May 3, 2011
Liberian Farmers’ Savings and Loan Club Marks One-Year Milestone
Club Helps Smallholders Earn Higher Prices on Cocoa
Liberian cocoa farmers who are members of the Kwadeador Savings and Loan Club recently marked a milestone: one year of successful operation with all of its original members intact.
“This money club that ACDI/VOCA introduced to us has really proven to us that we can manage our own loan clubs with no problems at the end of the cycle, where we share our money with no signs of cheating, compared with previous money clubs in our town,” says Lucy Yahnplu, a KSLC member.
The savings club, based in Nimba County, is part of the Kwakerseh Farmers’ Association, which receives technical assistance from ACDI/VOCA’s USAID-funded Livelihood Improvement for Farming Enterprises (LIFE) project.
Credit Club Optimizes Sales for Better Profits
ACDI/VOCA introduced the village saving and loan program to the Kwakerseh Farmers’ Association in January 2010 to help farmers maximize profits by selling their cocoa at optimal times.
Credit obtained through the KSLC enabled some of its members to avoid having to “pre-sell” immature cocoa to middle-level buyers. In general, these buyers pay a far lower price than what is published by the government of Liberia.
Such advance sales are disadvantageous to the farmer and the group because they interfere with the bulking of farmers’ production to attract better prices from licensed buying agents or exporters.
Innovative Structure Encourages Sustainability, Business Savvy
KSLC began with 70 members and at the end of the first year of operation it still had all of its original members. This is impressive because regular loan clubs in Liberia, known as Susu clubs, typically experience a 40 to 50 percent dropout rate.
The difference can be attributed to the club membership and lending structure. In Susu clubs, members contribute a fixed amount over specific intervals, and the money collected is then given to one member in rotation. The money is not a loan, and interest is not charged.
In contrast, the KSLC offers shares-for-purchase. Members choose how many shares to buy at each weekly meeting, with a limit of 10. Weekly limits and the price of $0.28 per share were determined when the club began.
At general meetings, with all members present, members are able to take out loans—as an individual or a group—for up to three times their total shares purchased. Members pay interest rates of 10 percent, and nonmembers can also take out loans at a 15 percent rate.
This model encourages continued participation and business-mindedness, and provides sustainability and flexibility to borrowers. It also enables farmers to become creditworthy in the eyes of Liberia’s formal financial institutions .
Members Celebrate, More Join
During the year, KSLC generated $2,050 from shares purchased and grew this to $2,180. The total was then distributed to members according to shares purchased. Social funds were also collected and disbursed to assist members with problems, such as loss of a family member. Any unused funds carried into the next cycle.
The members held a large celebration for the disbursements, and the event helped to create more community awareness of the club. At the beginning of the club’s second cycle in January 2011, it had registered 100 members—up from the original 70—and sold $525 of shares.
Though the membership seems large—most clubs have between 30 to 50 members—KSLC members are not willing to split the club because of their ambitious plans for next year. According to club chair Yah Bolie, “This club will be willing to provide [larger] loans to the Kwakerseh Farmers Association to prefinance their cocoa bulking efforts for the 2011-12 harvest season.”
Learn more about ACDI/VOCA’s work in Liberia.
Pictured at left: Members of the Kwadeador Savings and Loan Club in Nimba County, Liberia, participate in a regular club meeting.
