5,000 Rwandan maize farmers to get fairer prices through warrantage - new RIUtv film
27 September 2010
Earlier this month RIU news
featured RIU Rwanda's work on warrantage. This story generated a great deal of interest from policy makers and practitioners alike, so RIUtv went to Rwanda to find out how the warrantage scheme works.
identified warrantage as a potential solution to a problem highlighted by the Rwandan Maize Innovation Platform
: cash-strapped farmers often had to sell their maize crops to traders whilst it was still in the field at rock-bottom prices. This created a vicious circle of debt-dependency and meant that there was little prospect of these poor farmers being able to afford the productivity improvement programmes RIU Rwanda was advocating. The danger was that the poorest farmers would be left behind.
RIU Rwanda therefore facilitated the establishment of a warrantage scheme. This involved bringing in consultants with the required expertise and then removing the bottlenecks to the introduction of warrantage, including providing an initial grain supply as surety.
Djamila Mukeshimana was one of the first farmer to join the scheme. She explained the situation she faced:
"... those merchants came before because they knew people were needing money. They buy at a lower price because we don't have any options for getting money. That's why warrantage is good for us farmers."
The price paid to farmers for their maize under the Rwanda warrantage scheme can be more than double that received previously; e.g. 70 RWF/kilo (around US 10 cents) when sold in the field to traders compared to 150- 160 RWF/kilo (around US 25 cents) when traded at more advantageous market prices under the warrantage scheme.
RIU's approaches often involve the private sector. But in some situations there is such an imbalance between the buyers and sellers that these weaknesses can easily be exploited - as in this case. RIU Rwanda saw this problem and realised that warrantage offered a practical way forward. Instead of allowing excess profits to be generated by the traders, a partnership between the Nyagatare Maize Investment Group (NYAMIG) Ltd (a commercial offshoot from the Maize Innovation Platform) and the Duterimbere IMF (Institution de Micro-Finance) bank has allowed farmers to get loans at preferential interest rates using their grain as surety. The bank and the farmers decide on the most appropriate time to enter the maize market to maximise the income to the farmers. The warrantage scheme has also meant that many previously un-banked farmers have opening bank accounts.
Because profits are being captured by farmers rather than middlemen, the end price paid by the consumer should not be affected. Interestingly none of the traders who previously bought directly from the farmers now trade with the NYAMIG.
Augustin Bahorana of the Rwanda Development Agency explained that:
"The credit generated by the scheme is used [by farmers] to reinvest in good seeds and fertilizer to restore the soil fertility and increase productivity."
This move towards investment in greater productivity means that RIU Rwanda can see a clear exit strategy for their programme.
, from RIU Rwanda said:
"The news looks good. In terms of progress, we started with only 60 farmers in August 2010. We have now reached around 1000 farmers by September 2010 and aim to reach 5000 farmers next season by February 2011."
Warrantage is an approach originally used by European farmers in the 19th century. According to FAO
, to operate it needs three essential elements to be in place: 'a well functioning farmer's association (Nyagatare Maize Investment Group (NYAMIG) Ltd), an interested local bank or other financial institution (Duterimbere IMF bank) and a safe place where to store the produce. Crucially too, the crop used to guarantee loans must be non perishable and its price must have a proven record of rising in the months after harvest. Finally, agricultural produce as a guarantee for a bank loan needs to be recognised by the banking legislation of the country concerned.'