Although the concept of microfinancing is familiar, many people don't realize it's still prohibitively expensive for rural populations. With interest rates from conventional banks and the microfinance system at 18 and 24 percent, community groups are forming to provide one another alternative access to credit and loans.
Carrying lower interest rates of 5 or 10 percent, these Community of Savings and Internal Credit groups, or SILCs in French-speaking Senegal, are one way rural communities are banding together to support each other to provide access to funds for buying quality seed and other agriculture inputs.
As part of the community-led approach of the USDA-funded Millet Business Services Project (MBSP)—implemented by NCBA CLUSA in Senegal—access to credit was a major barrier for project clients. Through training, rural communities are forming SILCs so that they can finance and put into practice the new farming and processing techniques they have worked on with the millet project.
In a SILC group, the community sets up four funds: a savings fund, credit fund, solidarity fund and emergency fund. All of these funds are available to all members, without any binding warranty. Compared with the microfinance institutions that set up their local branches but answer to larger banks, the small SILC groups are set up by the people who comprise their membership—the beginnings of what we know as credit unions. These SILC groups are thus near to their members, accessible and subject to oversight by the population that relies on them.
Accessing finance was difficult for Latyr Faye, a 55-year-old farmer with 10 children and 40 other dependents in Yenguele Village. He wasn’t able to get a loan to buy farming inputs and equipment before the planting season, compounding the financial cycle.
“The microfinance institutions that we borrow from impose conditions we cannot fulfill,” Faye said.
Having worked with NCBA CLUSA on the first phase of the millet project, when the project returned to the area a group from Yenguele jumped on board for more training.
“We mobilized to join the SILC groups. We started the work ourselves,” Faye said. Since then, his commitment earned him the nomination of president of the producer organization in his group, which included facilitating access to funding through the SILC.
“Groups are formed and members start saving for the long term to prepare for the upcoming crop year so we can acquire quality inputs and seeds at the right time,” he said. And the group's savings are helping the larger community as well. Beyond agriculture inputs, the other funds provide clear financing for other community needs.
“The solidarity fund set up allowed us to help each other during baptism ceremonies and funerals, and the emergency fund allowed us to pay for urgent expenses like prescriptions,” Faye said. The trust among community members in the SILC has meant they are able to keep rates low and provide financing for populations who could not access it before.
Learn more about the Millet Business Services Project, and it’s community-led approach here.