Credit where it is due

In Spore N 12, Dr Mohammed Yunus, described how the founding of the Grameen Bank in Bangladesh had helped to stimulate the very poor to develop self-reliance through group credit and the setting up of small business enterprises. The UN International Fund for Agricultural Development (IFAD) has played a major role in providing funds for the Grameen Bank and is also involved in providing rural credit in Africa, as Bahman Mansuri, IFAD's Africa Division Director outlines. The Sahelian countries of Africa, like Bangladesh in Asia, have a history of climatic disasters and an inheritance of poverty greater than most parts of the world. If these cou ntries are to survive, let alone develop, the resources of the people must be engaged: sustainable prosperity, like sustainable development, must come from the grass-roots and one of the greatest challenges is how to help the very poor to help themselves. Mali is one of Africa's very poorest nations, often cursed by drought and pest attack. Farmers need extra funds to help them realize their potential to grow more food but loans to people who have no security or collateral to offer are not considered a risk worth taking by most banks. Provision of credit and its recovery in a cost effective manner remains one of the major obstacles for the development of smallholder sector. The Segou region of central Mali, 150 miles north-east of the capital Bamako is typical: agricultural production is constantly threatened and reduced by the short growing season and by poor soil fertility. The land needs preparation at the right time, and this demands the use of draught animals. But the villagers of the Segou, are for the most part, so poor that keeping animals is beyond their reach. Their subsistence farming consists of cultivating a little millet, sorghum, fonio and cowpea, and some vegetables. Only the better-off can afford cattle. Illiteracy is al most total. Since 1985, however, this vicious cycle of need has been broken. A Village Development Fund Project (VDFP) of $9.18 million was set up by IFAD (International Fund for Agricultural Development) as the result of an initiative in 1982, and is already benefiting 85 of the very Door 439 villagges in the Segou. Loans to projects generated in the villages are channelled through the Banque Nationale de Developpement Agricole (BNDA) of Mali, at the recommendation of village credit committees whose members are elected by the villagers and trained by the project. The annual rate of interest is fixed at 10% and the loan is repaid over a five-year period. The applications from villagers have to be approved by the whole village community, which then becomes responsible for guaranteeing repayment. The community has to put down 10% of the value of the loan, as does the VDFP, and this serves as security for the loan. The average loan is about $350, and is used mainly for buying draught animals so that the land under cultivation is extended. There is scope within the Project for direct short-term credit to provide for seasonal inputs and the marketing of crops. Interest earned on loans from the Village Fund is ploughed back into the fund itself, and 2.5% of th e interest earn ed on credit f rom the BNDA is collected by the villagers as rem uneration for assisting the bank in the recovery of its medium-term credit. The project has also successfully launched a functional literacy programme which permits widespread farmer training in primary health, basic hygiene and nutrition, as well as midwife training. In addition, training is organized for paraextension workers who are resident in the village and work directly with farmers in diffusion of technologies while acting as feedback agents for the project'stechnical package. The active involvement of the rural population in its own development is one of the great strengths of the VDF Project. By building on the traditional village organization, it creates village funds to attract village savings and to direct them towards productive investment and community welfare. Loans can also be made to help people diversify from agriculture, and so decrease dependence in times of drought. Schemes which have been approved and funded include setting up village shops, pharmacies, poultry farming and smallstock raising. For the first time in Mali farmers organizations under this project, following a successful competition with private traders, will be supplying 4000 tonnes in 1988/89 to the national cereals marketing board (OPAM), which represents one third of the replenishment of Mali's national security stock. Concerns for environmental protection are also reflected in the project implementation. This is done by way of reafforestation and also through utilization at household level, of energy-saving, improved stoves. As many classically patterned projects have fallen short of their objectives, the concept of 'integrated' development has been progressively abandoned. However, a major lesson from the Segou Village Development Fund is that what has failed is not the principle of integration, but the way such integration is often managed, without effective participation of beneficiaries. Further village funds like the one in the Segou district of Mali are at the moment being established by IFAD in Guinea under the Fouta Djallon Agricultural Rehabilitation Project, and are being contemplated in Niger. The views expressed are those of the author, not necessarily those of CTA.In Spore N 12, Dr Mohammed Yunus, described how the founding of the Grameen Bank in Bangladesh had helped to stimulate the very poor to develop self-reliance through group credit and the setting up of small business enterprises. The UN..