Small farmers in Mozambique access credit and markets by forming associations with assistance from the Cooperative League of the USA (CLUSA)

CGAP Agricultural Microfinance CaseStudy No. 5 August 2005 Small Farmers in Mozambique Access Credit and Markets by Forming Associations with Assistance from CLUSA This case study was written by Douglas Pearce and Myka Reinsch, with research support from Joao Pedro Azevedo and Amitabh Brar. Fion de Vletter contributed key field research. The authors thank Johnny Colon for his valuable suggestions as a reviewer of this case, and Richard Rosenberg and Brigit Helms of CGAP for their helpful comments as CGAP reviewers. Summary The Cooperative League of the USA (CLUSA) launched its Rural Group Enterprise Development Program in Mozambique in the mid-1990s, when the country was still overcoming armed conflict and settling into a market economy. The program organized 26,000 impoverished, isolated farmers in the northern provinces into associations that could market crops to commodities traders. These efforts led to higher farm gate prices and an 85 percent (inflation-adjusted) reported increase in average annual farm revenues. The CLUSA program assisted farmer associations to establish better relationships with the commodity traders and other agribusinesses. This enabled smallholder association members to access input credit and short-term crop advances from those agribusinesses, in return for the guaranteed purchase of their output. CLUSA also brokered a partnership with a local financial provider, GAPI, to offer solidarity group loans to the associations. As a result, associations supported by CLUSA established credit relationships that resulted initially in US $300,000 in agribusiness company credits and nearly $100,000 in loans from GAPI in 2003, with average repayment rates of close to 100 percent. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Background local agricultural sector. Many small farmers could not afford the small cash outlays (often US $20