Grey lives with her parents on their farm. Her parents are too elderly to run and manage the operations of the lands so they have given the responsibilities to their daughter. With the guidance of her parents, Grey is planting rice on the lands and she is gaining much experience. She wants the loan because she needs to invest in seeds and fertilizer. She also wants to avoid borrowing from informal lenders because her parents have told her about the risks of their interest rates. She hopes she can save the profits from the land in order to start a family of her own some day.
The Santa Lucia Communal Bank
She is part of one of the newest Communal Banks in the recently developed Mifex Rural Finance Program. All of the members of the Centro Agricola de Santa Lucia Communal Bank are part of an Association of Rice Farmers in Santa Lucia. They will use the microloans 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 Centro Agricola 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 microfinance 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. Special thanks to Mario Balazantegui who provided expert insight and contributed to the development of the alliances with the local organizations.
Economy of Santa Lucia
Santa Lucia County has a population of about 33,000 people. The sector is fit for rice cultivating because it is not in the lowlands and therefore it is not at risk of flooding. There is also great access to water because of the Daule River, which is accessible to many of the farmers in the area. About 70% of the farmers have basic infrastructure for watering their crops.
Rice production is the main economic activity of the area as about 80% of the people are rice farmers. Almost everyone is either directly or indirectly involved with the rice production, as they produce, commercialize or participate in activities that add value to the product. Within the county, there is a small town also named Santa Lucia. The town is filled with many small businesses and it serves as the social and commercial hub of the area.
Rice Farming in Santa Lucia
Most of the people in the Santa Lucia area are small farmers. They produce about 100 sacks of rice per hectare of land. In order to farm they first must prepare the lands by removing weeds and plowing. The farmers then 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. A risk factor does exist in rice farming because of drought, but in Santa Lucia this is somewhat mitigated by the access to water form the nearby river.
Access to Credit
The biggest struggle in the area has been the lack of credit. Because people do not count on formal financial services, 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.
The loans in this sector will be used to to buy soil, seeds, fertilizer and insecticides. They will also be used to prepare the land prior to farming, to plant the seeds and purchase other materials. The loan repayment schedule is also different from the typical microentrepreneur. Because farmers see the profits from their investments 5 or 6 months after making their initial expenditures, Mifex asks them 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.
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