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Datastory: The disruptive power of credit

If you want to start a business, you need capital. Which for many, requires access to credit. While there are many ways of accessing credit, for the economically vulnerable the door is often closed, and so too the chance to leave the vicious cycle of poverty behind.

The social warrantage scheme

In Burkina Faso, one traditional means of accessing credit is known as warrantage or the inventory credit systemBRACED partner Action Against Hunger (Action Contre La Faim or ACF) began to explore how this credit system could be developed with a social component — opening the services up to vulnerable groups in rural areas.

The concept is simple. At the end of the rainy season, a farmer will set aside a portion of their surplus harvest in a warrantage warehouse. In return, the farmer is given a sum of money by a microfinance company equivalent to the market value of the crop that they have set aside. With this credit, they are then free to invest in materials and income-generating activities.

Once they have repaid the loan, the stored harvest is returned to the farmer who is now able to benefit from selling it at the beginning of the following rainy season — when demand, and therefore prices are higher, thanks to extended dry ‘lean’ seasons.

In this way, farmers get access to credit and are able to resist the temptation of selling their surplus at an unfavourable time in the season, which in turn helps them withstand some of the impacts of climate extremes.

"In rural areas, the very poor couldn’t get credit from any institution, preventing them from buying seeds and fertiliser. Our intervention helped them get credit, which in turn assisted with income generating activities."

- Andre Gountan, Head of BRACED, Action Contre La Faim.

Launching the scheme in Passoré

A fellow BRACED implementing partner, ODE (Office de Developpement des Eglises Evangeliques), learnt from this system and decided to explore its potential in the Passoré province in north Burkina Faso.

Unlike other BRACED projects that were quick to get off the ground, it took some time to construct the warehouse that stores the sacks of grain and other produce protected under the warrantage scheme. The reason for this is evident — the strong concrete building, sealed with a heavy steel door, serves the purpose of protecting the precious harvest against weather, animals and theft.

Teblebsom Saba was one of the first to try out the new system last year in the town of Bagaré, where ODE had constructed a warehouse for the municipalityDepositing a sack of groundnuts and a sack of beans she was given a loan of approximately £40 in return.

Over the course of the dry season she used the money to make cakes and brew millet beer with this money, making over £90 in profit. Upon paying her debts, she also sold her beans for a profit and used the remaining bag of groundnuts for seed, generously giving some to her daughter-in-law to do the same.

Sadly, Teblebsom’s husband died last year, leaving her with a household of six to take care of by herself. While a great loss for her, the profits she made in the warrantage system meant that the economic impact on her family was thankfully mitigated.

Data snapshot

63% of low-income women like Teblebsom can now earn a high enough income to meet their needs compared to 0% before the programme.

Stability for the future

While this innovation depends on farmers producing surplus to sell, the benefits to profit, farm yields and household management are significant. Through 11 programmes of warrantage BRACED have created access to finance for 4248 community members, 2209 of which are women.

This season, Teblebsom, whose name means ‘to hold well’, will store four sacks of groundnuts in the warehouse, with the aim of purchasing more groundnuts to process, adding value to the stock and securing her family’s stability even further.

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Datastory: The disruptive power of credit