Opportunity International, one of the world's largest microfinance organizations, announced it has received a $1.2 million grant from the John Deere Foundation to provide increased access to financing for the hunger-afflicted in Africa
Through Opportunity International’s unique financing model, the grant will have a $10.6 million economic impact over the next three years. It will benefit thousands of farmers, food processors and retailers and their ability to provide affordable food to the rural poor in Malawi and Mozambique.
The John Deere Foundation grant will enable Opportunity International to implement low-cost, technology-driven programs that provide a full range of microfinance services to poor families living in rural areas in Malawi and Mozambique. The goal of the joint project is to create a sustainable framework in Africa to increase food production, food availability at local markets and family income for food.
“Our alliance with John Deere will allow us to dramatically expand access to capital and financial services for underserved populations in Malawi and Mozambique,” said Christopher A. Crane, president and chief executive officer, Opportunity International. “Microfinance contributes to poverty alleviation and food security by supplying loans, savings and microinsurance that enhance investments, reduce the effect of shocks such as illness of a wage earner, bad weather, theft or other such events, and lead to an increase in food consumption.”
Over the next three years, the John Deere Foundation grant will allow Opportunity International to open four new branch offices and finance 6,800 agricultural businesses ranging from fresh produce stalls at local markets to processing cooperatives and small maize farms. Entrepreneurs receiving the loans will create 3,500 additional jobs. Altogether, 62,000 family members will benefit from enhanced food security with the increased income derived from these enterprises.
“We are excited about our new alliance with Opportunity International and look forward to the significant impact that will be achieved in Malawi and Mozambique,” said John Bustle, vice president, John Deere Foundation. “These quality financial services will help thousands of people thrive as their agricultural and food-related businesses develop and will result in significantly increased food supplies for countless others.”
Due to Opportunity International’s unique business model and repayment rate of 98 percent, the impact of the John Deere Foundation grant on the global food crisis will be substantial. As client loans are repaid, the money becomes available to loan again and again. Clients’ savings accounts and borrowed financial funds add to the loan pool available to clients. Through the recycling of loans, mobilization of savings deposits and financial leveraging, the $1.2 million grant will amount to a total economic stimulus of $10.64 million over a three-year period.
Services to Hunger-Afflicted Malawi and Mozambique
In Malawi and Mozambique, hunger is an everyday reality. Malawi faced a severe food crisis in 2004, when an estimated five million people (40 percent of the population) suffered from a prolonged famine. To this day, millions of people in Malawi are struggling to cope with hunger and chronic poverty. Mozambique’s economy has been undermined by the aftermath of civil war and numerous natural disasters in recent years. Currently, 70 percent of the population lives below the poverty line and less than 20 percent has completed primary school.
Approximately 80 percent of the population lives in rural areas. The rural poor constitutes both the greatest unmet need and the largest underserved market for microfinance services in both Malawi and Mozambique. Providing financial services to small-scale agricultural producers can address problems associated with high levels of poverty, low levels of production and rural-urban migration.
Opportunity International Bank of Malawi will open the first satellite office in Mponela, located in the Central Region, followed by one in Zomba in the Southern Province. Banco Oportunidade de Mozambique will establish a full-scale branch in the Inhambane Province and a satellite office in nearby Gaza Province. The biggest barrier for the poor in remote areas is the time and money required to travel to the bank’s main branch office to do business. Time lost on unreliable transit systems translates to lost business revenues. Both banks will install low-cost, small satellite branches in rural hubs such as marketplaces. These outlying branches will provide easy access to financial services that can impact the profitability of clients’ microbusinesses, reduce transportation costs, provide convenient banking and increase the safety of savings deposits.
Additionally, both banks operate Mobile Service Centers that service rural markets by bringing the bank from the city hub to outlying areas. The armored vehicles offer nearly all of the capabilities of a bank branch, enabling customers to do banking within walking distance of their homes and businesses. Mobile banks can cover up to 25 service points as far as 120 km away on a weekly basis.
Opportunity International’s current product line in Malawi and Mozambique includes:
• Business loans provided to groups of seven to 10 entrepreneurs whose businesses need startup and early-stage expansion capital under a group guarantee. Clients receive training in business and health education from their loan officers and outside groups.
• Individual business loans designed for microenterprises with greater need for capital, and also for clients graduating from group products whose businesses have grown. These loans may be secured with some form of collateral, or through co-guarantors.
• Indexed loans with crop insurance for farmers (Malawi). A farmer takes a loan and purchases better seed and more fertilizer to increase yields, knowing that if the rains fail, a portion or the entire loan will be repaid by crop insurance. Opportunity International is the project leader for the World Bank in this groundbreaking work.
• Safe, interest-bearing savings accounts that offer rural families security and stability for the first time, since the majority of poor households have been excluded from formal deposit services. “Dead capital” becomes productive as the accumulated savings recycle back into the local economy.
Immediate Impact for a Farmer
Malawi farmer Augustin Kamanga raises poultry and grows groundnuts, barley, maize and soy beans. With an initial loan of $40 from Opportunity International, he nearly doubled his harvest of groundnuts, which set him and his family on a path of hope for the future. “I am food sufficient since receiving my first loan, which makes our lives better,” said Kamanga, who is planning to expand his farm by adding dairy cows, using fertilizer to increase production and hiring two workers from his village.