Piloting Alternative Financing Mechanisms for Improved Access to Farm Inputs


Posted January 29, 2016

Over the 2015 to 2016 agricultural season, the Agricultural Commodity Exchange for Africa (ACE), in partnership with the Malawi Oilseed Sector Transformation Project (MOST), Agro-Inputs Suppliers Ltd (AISL), Clinton Development Initiative (CDI) and Tukula Farming Company, will begin implementing a piloting project which explores alternative finance mechanisms in order to facilitate improved access to agricultural inputs and markets.

Through the distribution of soya inputs facilitated through small loans targeting smallholder farmers, the project aims to:
 
•  Enhance soya productivity through greater access to agricultural inputs (seed and inoculant);
•  Enhance smallholder farmer access to markets through ACE’s formal market; and,
•  Introduce to suppliers the existence of other financing mechanisms for sales growth.
 
To achieve these objectives, soya seed (Makwacha variety) and inoculant (Nitrofix) were provided on loan to 947 smallholder farmers, located in 4 districts (Ntchisi, Mchinji, Nsaru, Kasungu), of which more than half are women (563). The received input packages provide sufficient certified seed and inoculant to plant from 1/3 of an acre up to 1 acre, and were distributed to farmers during ‘Farmer Field Days’ at the four locations. Appropriate input packages for each location were defined based on average land availability per farmer.
 
As such, by May, 2016, farmers are expected to return their input loans with harvested commodity (soya grains), to be subsequently deposited in ACE certified warehouses. ACE will then auction the aggregated volume on the exchange platform, and the funds received will be used to pay back input suppliers (AISL and Tukula Farming Company) with surplus funds disbursed to cooperatives in profit situations.  In circumstances of non-performance by smallholder farmers, MOST is providing risk share, as well as logistical support. Farmers may also utilize ACE services to market the remaining portions of their harvest.
 
To coordinate the initiative, participating farmers have been registered and added to ACE market information systems. Throughout the project, farmers will receive regular SMS’ to remind of outstanding loans, provide advice on crop management, and to send current market information. In addition, all beneficiaries will have received training on ACE services. Furthermore, CDI provides training on crop management and other enhanced agricultural practices.
 
The initiatives long-term objective is to expand the pilot to more farmers, including commodities such as sunflower and groundnuts. This project is viewed as holding excellent potential for strengthening ACE’s relationships with partners, as well as to grow utilization of the commodity exchange’s services, and develop a new business model with inputs suppliers. 

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