MUMELA - VILLAGE COMMUNITY BANK (VICOBA)

Our Community Based Organization members engage in farming of fruit trees; mainly mangoes and avocadoes. For years now we have been struggling with the problem of poor market prices for our fruits. Middlemen usually come to the farms to collect fruits from the farmers at very low prices eg: The quantity of fruits that the middlemen buy for Kenyan Shillings 65 (Half $) they will sell it at the market for between Kenya Shillings 780 and 1,000 ( US $ 5.7 and 7.4)

The scale of this problem is really wide spread within my community because it affects more than 1600 farmers who are members of our CBO. I may not have the right figures globally but from my local research I can only expect that the problem is a universal challenge.

My Community Based organization has a membership of more than 1600 (One Thousand and Six Hundred) farmers and they are all affected by this problem.

The factors that lead to this problem in my area are:

A) POVERTY - Most of the CBO members are ranked in the lot that lives below the $1 (One Dollar) per day level. Their only means of survival and support for their families is what they harvest and sell from their farms. Middlemen take advantage of poverty levels to exploit our farmers.

B) LACK OF ACCESS TO LOAN FACILITIES - Being the rural poor these farmers cannot access loans and other credit facilities due to lack of collateral.

C) POOR INFRASTRUCTURAL DEVELOPMENT - Roads network in the area is very poor such that the farmers cannot easily get public transport to take their products to the nearest better priced markets hence depending on the middlemen who can afford to bring their own means of transport.

The VICOBA initiative purposes to raise funds to boost its kitty to make it capable of giving credit to farmers using their produce as collateral. This is an initiative which will make use of an existing framework called ‘table banking’ a solution that will enable small scale farmers to preserve and store their produce by accessing credit worthy their produce at harvesting time. The produce will be treated and preserved at the common ‘Village Community Bank’ (store) until a time when either prices at the market become favourable or means of taking to the lucrative market is available. Once good prices are available, the produce will be released into the market under supervision of the farmers and the top up amount will be given back to the farmer after charging them a minimal amount for storage and transport.

I will give a living example: In August of this year we expect our farmers to harvest plenty of maize and beans grains. At the time of harvest middlemen will be flocking the village to purchase the above commodities. They will buy a 90kgs bag of maize at Kshs 900 (US $ 6.6). After about two months there will be scarcity of the same commodity in the village and the same will be sold back to the same farmer at between Kshs 3600 and 5400 (US $ 26.6 to 40). Due to financial commitments such as school fees, hospital bills and other consumables, the farmer will be forced to ‘throw away’ the produce only to get it back at a four-fold price.

 Through our Village Community Bank, farmers will be given money in advance to offset their bills and basic needs expenses as they wait for prices to get better. In this way farmers will get better returns for their produce and improve their livelihoods. This initiative will as well help to eliminate the need for middlemen in the value chain, ensuring that farmers receive fair prices for their produce. This same solution will be applied during planting season whereby the government releases subsidized farming inputs like fertilizers, pesticides and insecticides but due to proximity and infrastructure challenges, these inputs cannot reach the farmers in time for use in their farms. Using the collected revenues, VICOBA will collect the farm inputs from the government stores which are far from farmers and stock them in our Village Bank. The same will be released to farmers, if possible on credit or hire purchase terms so that they are applied in good time for better crops and harvest. 

The Village Community Bank initiative targets around 1600 rural small-scale farmers in a remote Location of Kenya, Africa who are currently underserved by traditional markets and badly exploited by middlemen. These farmers who 75% comprise of women mostly widowed and single mothers often struggle to sell their produce at fair prices due to the absence of means of transport to the market and the presence of middlemen in the value chain.

By providing a solution to the farmers’ financial constraints, the farmers will be able to sell their produce at better prices improving their purchasing power. Ready credit facility which requires no collateral will remove the urgency of having to sell their produce at a throw away price and await for better market hence giving them better returns for their investment in the farms.

By making farm inputs available to farmers at the right time of farm preparation and planting, the initiative will help improve production and enhance food security of the small-scale farmers as well as increasing their incomes.

The VICOBA initiative will also help to reduce post-harvest losses by providing a guaranteed market for the farmers’ produce. It will as well give farmers upper hand as they negotiate prices and terms of sale directly with buyers. This will automatically increase the efficiency of the value chain and reduce food waste.

Going by the life example given above, it clearly shows that,  eliminating middlemen by providing farmers with direct access to credit facility and to better markets, small-scale farmers can often earn significantly higher prices for their produce hence improving their livelihoods.

I as the patron together with the leadership team of the Mumela Location Community Based Organization are committed and fully practicing part of the 1600 members. We were all born, brought up and we live in the same area affected by the challenge. We have organized activities (table banking, tree planting, poultry rearing) which bring us together weekly or monthly all year round depending on the nature of the activity. Our personal experiences of the challenges we have faced as rural farmers make us well-suited to develop an initiative that addresses the specific needs of our small-scale farmers.

Our long term struggles as a farming community give us a deep understanding of the issues faced by farmers in our area and a strong motivation to find solutions that can improve our lives and livelihoods. The combination of personal experience, the common resolve to get a solution as well as the already existing coordinated group activities (table banking) gives us a solid foundation as well as a framework to seamlessly deliver this solution. We have an already existing large membership base who will be our clients and who have already been organized and just waiting to receive and continue working on the initiative.

The fact that we have brought together over a thousand farmers who meet and do some activities geared towards improving their current living standards is a big proof that given better resources we can achieve tremendous results for our farmers hence improving their lives and those of their dependents. In addition, the whole membership of Mumela Location Community Based Organization is involved in all plans, decisions and executions of the activities of the group as per the bi-laws made by the members. Therefore this is practically an initiative informed by the farmers, needs, developed through their ideas and addressing their very own agenda. 

Our solution is a prototype because we already have the infrastructure  in form of an organization with permanent membership who are already undertaking an activity(table banking) which is so similar to the solution we are planning to start implementing. Therefore the VICOBA model will be an advanced stage of our existing table banking initiative. The VICOBA level will be run more technically and professionally than our current form. We are not exploring an idea for implementation but we are intending to build on an already existent model which seeks to be improved and advanced to look more professional and to cover more people in the near future.

We currently have a total membership of more than 1600 small scale farmers who together with their direct and indirect dependents could grow this figure to about 12,000 people. 

The areas where we require partnerships include:

• Asset acquisition: As mentioned earlier in my application, the VICOBA initiative will mean collecting and preserving produce in a common storage (Community Bank) therefore acquiring assets such as storage space for the produce will require significant financial investment.
• Product upgrading: In order to preserve and keep the produce in good consumable state for some months we will need to invest in good storage practices and acquisition of insecticides and other control measures.
• Legal matters: To ensure that our initiative operates within the law and meets the needs of all members, we might need legal advice and support to develop a Memorandum of understanding.
• Transport and Marketing: To be able to move our products to the favourable markets which in most cases are in the big towns we will need partners in the transport sector to assist in moving our produce at reasonable transport costs to minimize the expenses incurred by farmers and maximize their returns on investment. If we can manage a partnership with truck building companies we would greatly benefit from their products.
• Financial Aid: In order to ensure financial inclusion among our members the VICOBA model will require a startup capital which will be used to give our small scale farmers access to the much needed but ever elusive credit facility to meet their expenses and increase their production by applying proper farming practices.

The fact that we intend to use the farmers' own produce as their collateral to access credit is innovative. This is a risk that no other lender is ready to undertake but for us as Mumela Location Community Based Organization we have tried the model by using internal mechanisms to lend through our table banking activity and we are sure that it is going to work with our members. We have been actively lending to our members for more than ten(10) years now and have many success stories than failures.

• In the next one year, we intend to increase access to financial services for small-scale farmers by leveraging our Village Community Bank to provide access to credit and other financial services. This will help farmers to invest in their farms and increase their productivity, while also providing a more reliable source of income to them, their families and their dependents.
• In that same first year, we intend to bid farewell to the middlemen who have been a necessary 'evil' to our farms for the last 3 decades exploiting and impoverishing our people.
• In the next five (5) years we intend to scale up our solution to reach another 1000 new members from our neighbouring Locations. By expanding our network and membership, we can increase the number of farmers who have access to credit facility, to farm inputs and to a stable market for their produce, thereby reducing post-harvest loss and increasing their incomes.  We intend to increase our incomes by 50% by the end of the fifth year, this would lead to a significant improvement in our livelihoods and help to reduce poverty in the communities.

The indicators that we shall be applying to measure our progress include:

• The number of small scale farmers who will access our facility: We will keep records of the number of small scale farmers who will access our credit facility. This will help us understand the reach of our solution and whether we are effectively engaging with our members and clients.
• The reduction/elimination of middlemen from our farms: During harvest time we expect to have dwindling numbers of middlemen and eventually no middlemen at all as all our small scale farmers will bring their produce to the Village Community Bank.
• Improved farmers’ income: We will keep records of the progress made by farmers in their incomes especially for those who will subscribe to the VICOBA and compare with those who will not have subscribed. This will help us understand whether our solution is improving the livelihoods of small-scale farmers.
• Impact on our organization’s revenues: We will track our revenue growth to understand whether we are achieving our financial sustainability goals and whether our business model is working effectively.

The theory of change for the Village Community Bank model is contained in the name itself; this model being applied in a village whereby the nearest formal financial institution (bank) is situated almost 30 Kilometers away is by itself a logical framework. Understanding why farmers sell their produce at throw away prices and giving a solution to the same is a sufficient way to impact on a small scale farmer’s life. Also providing a stable market with good prices for their products will significantly reduce post-harvest loss and increase the incomes of our small-scale farmers in the area/location. Our activities will involve onboarding and training members, facilitating the process through our crediting platform, and providing support to farmers on best practices for harvesting, storage, and transportation.

Our immediate outputs include the establishment of networks of borrowers, the use of our credit facility to advance inputs and funds to farmers and the adoption of best practices by farmers. Our long-term outcomes include reduction or elimination of middlemen, an increase in farmers’ incomes by 50%, and the creation of a sustainable and scalable model that can be replicated in other locations neighbouring our area and eventually to other rural localities in the County of Makueni.

We believe that our solution will have an impact because it addresses the burning challenges of exploitation of farmers by middlemen and how to increase their incomes by cushioning the scarcity of credit facilities to the small scale farmers. By guaranteeing a reliable market and good prices for farmers we can provide them with a stable source of income and increase food security in the community. 

Table Banking is a modernized model of a traditional banking system which was used by women in our society since time immemorial. Our mothers used to meet once a month and contribute monies then lend the collected money to the members according to the urgency of the needs of each borrower. Our model is making improvements on this traditional knowledge by adding a few features to make it more modern, secure and to look more professional. 

The VICOBA system is a highbrid fashion of table banking which will add a security feature by connecting several members to guarantee a borrower to enhance shared responsibility and answerability to the credit extended to that borrower. It will also have a form of 'collateral' by storing the farmer's produce in order to reduce after-harvest wastage and enhance a sense of belonging/ownership in the part of the farmer towards the solution. 

The Mumela Location Community Based Organization as mentioned earlier is largely composed of rural women. The normal African woman who lives in the village taking care of the home affairs either because the husband is away where he attends to a job/employment, a big number of the other women members are single mothers and the third group of women are widows. The real setting of our village is that 75% of the membership is made up of women. The leadership positions of our organization is also occupied by women(80%). This leaves our organization leadership with the duty to start incorporating more men into the organization. We need men to form an integral part of this solution because we understand that both genders are required for proper development and sustainable growth of the solution. We have already started working on bringing more many onboard for this particular initiative. This initiative has members of the PLWD in leadership positions and as active members of the group. The youth have also started seeing sense in our activities and in the last three(3) years we have seen a big increase in youth membership to the organization.

VICOBA model being an initiative that aims to serve an almost 100% rural living members most of whom have no access to Information and Communication Technology is expected to apply the simplest business model available. In order to ensure value for our members we have to use simple arithmetic and traditional computation as well as book-keeping methods because this is the only way we can ensure total participation and contributions from our members. We will continue using the book-keeping model used by our table banking until that time when we shall do capacity building for all our members to make them capable of following a modern method of book keeping. The lending shall be done following the same system applied to the current table banking which adapts an over the table transaction(lending and payments). But once VICOBA gets into operation, we will incorporate Mobile Money Transfer technology (Mpesa) into our transactions for ease of transaction and record keeping.

Mumela Location Community Based Organization started working on sustainability some five(5) years ago. We already contribute small amounts that we get from our farming activities towards our common kitty. We already have some funds which we are already lending to those members who have pressing needs at a minimal interest of about 5% per annum. When we get the requested funds through MIT Solve, we shall improve our credit facility by lending to more and more members thus building our interest reserves. If our solution goes through, we shall also charge our members for storage and transport to the market and all these revenues shall go towards building our financial sustainability. In the long term, once we have improved our members' income, we expect to do more lending and more interests will be realized ensuring our sustainability.

Through our minimal monthly deposits, we have so far managed to build a gross collection of about Kshs 800,000 (Approx. US $ 6,000) in the last 5 years and the fund is still growing. We have also received grants in kind like tree seedlings(from the former Governor of the County), farm inputs, pesticides and sometimes we get extension services in our farms from agriculture extension experts from the County government of Makueni.