By Peter Marchant, KF12 Zambia
Maize is a staple of the Zambian diet. On average, each Zambian consumes about 200 kilograms of the stuff each year. Farmers across the country grow maize on small plots, but they often find it difficult to sell their crop at a profit.
Zambia is sparsely irrigated, so farmers plant nearly all of the maize in the country at the start of the rainy season in late October or November and harvest when the rains let up. The market is flooded with maize at harvest time (roughly may to July) and prices fall by as much as 30%. The government purchases around 300,000 tons of the 2.7 million produced by Zambian farmers each year, but while the government price is generally higher than the market (especially around the harvest) actually getting paid can take months and a thriving grey market for government purchasing contracts means most smaller and poorer farmers end up selling their maize to middlemen at significantly lower prices.
To take advantage of rising prices in October and November, Zambian farmers need both a safe place to store their maize and immediate access to capital to pay household expenses and purchase inputs for the next planting season. Empowerment Microfinance Institution has partnered with a USAid project called Zamace and a food facility project run by the Italian NGO CeLIM, to offer farmers just that combination of services.
Under E-MFI’s warehousing pilot program, farmers can bring their maize to local packing points where they sort it into 50 kilo bags. A truck collects the maize and deposits it in a secure warehouse where the grain is stored for a small monthly fee. E-MFI provides the farmers with a short-term loan at 2% monthly interest (due in a lump sum when the maize is sold) for up to half the value of the stored maize. The farmers can use the loan to cover household expenses and pay the warehouse fee. For E-MFI, the maize serves as collateral to ensure a high repayment rate.
Under the program, farmers will be able to sell their maize at significantly higher prices than what they would see in June or July. By combining microfinance with logistical support and organization, E-MFI and its partners help farmers get the most from their labors by providing a packaged service that neither warehousing nor microlending could offer in isolation.
Peter Marchant is a Kiva Fellow serving his second placement with Empowerment Microfinance Institution in Zambia (not yet a Kiva country). Previously he worked with AqroInvest Credit Union in Azerbaijan. Click on Azerbaijan Borrowers for a list of Azeri borrowers currently on Kiva or check out Supporters of Azerbaijan to join the Azerbaijan lending group.