MFI Report

AgroKredit Plus is a non-profit micro-credit agency (MCA) committed to helping the agricultural production of small plot farmers. It was founded in spring 2005 by TES Centre in Osh (registered on 24 March and licensed on 6 April 2005) to fill a gap in the credit landscape of Southern Kyrgyzstan. Although a number of credit organizations are already successfully operating in rural finance in the South of Kyrgyzstan. However, a. demand for credit still exceeded supply by far b. many agencies were not interested in processing loan applications under 500 USD c. since most credit agencies needed physical collateral to secure loans, procedures were often too time-consuming with a bureaucratic registration of collateral Most of credit institutions in South of Kyrgyzstan in actual fact not combined credit with consultation and the supply of agricultural inputs. A weak linkage between credit and inputs often leads to a situation where loans are not invested in line with the business plan, and lacking consultation and coaching of the credit client by an agricultural extension service will leave the entrepreneur alone when encountering unforeseen problems in production and marketing. After TES Centre had worked for a couple of years intensively with above mentioned credit partners it became obvious that the existing rural lending institutions were often not interested in i) disbursing small loans (under 500 USD), ii) operating in-kind loans (seed, fertilizer, chemicals), and iii) partnering with an agricultural advisory service. It was therefore decided to found a micro-credit agency which focuses on the niche of small agricultural production loans. In planning AgroKredit Plus four principles were identified in which the new micro-credit agency should differ from other rural credit agencies in the South of Kyrgyzstan:  AgroKredit Plus should specialize in small loans. As the majority of farmers in the South of Kyrgyzstan only own a hectare or less they often only require credit as small as 100 to 500 USD. Expensive procedures make it unprofitable for many credit institutions and their clients to process applications for small loans.  AgroKredit Plus should mainly work with non-collateralized loans, as most smallholders do not have collateral other than their own house. Physical collateral should be replaced by mutual liability of farmers who agree to form groups.  AgroKredit Plus should make sure that loans are used according to purpose and for the purchase of high-quality inputs. To this end, linkages between loans and input supply have to be established. AgroKredit Plus from the start collaborated with rural consulting organizations (TES,RAS, AFD etc.) as well as the Association of Agrobusinesses in Kyrgyzstan (AAK).  The interest rate should be competitive and cover all costs (administration, inflation, capital, bad repayment). And it should be a lower interest rate compared to other micro credit agencies in the area. The advantage of AgroKredit Plus for TES Centre was that now an entire package of consultation, inputs and finance could be offered to farmer groups. It was expected that this in turn raises the demand for TES Centre’s products (training, coaching, consultation and extension) and increases its outreach. Cacher