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.

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• 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
• 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?

• 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

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?

• 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

Gr

• up

De posit Guar anator s Asse t Collate r al

Sta tus q uo 33% 100% No ne Asse t c o lla te ra l

• lo w

25% No ne T a nk Jo int lia b ility 4% 21% T a nk Asse t c o lla te ra l

• hig h

4% No ne T a nk

T re a tme nt Gro ups

6

Gr

• up

De posit Guar anator s Asse t Collate r al T ake - up Re posse ssion Rate

Sta tus q uo 33% 100% No ne 2.4% 0% Asse t c o lla te ra l

• lo w

25% No ne T a nk 27.6% 0% Jo int lia b ility 4% 21% T a nk 23.5% 0% Asse t c o lla te ra l

• hig h

4% No ne T a nk 44.3% 0.7%

Re sults

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• a n T

a ke -up

2.4 23.9 24.7 41.9 5 10 15 20 25 30 35 40 45 100% c a sh c o lla te ra lize d + jo int-lia b ility 25% de po sit + 75% a sse t c o lla te ra lize d 4% d e po sit + 21% g ua ra nto r + 75% a sse t c o lla te ra lize d 4% d e po sit + 96% a sse t c o lla te ra lize d

Pe r c e nt of F ar me r s

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 .

• 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

And ha d re a l e ffe c ts

Minute s/ da y te nding live sto c k Minute s/ da y fe tc hing wa te r E nro lme nt ra te L ike liho o d

• f o wning

a ny ta nk 45% +17.5pp

• 3.17
• 9.66

8 +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

• 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

• L
• ts o f da iry fa rme rs with the sa me

numb e r o f c o ws o n a ve ra g e

• Wa te r sto ra g e is a pro b le m
• I

nstitutio na l pa rtne rs willing to pa rtic ipa te , i.e . da iry c o o pe ra tive s, 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

Re a sons it mig ht not work

• Da iry c o o pe ra tive s a nd SACCOs

a re se pa ra te e ntitie s

• T

a nks ne w ide a fo r individua ls

• T

a nks a re mo re e xpe nsive tha n in K e nya

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

16

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

Ano the r Wa te r T a nk L

• 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
• 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

L

• an Option

Ubude he Cate gor y

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• a n Only

5th (middle ), 6th (we ll o ff) L

• a n + Sub sidy

4th (surviving ), 3rd (po o r) L

• w-c o st a rtisa n ta nks

2nd (po o re r), 1st (po o re st)

T ha nk Yo u!