February 21, 2018

Last Mile Business Model Proves Poor Women Farmers Make Good Banking Partners

Sheila Azuntaba has a passion for empowering other hard working women.  When she founded Innovative Microfinance Limited (IML), she envisioned supporting bottom of the pyramid, smallholder agriculture actors all across northern Ghana – those living in dire poverty on less than $2.50 a day.  She believed that enhancing financial inclusion for women in deprived rural communities did not have to be risky.  Yet Azuntaba could not find an investor who shared her vision, and her business struggled.

“Lending to female-led agribusinesses is worthwhile,” Azuntaba said. “They require small loan amounts to run their businesses and make an impact on their families. Repayment amongst women is high as they want to protect their reputations.”

Through the USAID Financing Ghanaian Agriculture Project (USAID FinGAP), established to facilitate financing in the maize, rice, and soy value chains in northern Ghana, Azuntaba met Patricia Safo, General Manager of JCS Investments.  JCS Investments, a business advisory services (BAS) provider within the USAID FinGAP network, understood how to facilitate agribusinesses’ access to finance, with much of its experience coming from securing listings of small to medium enterprises on the Ghana Stock Exchange/Ghana Alternative Market (GSE/GAX).

JCS Investments worked to restructure IML from a  microfinance institution to a savings and loan company , acquiring the minimum capital required for licensing.  As a savings and loans company , IML would be able to access more stable and competitive deposits to disburse loans at lower interest rates to more clients in underserved areas and provide much needed banking services.

In June 2017, JCS Investments facilitated $305,496 in convertible debt to equity financing from Goodwell Microfinance Development Company, out of the Netherlands.   The loan term was 24 months, at the end of which it could be converted into ordinary shares for the investor. Over the past five years, IML has reached more than 10,000 clients through its headquarters based in Accra and three branches in Ashiaman (Greater Accra Region), Tamale (Northern Region), and Bolgatanga (Upper East Region).  The financing  will allow IML to encompass even more of the underserved and unserved with five additional branches in Bole, Yendi and Boma (Northern Region), Bawku (Upper East Region) and Wa (Upper West Region).

Since accessing the financing, IML has extended its services to over 1,000 actors in the maize, rice, and soy value chains, comprising 95% women in Zebila and Bolgatanga in the Upper East Region and Tamale in the Northern Region, with many more expected to benefit.  Most smallholder farmers in the area, due to low literacy rates and low income levels, were unfamiliar with banking services.  IML held informational meetings to promote its products and benefits, offering people in the community improved ways to save and transfer money and access financing to expand their businesses.

“IML has been very helpful to me,” Hajia Zaratu Yakubu, a female agribusiness owner who accessed a loan from the Tamale branch of IML, said. “They introduced me to banking and gave me a loan to increase my stock. I now have a savings account and can assess loans for my business.”

Azuntaba and Safo are two entrepreneurial women leading the way in northern Ghana to solve the paradox of the smallholder farmer.  Charged with providing the vast majority of the country’s food supply, these farmers have very little resources to do so. .

IML, with the assistance of USAID FinGAP and JCS Investments, has developed a successful “Last Mile” business model to support smallholder farmers (SMFs) in their critical role in establishing Ghana’s food security.  Hopefully, now that IML and JCS have proven that these poor customers are “good business,” other institutions will join in Azuntaba’s vision and emulate this model to bring up the economic levels of these SMFs.

As the impact of IML’s new branches’ financing of female smallholders’ activities begins to show, the men in these communities see the usefulness of accessing and repaying loans. They, too, have begun requesting financing.

“Working with JCS Investments and USAID FinGAP has been very rewarding,” Azuntaba said. “We have been able to achieve a lot of what we set out to do.”