If a smallholder farmer in Kenya can only afford one productive dairy cow, then each day he can produce as much as four-times more milk than if he had just a local zebu variety. There’s just one problem: such a high-producing dairy cow costs four-times as much as a zebu. This is money the smallholder farmer cannot muster and a bank will not give him a loan for lack of collateral.
Therefore, in 2003 Swisscontact came up with the microleasing approach and has been implement-ing it in various country programmes since 2006. Instead of taking a loan, smallholder farmers and SMEs in East Africa have been leasing productive assets, such as dairy cows with higher milk yields, a water pump, or a milling machine from local financial service providers. The microleasing ar-rangement offered will help small businesses and farmers generate income, build savings, and con-tinue to pay off the leased asset. The value of leased assets has increased over the last 10 years from US$55,000 to over $28 million.
Sustainable local value added: making financial services available to all
Well-functioning financial systems are essential to entrepreneurial initiative and economic growth. The stated objective of Swisscontact’s Financial Services Programme in East Africa is to make bank-ing services available to poorer segments of the population as well. In this way, MSMEs, subsist-ence farmers, and low-income households are able to expand their economic activities and diversi-fy their sources of income. Microleasing is just one of many components in this programme, which is celebrating its tenth anniversary this year. The focus is on linking various levels of the financial sector, developing innovative financial products, and supporting the organisational development of financial service providers.
In terms of the supply of various services, Swisscontact is working together with local financial insti-tutions and advises them in the development and introduction of goods and services that are also useful and important to poorer segments of the population. Thus, more than 2,000 providers of financial services have received support in capacity- and skills building over the last 10 years. On the demand side, Swisscontact for example has helped establish 1,900 savings groups through which villagers learn what it means to save and loan out money, in addition to concepts of securities, in-terest, and how to increase rates of return.