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Case Study: Agricultural Lending


A farmer in Madagascar harvests a rice crop by hand. AKAM and AKF work with rice farmers to help increase their yield which have increased by as much as 300 percent in programme areas.A farmer in Madagascar harvests a rice crop by hand. AKAM and AKF work with rice farmers to help increase their yield which have increased by as much as 300 percent in programme areas.Given the scarce access to financial services among the rural poor and the importance of agriculture as a critical livelihood activity, agricultural finance is a key focus area for AKAM. Several of AKAM’s institutions, particularly in sub-Saharan Africa, Pakistan, the Kyrgyz Republic and Tajikistan, have significant rural outreach and agriculture portfolios, but the unmet demand is still vast.  Where there are sister agencies, AKAM’s entities collaborate to help increase the farmers’ yield.

In the Kyrgyz Republic, 65 percent of its people work in the agrarian sector; 44 percent of them work on family farms. Agricultural output accounts for over 35 percent of the gross domestic product. Harvesting of the main crops such as wheat, sugar beets, potatoes, cotton, tobacco, vegetables and fruit, as well as raising livestock, is the main business in the country.

FMCC is the largest microfinance provider in the southern region of the Kyrgyz Republic. It works in provinces that have some of the highest poverty rates.  Given FMCC’s mandate to target the poor and underserved, it maintains a strong rural and agricultural focus with agricultural and livestock loans representing 73 percent of disbursements by number in 2010. 

The Kyrgyz Republic’s agricultural products include cotton, vegetables and fruits. As far as total production, the largest crop is assorted types of animal fodder to feed livestock. The second largest crop is winter wheat, followed by barley, corn and rice.

Animal husbandry is the main economic input in the mountainous regions and so sheep, goats, cattle and wool are popular products to sell as are chickens, horses, pigs and in some areas, yaks. This means that not all clients will be equally affected by weather conditions or disease outbreaks.

PAMF Madagascar’s focus, however, is to expand outreach in rural areas where the microfinance penetration rate is extremely low – currently at around 3.5 percent – and where poverty is high. Consequently, 62 percent of its loans are rural.  Although agriculture is a mainstay of the economy, employing 80 percent of the population, access to agricultural finance is low, particularly among PAMF-Mada’s focus areas of Sofia and Itasy. 

The focus of PAMF-Mada’s initial rural expansion has been small agricultural loans – in 2010, 48 percent of the numbers of loan disbursements were for agriculture.  PAMF Madagascar also collaborates with AKF to provide loans to rice farmers organised and trained by AKF in improved cultivation practices. To continue to support its target market, PAMF Madagascar expects small agricultural loans to remain an important share of its lending activity.  However, to support growth in agriculture more broadly, increase impact and support sustainability, PAMF Madagascar plans to introduce an agricultural SME product to develop appropriate financial services for other actors and gaps in the rice value chain in particular.

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