In Northern Ethiopia, the partnership between 2SCALE and Ras-Gayint Multipurpose Farmers’ Cooperative Union (MFCU) has the ambition to provide affordable, nutritious shiro for Base of the Pyramid (BoP) consumers. One of the set strategies to achieve this is integrating semi-automated bean-based-Shiro processing in the bean value chain. Over the past decade, the Business Champion, Ras-Gayint has been engaged in multiple business activities such as marketing of inputs, consumer goods supply, and grain marketing including the export of haricot beans. However, the Union's working capital has been limited to effectively finance the haricot bean business, and usually, this has been filled by linking with financial institutions for credit.
During the aggregation period, the union transfers cash to primary cooperatives as an advance payment to purchase haricot beans from farmers, at the price set by the Union. Most of this cash advance is usually obtained from loans given by commercial banks. However, accessing bank loans has not been easy for Ras-Gayint MFCU. Melkamu Fentahun, the General Manager at Ras Gayint explains:
To ensure that the union has consistent working capital, we always source for credit from financial institutions. Commercial banks are ready to finance and provide credit to the union. However, the process to get this money is always very tedious. Not only does the processing take very long, but they also require collateral, financial records, and too much paperwork. One must make so many trips to the bank before a loan is granted. Furthermore, interest rates are also high and not friendly to regular borrowers, especially those borrowing to finance a business. With such experiences, we had to seek viable and alternative solutions, and this was facilitated thanks to our partnership with 2SCALE.
Partnering with Lidet and Rib Saving and Credit Cooperative (SACCO) Unions
Through capacity building and facilitation by 2SCALE, Ras-Gayint MFCU established a healthy and viable business relationship with Lidet and Rib Saving and Credit Cooperative (SACCO) Unions. Lidet SACCO Union is a rural financial institution located in Nefas-Mucha town near Ras-Gayint MFCU. Coincidentally, most of the members of Ras-Gayint MFCU are also members of Lidet SACCO Union. Similarly, Rib SACCO Union is a rural financial institution located in the south Gondar administrative zone. Partnering with these two financial institutions has been a game changer for Ras-Gayint. Melkamu narrates:
We have experienced first-hand the impact of the facilitation done by 2SCALE. Thanks to this partnership, we have managed to build a viable and sustainable relationship with Rib and Lidet SACCO Unions. Trust has also been created and we no longer experience challenges accessing credit. For instance, in 2021, we received a total of ETB 13,000,000 ($243,000) from Lidet which was a huge boost for our business. This year, we have so far received a total of ETB 79,850,000 ($1,492,523) which was a loan from Lidet and RIB SACCO Unions i.e ETB 29,985,000 ($560,467) from Lidet and ETB 50,000,000 ($ 934,579) from Rib SACCO Union. This additional finance has been directed toward supporting the aggregation and processing of various bean varieties. In 2022, we have so far collected 300 metric tonnes of two bean varieties from primary cooperatives and we are yet to collect haricot beans from the just concluded season. This process has been made easier due to the financing we received.
2SCALE played a key role in facilitating discussions between Ras-Gayint MFCU and Financial Institutions. Demelash Seifu, the Inclusive Agribusiness Advisor for this partnership explains:
Together with Ras Gayint, we saw the need to initiate and strengthen the relationship between cooperatives and Saving and Credit Cooperative Organisations (SACCOs). This is because SACCO’s are more friendly and are not bureaucratic compared to commercial banks. Considering this and the immediate financial needs of the Business Champion, 2SCALE facilitated discussions with the management and board members of Lidet, Rib, and Ras Gayint Unions. The process was successful as they reached an agreement to immediately give loans to Ras Gayint without any collateral.