Presentation Fin4Ag S9 by Anne Gathuku

1. 08/08/14 1
AGRICULTURAL LENDING FOR
MFIs:
The GREENLAND FEDHA
EXPERIENCE
By
Anne Gathuku
General Manager
July 16, 2014

2. 08/08/14 2
Agenda
 Overview of the small holder tea sector
value chain
 Greenland Fedha Limited at a glance
 Why Agricultural Lending Business (ALB)
 Design of the ALB in GFL
 Role of technology in ALB
 Role of Farmer organizations in ALB
 GFL performance as at June 30th
2014
 Lessons learnt,

3. 08/08/14 3
Overview of the small scale Tea
Sector Value chain
 There are over 565,000 small holder
tea farmers who are also shareholders
of the tea factories
 Average farm size per grower is 0.2 Ha
(0.5 acres)
 Average productivity per farmer is
2,100 kg of green leaf per annum
 Average production per tea bush is one
kg per annum.

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Tea Value chain cont’d….
 Tea green leaf is marketed through
factory companies, which are owned by
farmers.
 There are 54 factory companies, each
with about 5,000 – 20,000 small scale
tea growers
 Tea is processed and packaged in bulk at
the factories
 Made tea is sold through tea auction and
direct sales abroad, and some locally.

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Greenland Fedha at a Glance
 Greenland Fedha Ltd (GFL) was
registered on 24th
August 2009 under
Companies Act
 Company is wholly owned by KTDA (H).
 GFL is a non deposit-taking MFI
 GFL mandate is to provide a variety of
affordable financial services to low
income households in the tea sector in
Kenya
 Membership to GFL is voluntary.

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Target Market
 The main target market is the low and
middle income households in the tea
Sector.
 Other customers include the employees
in the tea factories.

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Products and Services
 Greenland Fedha Ltd (GFL) has developed
loan products along the tea value chain which
include:
 Producers’ loans
 Working capital loans – that cater for farm inputs
such as farm labour wages, fertilizer, lease
payments
 Angaziwa loans - Solar home energy lighting
products
 Personal protective equipment loans
 Education loans – ensures quality education for the
families

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Products and Services
 Processors and packers loans
 These loans target the employees in
tea factories who are involved in
processing and packaging of tea.

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Why Agricultural Lending Business
 25% (141,250) of the small scale tea
growers marketing their tea through KTDA
have no access to financial services. They
receive their payments in cash.
 Reduce high cost of borrowing for the
farmer
 Poor governance in some SACCOs has led to
huge financial loss by farmers
 Access to financial services through SACCOs
has been on the decline from 13% in 2006
to 9% in 2012 (FinAccess 2012)

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Design of Agricultural lending business
 GFL accepts green leaf that is produced and
delivered to the tea factories as collateral for
loans.
 The loan repayment is adapted to the payment
seasons, some monthly others annually.
 The company uses the tea factory companies
as a channel to reach the farmers.
 GFL is also using mobile banking for loan
application and disbursement as a means to
increase reach to the tea farmers.
 The loan recovery is through a check-off
system.

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Lending Methodology
 GFL uses individual lending
methodology.
 GFL accepts green leaf production as
collateral for loans.
 Farmers pledge household and/or
business assets as additional collateral
 The methodology requires a minimum
of 3 personal guarantors

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Risk Mitigation
 All loans are insured.
 The insurance covers the outstanding
loan balance in event of death or
incapacitation of a borrower.
 The loan insurance does NOT cover the
borrower OR his/ her business
 Financed assets are insured separately.

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Mobile Banking – PESA ULIPO
 GFL is also using mobile banking for on-
line loan application and disbursement as
a means to increase reach to the tea
farmers.
 These are emergency loans
 The customers can access low value
loans of between Kshs 500 – Kshs 5,000
through their phones.
 This service has helped reduce the cost
of access to credit and created
convenience

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The role of farmer organizations
 The primary farmer organizations that
GFL works with are the factory
companies which are under KTDA.
 Factories are owned by the small scale
tea growers.
 Services provided by F.O.s include:
 Provide information about the farmers e.g.
productivity
 They organize for farmer forums
 Channels of distribution
 Recovery of loans through factories

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Performance of GFL as at June 30th
2014
 Cumulative no. of loans disbursed
209,667
 Cumulative Value of loans disbursed Kshs
6.1 Billion
 Average loan size Kshs 29,000
 Outstanding portfolio Kshs 1.83 Billion
 Portfolio at risk 2%

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Lessons Learnt
 Agricultural lending is a profitable
business.
 There is need to adapt the loan products
to the farmers income seasonality and
cash flows
 Check off system has been critical to our
success

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Lessons Learnt Cont’d…
 The use of mobile banking technology
has enabled GFL to deepen market
penetration and reduced the cost of
lending for farmer and company.

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Our Aspirations
 To reach 60% of the market in the small
scale tea sector by 2015.
 Transform to a micro finance bank to be
able to offer a wider range of financial
services
 Diversify to other value chains in the
agricultural sector.

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GFL
Thank you