Jorge Mora

Jorge has a small farm where he produces rice. He has been living on this land for about 15 years with his wife. He has two children, both of who are in school. He will use the loan to clean and prepare his land in order to make it adequate for rice production. He lives at home with his wife, children, and mother. He is planning to make several improvements to his home because the floor and roof need much work.

Communal Banking in Baba

This borrower is part of the newest and largest Communal Bank in the recently developed Mifex Rural Finance Program. All of the members of the Centro Agricola de Baba Communal Bank are part of an Association of Rice Farmers in the county of Baba in rural Ecuador. Their association works cooperatively to cultivate rice and commercialize the product after it has grown. As an association, Centro Agricola helps the farmers by providing access to machinery and training services. The farmers from Centro Agricola have received special instruction on financial responsibility and accounting from Codemicro, an organization that specializes in training programs geared towards the rural sector.

The members of Centro Agricola 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 others' 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 Centro Agricola de Baba 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 works with to have capital reserved for future investments or unexpected difficulties.

Below is more information about Santa Lucia 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 Santa Lucia

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 financial finance, they have turned to loan sharks for financing. They have been affected by expensive lines of credit that exceed 100% interest a year and can be as expensive as 240%. Intermediaries also exploit the farmers because of their outstanding debt. Farmers also lack skills and knowledge to commercialize their products and pay 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 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.