Some Qualitative information/data that I obtained from my respondent this week, especially related to loans:
Farmers are unhappy with the Microfinance Institutions’ (MFI) services because of the following reasons, among a few:
- They strongly hate/criticize the group collateral approaches being used by the MFI because, in case a member fails to repay the loans, the responsibility of repayment will fall on the shoulders of other members. Failing to repay can be associated with crop failure due to factors like disease and pests, mismanagement of finance, borrowers’ perception, and some social capital like trust, which is very important in group collateral. Also, since vegetable production is a risky business due to ever-increasing disease and pests, market price fluctuations, floods, etc a sort of agricultural insurance system in case of crop failure is not in place for producers, even though some initiative has been seen. For example, one of my respondents ( smallholder with ID # 320) told me that during the past three years, he got involved in vegetable production through the support of iDE, an NGO. This NGO linked the farmers with MFIs so as to get loans that help farmers to purchase seeds and fertilizer. Then, he started production, but unfortunately, his vegetable failed due to severe disease and the harvest couldn’t afford him to repay the loans he received. As a result, the iDE repaid his loans, i.e, he used iDE as an insurance company. Such kind of intervention is very critical for smallholder farmers
- Secondly, farmers are unhappy with the bureaucratic procedures of processing the loans.
- Thirdly, some said, the MFI’s interest rate is very high and the penalty imposed is also bad when they fail to repay the loans. Some said that the penalty they impose sometimes leads to prison and a sale of fixed assets which some regard to as “mana cufsiis”.
I also got additional qualitative feedback related to loans. Some respondents told me that, they don’t want to take any loans that have interest rates because their religion does not allow them to do that.
In summary, based on the respondents’ feedback, the majority of farmers need loans but not the ones that need group collateral. The problem here is that other Banks need fixed assets as collateral and the farmers don’t have them.