Microloans Help Zambian Farmers Cover Their Nuts

Tryness Nsofwa, 57, proudly inspects her field of groundnuts. She uproots a clump of pods from the damp, red earth and is pleased with what she sees. Cracking open a husk to reveal the edible insides, Tryness says the nuts are well formed and plentiful. “It’s looking very nice,” she says of her crop. “I will keep some for my family and I will sell some.”

To raise this field of legumes has been a labor of love for the mother of two. She had to acquire the seeds, hire laborers to sow the field and then buy fertilizer to keep the crop healthy. All this toil has taken time, dedication and above all else, money. Tryness has spent 1,500 Kwacha (US$88), a significant sum for a small-scale farmer in Zambia, to get the field ready for harvest. 

However, in low-income communities, working capital is hard to come by. Most people barely have enough to run their homes and pay their children’s school fees. Small-scale farming constitutes 80 percent of Zambia’s food production and is the main income source for rural families, says the 2015 Zambia Living Conditions Monitoring Survey. But most food local householders grow is consumed by family members, leaving little leftover to sell and build savings.

Without capital, it is near impossible for people to get ahead and lift themselves out of poverty. Traditional bank loans are difficult to access because of high interest rates and requirements for collateral and prompt repayment. At the same time, borrowing from private village lenders is ill-advised as they can charge exorbitant interest rates and often engage in aggressive practices to collect on debts.

To address the situation, iDE is powering a broad initiative that sees locals – particularly women and other marginalized groups– gain access to the capital they need to start businesses. Under three separate programs, iDE is assisting the community to establish catalytic savings and loans groups. The groups typically consist of about 25 members who each contribute their own money – not handouts – to a pool fund.

Under rules established by the groups, members borrow money from the fund – typically twice what they put in – for business purposes and are required to repay the loans plus moderate amounts of interest. Money contributed by members is safely stored, usually in a locked metal box, and only ever opened at group meetings by separate “key holders” who each possess a key to a number of different padlocks on the box.

At the end of each six to 12-month “cycle” – when all loans must be repaid – members gather to celebrate a “share out” when they are given back their original contribution and all the members share in the interest, proportionate to the amount they saved through the cycle. “Without the loan, I couldn’t say where I would’ve gotten the money,” says Tryness, who borrowed money to sow her field from the Natwange Savings Group of mostly women. Her group shared about US$2,000 at the end of its last six month cycle. 

iDE is working with 379 community savings and loans groups across six Zambian provinces, including Central, Copperbelt, Western, Northwestern, Luapula, and Lusaka. A 2021 survey of small-scale farmers targeted by the Strengthening Farmer Incomes (SFI) project, one of the three iDE is involved in, found 43 percent of the farmers were part of savings groups and received credit awareness training.

A major challenge faced by smallholders, says the survey report, is the lack of ability to invest in the value chains being promoted by the project – which also includes activities to increase access to agricultural inputs, access to markets, and access to entrepreneurship skills. “Having many scalable options available, and building the capacity of smallholders to manage and grow from their own resources, is an important first step towards sustainability,” says the report. 

The survey concluded that farmers who took part in all aspects of the SFI project increased their annual income by US$95, a significant amount when compared to average local incomes. According to the United Nations 2020 Human Development Report, in Zambia 47.9 percent of the population are multidimensionally poor while an additional 23.9 percent are classified as vulnerable to multidimensional poverty.

“Access to finance was a problem, especially for women,” says Kalonge. “But we also had a gap in women’s attendance at trainings iDE was hosting, on pest management, horticulture and other issues. It’s not that they don’t want to attend. They just didn’t have the time because they were busy at home. These savings groups now provide motivation to come to meetings, where members get access to know-how about topics like preparing nutritious meals for children.”

iDE has also linked many of the groups to Vision Fund Zambia, part of international nonprofit, World Vision, which also provides access to microfinance in low-income communities here. Joseph Mubwana, Vision Fund savings officer, said the groups sometimes lacked money to lend at the beginning of the cycle. “We come in and give them some funds so they can loan each other. It’s a top up to what they are doing,” says Joseph. He said Vision Fund also provided members with training on business investment best-practice.

At a recent meeting of Tryness’ group, members proudly explain how they’ve recently moved beyond loan-making and are now using their capital to start businesses for the common good. One is a piggery which comprises four pigs purchased with group funds made from growing and selling groundnuts. The group recently slaughtered a pig and provided additional loans to members who were struggling financially.

“We have a plan to rear rabbits,” says group chairwoman, Edith Chibwe. “To start the business, we are going to slaughter another pig and sell the meat. The money we make will go toward the purchase of rabbits. Rabbits fetch a lot of money, and they reproduce quickly. The meat also goes for a good price in the shops.”

Edith, who also works as an iDE-trained Farm Business Advisor, provides advice, agricultural inputs and aggregation services to group members and other local farmers. Tryness will make a tidy profit from her groundnut field, says Edith, likely earning more than double what she borrowed from the savings and loans group.

“She will be able to pay back her loan with interest and even have enough to buy iron sheets for her roof!