Growing support for RIU Rwanda-backed warrantage programme through fertilizer intervention
19 December 2010
In September 2010, RIU Rwanda initiated discussions with Duterimbere (the warrantage banking partner), NYAMIG (the commercial arm of the maize platform), fertilizer dealer SOPAV and some 17 maize farmers' cooperatives to look at fertilizer supply.
In September 2010, RIU Rwanda initiated discussions with Duterimbere (the warrantage banking partner), NYAMIG (the commercial arm of the maize platform), fertilizer dealer SOPAV and some 17 maize farmers' cooperatives to look at fertilizer supply.
A plan emerged for SOPAV to supply fertilizer to farmers with further payment for the goods being made through the bank using the warrantage approach.
The scheme builds on current Rwandan government strategy to provide 50% subsidy on fertilizers, with farmers paying cash for the other 50%.
We knew that some poor farmers could not pay the 50% in order to be eligible for the subsidized fertilizer so we wanted to introduce them to warrantage as an alternative solution, enabling them to get access to fertilizers using their projected harvest as collateral. This means that they can gain access to reliable and fair maize markets as they get a much better price through warrantage and avoid kotsa - a form of exploitation of farmers where the need for cash pushes them to sell their maize in the field at a rock bottom price.
SOPAV, the fertilizer dealer, opened a bank account in Duterimbere Nyagatare Branch, to enable these transactions to take place.
However, we were not able to implement the plan as the Ministry of Agriculture instructed the fertilizers dealers in the country to give the fertilizers by loan to farmers, with the local government administrative authorities responsible for making sure farmers repay their loans.
But we still believe in the approach we developed with our partners and we will try to implement it during the next planting season in March 2011.
This seemed to be the end of the line for the RIU-back loan scheme. However, news emerged that farmers in the Katabagemu sector, Nyagatare District, were not repaying their loans.
It appeared that some farmers still had their maize harvest stored at home and were reluctant to sell it in order to reimburse the fertilizer loan because the price offered by local maize traders was too low at 7000 Rwandan Francs per tonne (US $11.5 per tonne). This is around half what the World Food Programme paid NYAMIG.
In October 2010, one of our service providers approached these farmers and discussed the possibility of them joining the warrantage scheme as a way to break the deadlock. The Nyagatare District Mayor was very supportive of this proposal.
We agreed with NYAMIG and Duterimbere that farmers willing to participate in the pilot will bring their produce to a local collection site in Katabagemu Sector, where quality will be checked.
We also had to ensure that the value of maize supplied by each farmer had to correspond to the fertilizer loan they had received.
The price offered was 12,000 Rwandan Francs per tonne (US $20), much higher than that offered by local traders.
Through this initiative we ensured that 120 farmers were able to pay back their fertilizer loan. 34,719 tonnes of maize went through the warrantage scheme.
Duterimbere and NYAMIG paid the Rwanda Development Organisation (RDO), the organization that had supplied fertilizers on credit, 2,499,768 Rwandan Francs (US $ 4,200).
But the big gain for NYAMG and the warrantage programme was that we have 120 ambassadors for the scheme who will be really important as we scale up the warrantage in time for the next harvest.
The scheme builds on current Rwandan government strategy to provide 50% subsidy on fertilizers, with farmers paying cash for the other 50%.
We knew that some poor farmers could not pay the 50% in order to be eligible for the subsidized fertilizer so we wanted to introduce them to warrantage as an alternative solution, enabling them to get access to fertilizers using their projected harvest as collateral. This means that they can gain access to reliable and fair maize markets as they get a much better price through warrantage and avoid kotsa - a form of exploitation of farmers where the need for cash pushes them to sell their maize in the field at a rock bottom price.
SOPAV, the fertilizer dealer, opened a bank account in Duterimbere Nyagatare Branch, to enable these transactions to take place.
However, we were not able to implement the plan as the Ministry of Agriculture instructed the fertilizers dealers in the country to give the fertilizers by loan to farmers, with the local government administrative authorities responsible for making sure farmers repay their loans.
But we still believe in the approach we developed with our partners and we will try to implement it during the next planting season in March 2011.
This seemed to be the end of the line for the RIU-back loan scheme. However, news emerged that farmers in the Katabagemu sector, Nyagatare District, were not repaying their loans.
It appeared that some farmers still had their maize harvest stored at home and were reluctant to sell it in order to reimburse the fertilizer loan because the price offered by local maize traders was too low at 7000 Rwandan Francs per tonne (US $11.5 per tonne). This is around half what the World Food Programme paid NYAMIG.
In October 2010, one of our service providers approached these farmers and discussed the possibility of them joining the warrantage scheme as a way to break the deadlock. The Nyagatare District Mayor was very supportive of this proposal.
We agreed with NYAMIG and Duterimbere that farmers willing to participate in the pilot will bring their produce to a local collection site in Katabagemu Sector, where quality will be checked.
We also had to ensure that the value of maize supplied by each farmer had to correspond to the fertilizer loan they had received.
The price offered was 12,000 Rwandan Francs per tonne (US $20), much higher than that offered by local traders.
Through this initiative we ensured that 120 farmers were able to pay back their fertilizer loan. 34,719 tonnes of maize went through the warrantage scheme.
Duterimbere and NYAMIG paid the Rwanda Development Organisation (RDO), the organization that had supplied fertilizers on credit, 2,499,768 Rwandan Francs (US $ 4,200).
But the big gain for NYAMG and the warrantage programme was that we have 120 ambassadors for the scheme who will be really important as we scale up the warrantage in time for the next harvest.
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