A vibrant microfinance organization achieves all the best practice ratings. It ranges from acceptable levels of portfolio at risk (par) client utilization, productive outstanding portfolio and of course motivated staff.
But the current situation in most Microfinance organizations is not good at all. High par is haunting organizations each and every month. Loans were disbursed like Christmas parties. Disbursement risks were overlooked.
When some of us were joining this industry, we already found the golden rule depicted on the notice board saying “thou shall not disburse agricultural loan” and we grew while having negative attitude towards any disbursement of agriculture loan.
I have spent 16 years in this field but I have not seen good years in microfinance organizations as far as profit maximization and financial reserves are concerned. None of it has been continuously posting profits. Agriculture or no agriculture loans microfinance organizations are still limping and staggering to death.
My opinion is that we are missing a lot by not investing or disbursing the loans to the agricultural sector.
Malawi is an agro based economy. Economic activities flourish during harvesting season. Isn’t this a pure manifestation that agriculture is the hub of our economy? Why can’t the microfinance institutions reorganize themselves and see beyond the said risks and invest in agriculture. Let us think and see beyond the effects of climate change. If the smallholder farmers without much knowledge of agricultural best practices are able to make some strides in it, what more with us equipped with vast knowledge of doing things? We can make a very good business in farming.
When we want to disburse agriculture loans we should know when to start engaging the farmers. Most of us engage them during planting time. This is not the right time, the best time to engage the farmers is from land preparation period to harvesting time. You make sure that the farmers do not miss any agriculture best practice. By doing so they will be able to produce more and loan repayments will be good.
Most of us are happy that the harvesting season is around the corner, repayments will pick up but what have we done to assist the farmers during the entire farming calendar? If all of us can have a very good focus on agriculture, the economy can improve for the better.
*Joshua Mbewe writes on business and the economy and is an expert in micro finance.