This assignment was done by a student of Mocu in viewing the economic activities found within the ghona village at the chekereni market

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A FIELD REPORT ON ACCESS TO FINANCE FOR SMALL HOLDER FARMERS IN GHONA VILLAGE.

ABSTRACT:

This report has aimed at examining the accessibility of financial services particularly the farmers conducting the agricultural business within the rural societies at large. Specifically, the report focused on Ghona Village, in Chekereni in Moshi District. The concerned individuals involved were all road-side business participants (whereby only women were the ones found at present) at the study area who were been interviewed. The information was collected through the use of interview schedules (mostly open interview), observation focused group discussion and documentary review. The findings of the study revealed that financial services accessibility in Ghona village at general, is poor in general where as to quick access to cash money is through mobile banking such as the mpesa tigo pesa and airtel money and also the financial services like loan and credits are available through informal organized cooperative societies which were particularly the VICOBA’S and the TUPENDANE COOPERATIVE SOCIETY. The findings however showed that the financial services are crucial and have a significant role in empowering, improving, and developing the agricultural business activities of the several individual households. There were challenges and opportunities arising from the accessibility of such financial services to the Ghona village residents. Some of the opportunities that emerged as a result of scarce financial services is the result of the establishment of local cooperative societies i.e. VICOBA (Village cooperative Bank Associations) and TUPENDANE COOPERATIVE SOCIETY which they have facilitated to the accessibility of small credits to business women and local farm business men individuals within the Ghona village at Chekereni. The main challenge which has commonly been observed in the accessibility of such financial services is that such cooperative societies are mostly operated by women and also managed by the women therefore they exclude the interests of business men (they don’t entertain the demands of men at all) With the above findings, the study recommends that district commercial/business officers should coordinate and facilitate education particularly the financial education in financial accessibility development and product development and skills development for the agricultural sellers in the area. Also, there is a necessity of establishing a financial institution in the area. Moreover, business environment should be improved for the better health of customers as well as individual sellers. Finally, different agricultural promoters, trainers, facilitators, planners, decision makers and educators should undertake a thorough study throughout the country where there are several challenges and opportunities equivalent to this kind which has been observed in Ghona village due to its significant impact from the individual household level to the nation at large.

Key Words: Access to finance, Small holder farmers, financial impact.

INTRODUCTION:

General background information:

Small-holder farmers' access to finance has remained one of the major obstacles to an agricultural revolution and the speedy eradication of poverty in society.

Unexpected hindrances arising from the agricultural process, such as dependency on rainfall and poor farming systems have been making lending facilities hesitate to disburse loans to farmers for large-scale investments to boost productivity. A land title is one of the essential prerequisites for loan qualification set by the lending institutions, but which has been denied to most small-holder however it’s a very bureaucratic the process in general of obtaining the land title in general for an individual within the Tanzanian Country.

Considering Ghona village as a case study which is located in rural area within the Kilimanjaro region where social services are scarce comparing to the urban areas, it is famously known for a variety of small business activities particularly the agricultural produce as business products. However financial services accessibility is limited to local informal cooperative societies. It is comprised with a population of approximately 2,600 residents residing in such a particular village. Chekereni is the name of the market famously known practicing the selling and buying activities of the agricultural products.

Most of the villagers in Ghona village are peasants. There is only a single institute that facilitates the agricultural activities improvement known as (KADC ) i.e. Kilimanjaro Agricultural Development Centre mainly initiated as a project foundation with the support from the government. It was established in 1994 by the ministry of agriculture

In spite Ghona village been faced with a variety of challenges and difficulties to the accessibility of finance to their small holder farmers, Tanzania in general has established a conducive various strategies and policies favoring the such interest of smallholder farmers at general. Such policies are like the VISION 2025 – whose purpose is to ensure food self-sufficiency and food security, Mini-Tiger plan 2020 - whose purposes are such as (One village one product program (OVOP) Cash crop Special Economic Zone program, National Strategy for Economic Growth and Reduction of Poverty (MKUKUTA) - Improve food availability and accessibility at household level in urban and rural areas, and Property and Business Formalization Program (MKURABITA) - reduce individual household poverty plus Improve the living standard of the targeted groups

OBJECTIVES

Main objective:

The main objective of this report is to analyze the phenomenon and the perception on the accessibility of the finance to smallholder farmers who are the peasants in Ghona village

Specific Objectives:

The specific objectives of the report rely on the areas such as

· Analysing the financial intermediaries presently prevailing and available in a particular area

· The challenges faced upon the accessibility of finance to small holder farmers

· Policies initiated by the government favoring the access to finance to such smallholder farmers

· The impact of finance to small holder farmers to their general livelihood at general both the positive and negative sides

· Proposed agricultural market access support strategy for Tanzanian smallholder farmers.

METHODOLOGY:

A visit was made to Ghona village at Chekereni in Khai district to collect information on agricultural business activities and finance accessibility to small holder farmers respectively. Interviews were held with key informants along the value chains of respective agricultural business activities. An interview is a conversation between two or more people where questions are asked by the interviewer to obtain facts or statements from the interviewee. Different interviews are also used in journalism and media reporting in various employment-related contexts.

Types of interviews that were conducted

Informal, Conversational interview

No predetermined questions are asked, in order to remain as open and adaptable as possible to the interviewee’s nature and priorities; during the interview the interviewer “goes with the flow”.

General interview guide approach

Intended to ensure that the same general areas of information are collected from each interviewee; this provides more focus than the conversational approach, but still allows a degree of freedom and adaptability in getting the information from the interviewee.

Standardized, open-ended interview

The same open-ended questions are asked to all interviewees; this approach facilitates faster interviews that can be more easily analyzed and compared. The most commonly method of interviewing that was been used within the field

Also this report was complemented by an observation as another aspect of the research methodology where there were different activities taking place alongside the road and within the farm such as the process of cleaning the dirt in carrot products and also the spraying of insecticides within the crops at the farm as to such information can be attained through the observation techniques.

Observation is the active acquisition of information from a primary source. In living beings, observation employs the senses. In science, observation can also involve the recording of data via the use of instruments. The term may also refer to any data collected during the scientific activity. Observations can be qualitative, that is, only the absence or presence of a property is noted, or quantitative if a numerical value is attached to the observed phenomenon by counting or measuring. The data collection exercise was followed by mixture of data collected to create information out of it, organizing and producing this report.

Focus group discussion can also be included as one of the methodology evolved in the collection of data of this particular report. A focus group discussion (FGD) is a good way to gather together people from similar backgrounds or experiences to discuss a specific topic of interest. Different business women expressed a variety of their experiences in the performance of their daily business activities at general in context of challenges they have been facing in their daily life routine from time to time.

FINDINGS

Economic activities performed by households i.e. chekereni

There are several economic activities that have been observed taking place at chekereni. Most of such activities the main participants are the women who play a vital role in performing their daily activities.

Selling and buying of farm products as an economic activity.

The most common type of economic activities which have been observed are the selling and buying of the farm products where by such activities the main participants are women and their business activities are been conducted alongside the road. Their customers are travelers who pass through such a particular road going to Tanga region or even moving from Tanga region to the Kilimanjaro region.

Example of the farm products evolved in the buying and selling activities are mostly the vegetables particularly such as the tomatoes, eggplants (known as nyanya chungu), okra and onions plus the carrots. Not only vegetables but also products like Irish potatoes and mango fruits are also part of the farm products been bought and sold as part of an economic activity within the Ghona village at chekereni.

Their products are some been obtained from the farms presently available in such a particular area but in huge part of contribution of their products is from the Mbuyuni market available at Moshi Municipal. The Mbuyuni products are relatively cheap hence affordable to the business women to purchase them for reselling to the Chekereni market at the Ghona village. The mostly common products been bought from Mbuyuni market for the reselling in chekereni market are the Irish potatoes and the carrots.

It is a very profitable business and a variety of women has benefitted financially from the selling and buying of such farm products within the chekereni market at Ghona village. For instance a tin of Irish potatoes that costs Tshs 4000 at chekereni is sold for amount of Tshs 9000 to Tshs 12000 hence a profit obtained is over a 100% which is benefiting directly the many business women of the chekereni market at Ghona village.

The common challenges that are accompanied with this type of economic activity from the interview that had been conducted from the field one of the respondent commented that price fluctuation are the main challenges facing them. The prices of their agricultural products are never constant or even standard something which affects the growth and development of their business activities hence failing to prosper further.

Farming activities performed as part of an economic activity

The people or residents of the Ghona village are peasants who have engaged into variety of farming activities. The farming activities of chekereni depend on rainfall, irrigation and wells as source of water hence becoming more sustainability from time to time. The well been used is of deep distance going below creating constant supply of water also the irrigation system which has been created creates constant availability of water to the plantations hence crops growing very well in terms of their quality and quantity. Most of the crops been cultivated from a variety of farms present at the Ghona village are mostly the vegetable crops particularly such as the onions, cabbages, carrots, Chinese and tomatoes.

They are well organized (farmers and peasants at general) with the support of the extension officers contribution on the maintenance of such farms a variety of crops which have been cultivated have continued to be sufficient from time to time. However Kilimanjaro Agricultural Training centre (KATC) as an institute initiated through the project by the government and the external donor funds has also played a vital role in improving the farming activities at general performed within the Ghona village at chekereni.

An illustrated example of a farm of onion production found in Ghona village

Challenges:

The main challenges that have been facing the farmers of the ghona village is the fertilizer problem which is scarce at general and very expensive. The insects eating crops have contributed drastically in retarding the development and growth of the farmers, (Tuta absoluta) is one of the common diseases in Swahili known as “kantangaze” destroying different crops in the farm as no cure has yet been established to prevent them from destroying the crops

Soil fertility is another challenge that has been observed to the tomatoes plantations within the farm. There is much use of fertilizers on the land than the manure which destroys dramatically the fertility of the soil.

Inadequate educated officials and elites is one of another challenge facing the farmers of Ghona village. The extension officers are few i.e. scarce to satisfy the demands of the farmers in terms of educating and improving their cultivation activities in general so as to increase their farm products within the market.

Carrot processing as one of an economic activity.

Carrot processing is another economic activity performed at the chekereni market in ghona village. It is also performed by only women. The processing of the carrot is for the sake of removing the dirt obtained from the cultivated carrot within the farm. The stream water is the main source for washing which is poured into the sack of a carrot and two women start shacking the sack until the dirt washes away, the dirt mostly is inform of mud and dust. With the way they perform such an activity you may be inspired because they almost look like men doing such an activity they are very strong and powerful. The reason why women instead of men as been interviewed from the field one of the women commented that men prefer selling on shops than engaging into the processing of such carrots. They don’t value such an activity at all. They don’t see its worthiness to their improvement in their livelihood economically and socially.

Using a sack saves time and simplifies the bulkiness load of the carrots within a sack than cleaning such carrots by using a hand. And such carrots durability is maintained through the sacks as few drains of water remain in the sack preserving the dry condition of a carrot. However the healthy concern of the water been used is not favorable as the stream water pouring from the highland is the one been used therefore worm diseases in such crops can be presently available. Someone in the highland may urinate on such water and still the same water can be used in cleaning such carrots with or without their knowledge.

An illustrated diagram of women cleaning the dirt in carrots as a way of processing it.

Lending and credit provision as an economic activity

Lending and credit provision is another economic activity been observed within the ghona village. Different individuals have managed to build up several cooperative societies mostly the informal and local ones for the sake of been able to obtain a loan and support each other as member of the groups in lending activities.

MWANGAZA SACCO'S is one of a cooperative society mostly favoring the interests of business women alongside the road in lending and credit provision activities. Members are the business women alongside the road. They do not entertain the external members whose residents are not permanent in their ghona village. And each member is well known in such a cooperative society in terms of the household members and the type of business activity she daily conducts at chekereni market in ghona village.

Village Community Banks are also small cooperative societies which are informal prevailing within the Ghona village. The members are also the women who also assist each other in financing themselves from time to time.

TUPENDANE SACCO'S GROUP is another cooperative society that was observed engaging in the economic activities of lending and credits in particular. It was established from year 2008 up to present. Such a group has developed further and even established its own shop. This shop is where members buy basic needs such as oil, flour at lower price where as the group in general obtains the profit from such shop which in later it is been redistributed among members. (They call it duka la mkononi). This group is comprised of 37 members who are women mostly. Their objective is to support each other i.e. the members in ups and downs of the life struggles particularly the economic hindrances that face every individual

Such group does have a constitution guiding them in performing their daily activities. The members also do engage in cooking activities at different areas within the Ghona village at chekereni.

Rural financing in Tanzania basing on Tanzanian rural areas with accordance of Ghona village at chekereni

General framework of Agricultural Finance within Tanzania

Tanzania’s economy is widely occupied with agricultural activities, with over 78% of the working population relying on this sector. Agriculture contributes a sizeable proportion of the GDP (over 27%), a major source of foreign exchange earnings (over 30%) and food security. Besides its importance to the economy and people’s livelihood, the sector continues to face sustainable growth hindrances. One of these limitations is lack of financing.

Agricultural finance in Tanzania has traditionally been limited to providing credit to large agricultural producers and processors. Little emphasis has been to small scale farmers particularly in the provision of credit, insurance and payments facilities.

However there are different measures that can be likely applied to improve the welfare of agricultural financing within the rural population:

· Monetising surplus agricultural production (over and above what farmers need to feed their households) to provide cash that can service other needs.

· The need for increased investment in assets and other mechanisms that increase agricultural productivity, e.g. small-scale irrigation and processing for value addition.

· Development of risk management tools and systems specific to agriculture, especially the ones with relevant methodologies and those synchronies the financial service requirements with agricultural cycles (e.g. warehouse receipts and related insurance products).

It is important to note that the success of agricultural finance is also closely linked to other factors. Also it has been observed that other factors affecting agribusiness apart from financing are access to infrastructure (e.g. roads, connectivity, water and irrigation etc.) markets, information (financial advisory resources, usage of credible business advisory resources, and exposure to appropriate agricultural advice/support) and social capital (access to group networks and support structures). Therefore the success of agricultural finance is closely linked to the access farmers have on those aspects.

Financing accessibility perspective in rural areas:

The majority of the Tanzanian population (over 78%) leaves in rural areas engaging in various economic activities including agribusinesses. However, according to Fin Scope 2009 over 60% have no access to financial services.

The strategic priorities in this area are to build capacity of the communities and institutions to innovate and explore the possibilities for linkages in the agribusiness value chain. This aims to build sustainable systems at the grass root level.

The key driver on this area is support of the informal financial institutions (IFIs), popularly known as “savings groups”.

The IFIs are channels such as Village Savings & Loan Associations (VSLAs), Village Community Banks (VICOBAs), Savings & Credit Associations (SACAs), and Rotating Savings & Credit Associations (ROSCAs). It is evident that the IFIs are important in the Tanzania financial market, particularly in terms of outreach, relevance and convenience in the rural areas. According to Fin Scope Survey (2009), a larger percentage of the population (27%) relies on informal channels compared to the formal channel (12%) for financial access.

In an effort to organize IFIs and rural finance growth, the government and nongovernmental organizations have over the years been supporting initiatives to build capable informal financial institutions in the country particularly within the rural areas.

Financial record keeping in rural context at Ghona village in Chekereni

The level of education of the most peasants and business women at Ghona village are standard seven leavers. They are not well educated to have financial knowledge on recording appropriately the financial activities in terms of their profits, their cost of production and revenue generated from time to time so as to analyze the trends of finance whether if it is profitable.

Also most of the graduates neglect taking their career in rural areas due to such an area having scarce social services hence making most of the elite professionals of finance activities residing in the urban areas rather than them living in the rural areas.

Summary and conclusion:

Summary:

The economic activities in general from the study area has a potential contribution on socio-economic and livelihood development to the individuals concerned although finance act as a blood to stir up to prosperity of all such mentioned economic activities.

Also as it has been analysed the business is age perceptive but not gender perceptive. It is age perceptive in a sense that it involves people of at least all age groups (working age group). This has revealed that even elders and youth can participate in the business. But it is gender based since men seem to be not involved in the business by having a perception that the business belong to women and not otherwise.

The findings of this study have revealed the difficulty economic condition prevailing within the rural society in accessing a variety of the financial services. The selling of vegetable business at Chekereni area and farming activities have socio-economic importance since from the business, people have been able to purchase land, take care of their families, send their children to school, build houses, and invest in several other assets at home.

It was also revealed that the business was part and parcel of the weapon to food insecurity in the study area. Most of the village members were assured of availability, accessibility as well as affordability of food. Through farming activities people in the study area have also managed to have access to other socio-economic opportunities like increased social capital, business networking with other people within and outside the village. They have also access to loan opportunities hence improving the accessibility of financial services to small holder farmers through the formation of informal cooperative societies as well as having business (entrepreneurial) education provided by Opportunity Tanzania located in Moshi Municipality.

Respondents have proposed several issues for the improving vegetable business not only in the area but this can also be applied somewhere else in the country. Some of the issue proposed included: providing them with financial training programs on entrepreneurial skills, market accessibility easy access of loan for business expansion especially for external market accessibility and education in business ethics.

Recommendations

The private sector and the government in general should establish several financial intermediaries in rural areas that favor the interests of rural individuals for example at Ghona village there is no any commercial bank presently active over there.

Also improving the presently performing financial organizations particularly the informal cooperative societies through provision of subsidies and credit so as to develop and grow more in their involvement of their financial activities.

Gender equality should be observed since men also have their significance in improving and developing the economic financial prosperity of the society in general within the Ghona village at chekereni.

Conclusion:

Agriculture in Tanzania is profitable and there are several individuals who have managed to become potential entrepreneurs and big owners of different assets due to their involvement in the agricultural activities. If the finance accessibility is well improved at rural areas particularly within the Ghona village it is most likely to have a profound number of business men and women becoming rich and richer due to their engagement of several agricultural activities practiced within the rural areas.

References:

Komba,C.L. & Hizza,E.L. (2014) Livelihood implications of rural communities: A case of vegetable business at chekereni area, Moshi district. Vol. 2, Research Report series – MUCCOBS

Financial Sector Deepening Trust (FSDT) Agriculture and Rural Finance

http://www.fsdt.or.tz/theme-areas/agriculture-and-rural-finance/ accessed on 10.1.2016 at 00:25 hrs

Towo, N. and Kimaro, P. (2013) Warehouse Receipt System: A Solution towards Smallholder Farmers Financial Constraints, Vol. 2 Muccobs Working Paper series

IFAD, Independent Office of Evaluation (2011). Rural Financial Services Programme and Agriculture Marketing Systems Development Programme. Interim Evaluation IFAD

Interview definition – Wikipedia

https://en.wikipedia.org/wiki/Interview accessed on 6.1.2016 at 14:53 hrs