product selling for premium prices and access to additional markets. The fees earned for these services were put right back into the lending pool. With the second incentive award, TCCU completed work on its new office building and purchased motorbikes for loan monitoring to ensure repayment.
USAID FinGAP also linked the FI with two business advisory service (BAS) providers. Solutions Consulting Limited and DAB Consult organized agribusinesses into groups, providing social guarantees for accessing loans to those who would not have had those on their own. Assistance with document preparation and loan applications clarified the viability of the enterprises, creating a more reliable agriculture loan portfolio. Loan repayment for TCCU since working with USAID FinGAP has been around 97%. BAS providers also benefitted farmer groups like Kanyirewieri by facilitating financing and negotiating lower interest rates.
“We did not know we could access finance from the bank for farming,” Kanyirewieri member Afisatu Iddrisu said. “Now we are able to do so whenever necessary.”
Technical assistance and institution-specific training programs developed by USAID FinGAP helped TCCU develop four new agricultural financing products for increased lending and improved liquidity. Biiriniia, a local Sissala name, is geared towards youth savings. Another, Paarinchining, is a farming loan product tailored to disburse according to the crop calendar to ensure efficient utilization of funds.
USAID FinGAP is also committed to ensuring financial inclusion for women. In 2015, the female-led TCCU supported this effort by extending $13,326 in credit to female-led agribusinesses, including women’s groups. In the second year, financing to women’s enterprises more than doubled, and the trends show that this type of lending is becoming sustainable.
Over the past three years, five female-led agribusiness enterprises, benefitting 77 smallholder farmers, received a total of $90,996 in financing. Most recently, USAID FinGAP recognized TCCU at the Women in Agribusiness Development Summit for increasing productivity of smallholder actors, including women, in the maize and soy value chains through financing.
Beyond the honors hanging on the office wall, TCCU’s membership since joining the performance incentive program has increased from a membership of 3,625 (2,879 males, 540 females, and 206 groups) as of December 2014 to 7,726 (3,637 males, 3,599 females, and 490 groups) three years later. Those kinds of numbers are all the award TCCU and the community really need.