Maria Santillan

Maria and her husband Mario have been living on their land for about ten years now. They have been able to slowly build their home out of hard work, although it is still admittedly in need of much improvement. Maria has a 7 year old daughter who she works hard to feed and educate. Her husband is a field worker who is mostly employed in big farms outside of their town. Meanwhile, Maria tends to their own piece of land with the help of Mario whenever he is out of work or she really needs him. They hope to invest in fertilizer and pesticides to preserve the crops they have already planted.

Communal Banking in Baba

This borrower is part of one the new Communal Banks formed in the recently developed Mifex Rural Finance Program. All of the members of the Anzuelo Baba Communal Bank are part of an association of rice farmers in the county of Baba in rural Ecuador. Their organization, El Anzuelo Asociacion, works cooperatively to help their members cultivate rice and commercialize the product after it has grown. Most recently, El Anzuelo was able to start a program that improved their members access to watering services.

The members of La Asociacion El Anzuelo de Baba will use the micro-loans to prepare their lands and cultivate rice on their farms. Because they form part of a communal bank, they are all each other’s guarantors for the loan. This means that if for some reason one person in the group cannot fully repay the loan, the other borrowers and the association are responsible for the amount in default. The members of the bank also participate in a program designed to teach and encourage savings among the group. Promoting savings is often forgotten in many micro-finance programs, but Mifex believes that is imperative for the communities we work with to have capital reserved for future investments or unexpected difficulties.

Below is more information about Baba compiled by Luis Crespo and Robert Edgar of the Mifex team when evaluating the potential of the sector for the Rural Finance Program.

Economy of Baba

The people of Baba have been organized since the days of Gran Colombia when Ecuador was yet to be a country. The area has always been popular because of the extremely productive lands that gave way to cultivation of cacao for decades. Now Baba is a county in the province of Los Rios in the coastal region of Ecuador. For most of the latter part of the 20th Century it was a cacao and banana producing sector. Most of the surrounding areas of Baba in Los Rios are owned by large mulitnational
companies such as Dole, but Baba is a sector characterized by the small and informal farms.

Rice production has now turned into the main economic activity of the sector as about 80% of the people are rice farmers. Cacao is still very popular in the area, but because of the long cultivation cycle people prefer to invest in rice. The lands in Baba are very fertile though, and most farmers in the sector often grow other crops, such as plantains and soy beans
as secondary sources of income. Many farmers also keep livestock as emergency sources of food and income, commonly resorting to selling a chicken or pig if they are in need of cash.

Rice Farming in Baba

Most of the people in the Baba area are small farmers. They produce about 80 sacks of rice per hectare of land. In order to farm they first must prepare the lands by removing weeds, plowing and leveling the lands. This is the most difficult part for the farmers in Baba, who often lack the necessary machinery to properly plow the lands for rice production. After appropriately preparing the lands, the farmers fill an area with water to form what is known as a paddy field, because rice is a very water intensive crop. The rice seeds are either dispersed freely (the process is known as boleo in Spanish) or hand sowed. Once the rice has grown, most farmers rent machinery that helps them gather their production.

Access to Credit

One of the biggest struggles in the area has been the lack of credit due to the absence of any type of financial institution.
Because people do not count on formal financing, they have turned to loan sharks, paying between 100% and 240% annual interest. Intermediaries also exploit the farmers because of their outstanding debt. Farmers also lack skills and knowledge to commercialize their products and earn fair prices for their crops.

Risks

The largest risk in the sector is due to absence of watering systems. Although Baba is in the province “Los Rios” (the rivers) there is a severe problem with access to water. The lack of infrastructure in the sector does not allow the small farmers to benefit from the presence of the many rivers in the area. If the winter season is too dry, it is likely that the lands will not be sufficiently fertile for rice production in the summer. On the other hand, if there is too much rain there are not any drainage systems to prevent flooding and the crops are often ruined. Generally speaking though, Baba is a very productive sector where the lands yield all types of crops including rice, cacao, corn, watermelons, plantains, and soy beans.

Loan Use

The loans in this sector will mostly be used to to buy soil, seeds, fertilizer and insecticides. Many clients will use the capital towards renting machinery and equipment necessary to effectively work and prepare the fields. Clients also typically use a part of the loan to buy livestock in order to raise and have as reserves. The loan repayment schedule is different from the typical micro-entrepreneur because farmers see the profits from their investments 5 or 6 months after making their initial expenditures. Mifex asks our rural clients only to pay 50% of the capital in the first 6 months of the loan. The rest of the debt must be paid in the seventh and final month.