Sc a ling a n inno va tive c re dit pro duc t fo r sma llho lde rs - PowerPoint PPT Presentation

Sc a ling a n inno va tive c re dit pro duc t fo r sma llho lde rs a c ro ss c o nte xts Mic ha e l Kre me r, Asma n Sule ima n, Pa ul Nuthu, a nd Emily C up ito Evid e nc e to Ac tio n C o nfe re nc e 25 Ma y 2017

E vide nc e fro m a Ra ndo mise d E va lua tio n in K e nya Ja c k, Willia m; K re me r, Mic ha e l; de L a a t, Jo o st; a nd Suri, T a vne e t, “Bo rro wing Re q uire me nts, Cre dit Ac c e ss, a nd Adve rse Se le c tio n: E vide nc e fro m K e nya .” NBE R Wo rking Pa pe r 22686. Se pt 2016.

L o w a do ptio n o f a g ric ultura l te c hno lo g ie s Re c e nt de ve lo pme nt o f ne w a g ric ultura l te c hno lo g ie s with po te ntia l to c o ntrib ute to • e c o no mic g ro wth a nd po ve rty a lle via tio n Cre dit c o nstra ints pre ve nt ma ny sma ll ho lde r fa rme rs fro m inve sting in ne w • te c hno lo g y – Size a b le initia l de po sit o r a g ua ra nto r is o fte n re q uire d to re c e ive a lo a n, re stric ting a c c e ss fo r mo st I n de ve lo pe d c o untrie s, a sse t c o lla te ra lize d lo a ns fo r purc ha se o f ho use s, ve hic le s, • a nd sma ll b usine ss e q uipme nt a re c o mmo n • In e ve nt o f lo a n de fa ult, a sse t is re po sse sse d b y b a nk • Using a sse ts a s c o lla te ra l is ra re in de ve lo ping c o untrie s, whe re c re dib le a nd e ffic ie nt pro c e sse s to se ize c o lla te ra l ma y b e la c king F o r c e rta in pro duc ts, c a n a sse t c o lla te ra liza tio n e xpa nd fa rme r a c c e ss to c re dit • witho ut a ffe c ting re pa yme nt ra te s?

Ca n inno va tive fina nc ing he lp fa rme rs a c c e ss wa te r ta nk lo a ns? T he a sse t: Wa te r ta nks a re a b ig o utla y (~$350) b ut mig ht b e a ffo rda b le if c a n pa y g ra dua lly. • Wa te r ta nks ma ke g o o d c o lla te ra l: – Ha rd to hide a nd ha rd fo r the fa rme r to mo ve • E a sy fo r the c o o pe ra tive to re po sse ss • Ma inta in the ir va lue a nd c a n b e re so ld • Study c o nte xt: • K e nya ’ s Ce ntra l a nd Rift Va lle y pro vinc e s • Ma ny fa rme rs a lre a dy invo lve d in SACCOs Study po pula tio n: Sma llho lde r da iry • fa rme rs F a rme rs we re me mb e rs o f SACCOs, se lling • milk to lo c a l da iry c o o pe ra tive s Ave ra g e he rd size o f 2 c o ws •

I nno va tive fina nc ing Re se a rc he rs pa rtne re d with Nya la Da iry Co o pe ra tive to o ffe r sma llho lde r • da iry fa rme rs a lo a n to purc ha se a 5,000-lite r ra inwa te r ha rve sting ta nk Wa te r ta nks o ffe re d to fa rme rs thro ug h a n inno va tive c re dit c o ntra c t: • • T he ta nk itse lf is use d a s a c o lla te ra l • Re pa yme nts a re a uto ma tic a lly de duc te d fro m mo nthly milk sa le s a t the c o o pe ra tive • T e rm: 24 mo nths; ma na g e d b y the SACCO • I f fa rme rs fa ile d to re pa y, the c o o pe ra tive wo uld re po sse ss the ta nk a nd se ll it to c o ve r the o utsta nding lo a n o b lig a tio n Re se a rc he rs a lso c o mpa re d this a sse t c o lla te ra lize d lo a n c o ntra c t to o the r • “sta nda rd” lo a n c o ntra c ts, inc luding o ne tha t wa s fully c a sh-c o lla te ra lize d b y the fa rme r’ s o wn de po sits a nd g ua ra nto rs

T re a tme nt Gro ups Gr oup De posit Guar anator s Asse t Collate r al Sta tus 33% 100% No ne q uo Asse t 25% No ne T a nk c o lla te ra l - lo w Jo int 4% 21% T a nk lia b ility Asse t 4% No ne T a nk c o lla te ra l - hig h 6

Re sults Gr oup De posit Guar anator s Asse t Collate r al T ake - up Re posse ssion Rate Sta tus 33% 100% No ne 2.4% 0% q uo Asse t 25% No ne T a nk 27.6% 0% c o lla te ra l - lo w Jo int 4% 21% T a nk 23.5% 0% lia b ility Asse t 4% No ne T a nk 44.3% 0.7% c o lla te ra l - hig h 7

L o a n T a ke -up 45 41.9 40 35 s me r ar 30 c e nt of F 24.7 23.9 25 20 Pe r 15 10 5 2.4 0 100% c a sh c o lla te ra lize d + 25% de po sit + 4% d e po sit + 4% d e po sit + jo int-lia b ility 75% a sse t c o lla te ra lize d 21% g ua ra nto r + 96% a sse t c o lla te ra lize d 75% a sse t c o lla te ra lize d T a ke -up ra te s a re o ve ra ll ra te s ta king into c o nsid e ra tio n the o rig ina l sa mple a nd the o ut o f sa mple o ffe rs W. Ja c k, M. K re me r, J. d e L a a t & T . Suri (unpub lishe d ) Jo int L ia b ility, Asse t Co lla te ra liza tio n, a nd Cre d it Ac c e ss: E vid e nc e fro m Ra inwa te r Ha rve sting T a nks in K e nya .

And ha d re a l e ffe c ts Re al impac ts o n ho use ho ld wa te r a c c e ss, time sa ving , a nd g irls’ • sc ho o l e nro lme nt 8 Minute s/ da y Minute s/ da y -3.17 L ike liho o d fe tc hing wa te r -9.66 te nding +17.5pp o f o wning live sto c k a ny ta nk E nro lme nt ra te 45% +4pp 98.4% 9

Disc ussio n Asse t c o lla te ra liza tio n ha s the po te ntia l to e xpa nd a c c e ss to c re dit • Ho we ve r, the re ma y b e a minimum le ve l o f de po sit re q uire d. • T he SACCO c o ntinue d the a sse t-c o lla te ra lize d lo a ns, b ut c ho se the o ptio n o f • 75% c o lla te ra l a nd a dde d a n a ppra isa l fe e o f 700 ksh. Bro a de r L e sso n T he pro fit ma ximizing le nde r will se t b o rro wing ra te s to o hig h. • Go ve rnme nt c a p o n inte re st ra te s c o mpo unds the pro b le m. • I nno va tive fina nc ing c a n he lp so lve this. •

Applying the ide a in Rwa nda E mily Cupito J-PAL Afric a

Glo b a lly I nfo rme d

L o c a lly Gro unde d

T a ke a wa ys fro m c o nte xt sc o ping Re a sons why the proje c t mig ht work Re a sons it mig ht not work L o ts o f da iry fa rme rs with the sa me Da iry c o o pe ra tive s a nd SACCOs • • numb e r o f c o ws o n a ve ra g e a re se pa ra te e ntitie s Wa te r sto ra g e is a pro b le m T a nks ne w ide a fo r individua ls • • I nstitutio na l pa rtne rs willing to T a nks a re mo re e xpe nsive tha n in • • pa rtic ipa te , i.e . da iry c o o pe ra tive s, K e nya the ir c o o ling c e ntre s, a nd SACCOs Ava ila b ility o f lig htwe ig ht dura b le • pla stic ta nks So lutio n: T e st the pro c e ss a nd mo nito r ta ke up a nd re pa yme nts .

Pha se I : I nte nse suppo rt Sma ll pilo t in 1 se c to r, with inte nse suppo rt • 43 fa rme rs to o k the lo a ns (a b o ut 25% o f tho se • e lig ib le ) Re pa yme nts we nt mo de ra te ly we ll • – 1 fa rme r de fa ulte d b ut re po sse ssio n a nd ta nk re -sa le we nt smo o thly – 40% o f fa rme rs ha ve b e e n la te a t le a st b y 1 mo nth

Pha se I I : Wo rksho ps fo r SACCOs • 53 SACCOs a tte nde d the wo rksho ps • 13 SACCOs ha ve sig ne d a c o ntra c t with a ta nk c o mpa ny • 6 SACCOs a c tive ly o ffe ring lo a ns 93 a dditio na l ta nks so ld so fa r • 16

Ano the r Wa te r T a nk L o a n Pro je c t in Rwa nda Rwa nda Na tura l Re so urc e s Autho rity o ffe re d a sse t-c o lla te ra lize d wa te r ta nk • lo a ns 3 ye a r, e nviro nme nta l pro g ra mme : 2014 – 2016 • L oan Option Ubude he Cate gor y 5 th (middle ), 6 th (we ll o ff) L o a n Only 4 th (surviving ), 3 rd (po o r) L o a n + Sub sidy 2 nd (po o re r), 1 st (po o re st) L o w-c o st a rtisa n ta nks Ab o ut 5,000 ta nk lo a ns pro vide d (lo a n a nd lo a n + sub sidy) a s o f De c 2016 •

T ha nk Yo u!