Less risky business

The growth of micro-lending has been a boon to people who have traditionally lacked access to finance because they lack collateral. While there are increasing numbers of institutions willing to make small loans, a problem remains for all of them: if there is no collateral to back a loan, how do you manage your risk for failure to repay? In the North West Province of Zambia, you rely on someone who intimately knows the borrowers, an iDE-trained Farm Business Advisor (FBA).

David Mbwita has been an FBA since 2012, discovered during the Wealth Creation in the North Western Province (WIN) project funded by the European Union with support from Barrick Lumwana. David’s farm is a perfect example of how to use drip irrigation and quality inputs to create an emerald green oasis in amongst the otherwise under-utilized area of abundant water. In addition to using his farm as a demonstration, David supports 53 farmers directly as an FBA. 

Working in 2014 with the local Zambia micro-finance organization, Vision Fund, David acted as a de facto underwriter for loans for his clients. With intimate knowledge of their farms, their capabilities, and their personal histories, David was able to analyze loan applications and provide recommendations for 12 of them to Vision Fund. All 12 repaid the loans, after which David received a commission from Vision Fund for identifying reliable borrowers. David only recommends farmers to Vision Fund when he is convinced of their skill and capabilities to honor a loan.

This is an example of how local knowledge at the “last mile” can combine with outside resources from NGOs and public entities to fill the funding gap for people who currently make less than $2 a day. Farm Business Advisors like David Mbwita are relationship managers, with deep understanding of the business challenges his clients face as well as the acumen for analyzing their abilities, which a loan officer sitting in an building miles away does not have. By leveraging the local knowledge of FBAs, micro-finance institutions can expand their lending and continue to fund the revolution that is ending global poverty.