Asking and answering fundamental questions through informal markets

Street markets or roadside food markets have remained a permanent feature in most developing countries. The fact that these markets continue to flourish alongside emerging shopping malls shows they occupy a unique position in commercial activities.  Informal markets were previously designed for disadvantaged, low income households with ad hoc incomes who were considered not able to buy from supermarkets and formal value chains.  However, spending years in the informal business has seen some of the traders and vendor upgrading their standards to cater for diverse consumer classes. Consequently, informal markets are now part of a business growth path comprising food chain stores, hotels, restaurants and formal institutions.  In order to stay in this game, traders and farmer have been compelled to acquire a certain level of tertiary knowledge, resources and entrepreneurial skills.


On the other hand, this evolution in markets has brought its own challenges in many African countries where agriculture continues to be the backbone of the economy. The formerly employed and pensioners with reliable sources of income have been attracted to moonlight in informal markets, pushing out poor and low income traders in whose name informal markets were originally set up. Instead of being a domain for the poor, informal markets are now for every business-minded individual. Most of these markets have become part of solid business value chains able to ensure consistency in supply as opposed to ad hoc participation in the market.

Solidifying the aggregation role of informal markets

African food markets are no longer just seasonal events where farmers come to the market according to seasons.  Middle class farmers who have embraced farming as a business are now found in the market consistently since they have built niche markets that have to be continuously served. In order to consolidate its aggregation role, each informal market now requires resources to be able to ensure necessities like potatoes, vegetables, eggs, fish and other commodities are always available.

As niches become highly competitive, ad hoc traders and market participants are being pushed closer to the supply side like road side markets in farming areas and village markets. In these areas, ad hoc traders become small aggregators with just enough resources for pulling a few resources from farming areas.  Once in a while, marginal traders can go to big urban markets where they buy a basket of banana and a crate of tomatoes for selling in local markets where these commodities are not produced.

Need for middle class markets

With urban informal markets becoming part of regular value chains, the need for middle class markets, different from supermarkets or food chain stores has become more urgent in many African cities. New land uses, accompanied by investment in agricultural value chains by different classes of actors, are producing more commodities than can be handled by supermarkets and informal markets traditionally meant for the poor. This has seen many of the commodities overflowing into street sales, some sold from stationery vehicles and makeshift market stalls. Middle class markets from which food chain stores, processors and even exporters can get commodities consistently represent the future of agriculture in developing countries.

Almost everyone now knows how to produce commodities but very few know how to deal with perishables once they have been harvested. Neither are many producers able to anticipate the speed at which consumers consume and come back to buy or re-order.  Ministers, members of parliament, bankers, lawyers, accountants, university professors and other professionals interested in agriculture are all competing in producing and selling agricultural commodities through informal markets when they should invest in building a middle class market of their own.  How can a whole minister compete to sell cabbages in the same informal market with grandmothers struggling to feed orphans?

Need for careful characterization of markets 

In addition to congestion in most informal markets, there is limited differentiation in terms grading and quality. For instance, the prices of a box of tomatoes can range from $1 to $8 in the same informal market yet such a market should be for low income consumers and traders. A trader who sells fruits for $1, another  one who sets a price by counting the number of fruits in a pile and yet another one who sells for $10 for the same commodity quantity, are all found in one market.  While this is good for diversity, it inhibits definition of business boundaries.  Absence of proper clustering means you cannot separate classes or good products from bad products.

Clear characterization and classification can support the evolution of a middle class industry and ensure the definition of Micro, Small, Medium and Large does not just remain on paper.  Different classes should be in specific locations – building layers of one enterprises on another. Where these classes are all in one space, micro and small enterprises end up being over-shadowed by medium and large actors.  It should not just be about numbers of actors in one category but different capacities.  Some commodities can have differently entrepreneurial capacity, quality, standards, formality like registration and markets. For instance, those in processing industries may not want to see commodities being delivered in baskets.

Appeal to a broad section of the middle class

There is need for middle class traders, saving the up-market and farmers like pensioners with high capacity to produce more volumes. For most pensioners, farming is the next career step so they should have appropriate markets. Most pensioners have resources and need a market that can ensure good return on investment (ROI). Some have built networks in government institutions, hotels and even foreign markets. For instance former ambassadors in foreign countries need a market that acts as a holding centre before they connect and ship commodities to their networks in foreign countries. They cannot use informal markets or their farms as holding centres.

Agribusiness is no longer for the uneducated or illiterate. It is now export- focused and a career path for many people. With high literacy levels, it means a lot of ethical considerations like licensing, book keeping and other formal requirements are critical. Unfortunately, governance approaches in developing countries still focus controlling than enabling the growth of local informal economies. Public expenditure is also not taking these markets into account. Collecting and sharing evidence can assist in positioning informal markets for public expenditure. Government input programs tend to absorb a lot of the public expenditure but incentivize corporate industries. Informal markets are different from shopping mall-driven models where people are working long hours for low wages.  On what terms are smallholder farmers in developing countries participating in contract farming models and value chains?  In most cases they are just providing land, cheap labor and pushed into debt cycles for the sake of obtaining inputs. An integral part of informal food markets is the capacity of people to mobilize and exchange food commodities, informed by an intuitive cultural value of food.  / /

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Why injecting money in agriculture markets is the best way of financing rural areas

In many African countries such as Zimbabwe, banks, micro finance institutions and insurance companies are concentrated in urban areas. With 70% of the population living in rural areas, it follows the majority have no access to financial services. Many banks no longer have functional branches in rural areas. Since the bulk of commodities flowing into urban food markets like Mbare (Harare), Sakubva (Mutare), Garikayi (Gweru), eMalaleni (Bulawayo), Chikonohono (Chinhoyi) come from rural areas, injecting money into these markets is the only way of financing rural areas.


While banks still think financing agriculture should target the farmer as the main recipient of the loan, in Zimbabwe there is enough evidence showing that when traders have money, such money end up with farmers in Mutoko, Chipinge, Murewa, Gokwe, Mhondoro, Mwenezi, Muzarabani and many other rural areas which supply commodities to the people’s market. The table below shows amounts of revenue that migrated from Mbare Agriculture market to diverse rural areas in Zimbabwe from January to March 2015:

Expected Revenue (E R)
MHONDORO $ 146,649.00 $ 208,704.62 $ 239,892.20 $ 595,245.82 14%
MUTASA $ 165,442.50 $ 213,380.30 $ 195,112.60 $ 573,935.40 13.43%
MUREHWA $ 171,134.00 $159,165.28 $ 226,284.17 $ 556,583.44 13.03%
MUTOKO $ 120,120.50 $ 117,674.62 $  262,207.32 $ 500,002.44 11.70%
MAKONI $ 195,809.00 $ 145,415.43 $ 94,543.88 $ 435,768.31 10.20%
HARARE $ 155,941.00 $ 165,076.10 $ 112,571.19 $ 433,588.29 10.15%
GOROMONZI $ 106,773.00 $ 94,851.08 $ 87,401.60 $ 289,025.68 6.76%
WEDZA $ 49,203.00 $ 56,567.17 $ 51,870.09 $ 157,640.26 3.69%
SHAMVA $ 32,143.00 $ 43,531.23 $ 42,642.94 $ 118,317.17 2.77%
MARONDERA $ 50,061.00 $ 35,486.92 $ 24,544.79 $ 110,092.71 2.58%
CHIMANIMANI $ 22,160.00 $  30,221.60 $  54,737.00 $ 107,118.60 2.51%
MAZOWE $ 37,577.00 $ 25,955.85 $ 33,528.07 $  97,060.92 2.27%
NYANGA $ 17,592.00 $ 11,394.33 $ 28,874.44 $ 57,860.77 1.35%
BUHERA $  1,056.00 $  7,217.25 $ 35,558.00 $  43,831.25 1.03%
U M P $ 11,634.00 $ 15,060.98 $ 12,741.99 $ 39,436.97 0.92%
SEKE $  9,940.00 $  7,899.40 $  940.70 $ 18,780.10 0.44%
BINDURA $  8,625.00 $  5,746.33 $4,323.65 $ 18,694.98 0.44%
MASVINGO $ 3,756.00 $ 7,320.63 $  6,231.00 $17,307.63 0.41%
CHIKOMBA $  9,159.00 $ 1,166.40 $ 3,676.40 $ 14,001.80 0.33%
CHIRIMUHANZU $  168.00 $     – $  13,063.32 $ 13,231.32 0.31%
GOKWE SOUTH $  840.00 $   434.50 $ 11,700.00 $ 12,974.50 0.30%
ZVIMBA $ 5,351.00 $ 1,238.79 $  2,886.88 $ 9,476.67 0.22%
CHIPINGE $  672.00 $  5,020.54 $ 3,598.00 $   9,290.54 0.22%
BEIT-BRIDGE $   – $    – $  8,856.00 $ 8,856.00 0.21%
CHEGUTU $  5,225.00 $ 631.75 $ 2,928.60 $  8,785.35 0.21%
GURUVE $  838.00 $ 871.18 $  4,989.80 $ 6,698.98 0.16%
CHIREDZI $ 1,396.00 $ 1,089.90 $   3,690.00 $  6,175.90 0.14%
GWERU $  1,200.00 $ 1,613.20 $   – $  2,813.20 0.07%
MUTARE $   – $   200.00 $  2,191.52 $ 2,391.52 0.06%
MT DARWIN $  195.00 $   761.28 $ 720.00 $  1,676.28 0.04%
RUSHINGA $  – $  – $ 1,584.00 $  1,584.00 0.04%
MUDZI $   84.00 $   – $  1,440.00 $ 1,524.00 0.04%
GUTU $    – $   581.28 $   614.00 $ 1,195.28 0.03%
KADOMA $   816.00 $   – $    – $  816.00 0.02%
ZAMBIA $   – $   – $ 780.00 $  780.00 0.02%
ZAKA $   225.00 $     – $   – $   225.00 0.01%
KWEKWE $  – $  164.00 $   – $ 164.00 0.00%
MAKONDE $   – $    – $  120.00 $  120.00 0.00%


$ 1,331,785.00 $ 1,364,441.93 $ 1,576,844.15 $ 4,273,071.08 100%

At US$ 595,245.82, Mhondoro district took away the largest share from Mbare market between January and March 2015. Mutasa, Murewa and Mutoko completed the list of districts that cloaked more than half a million dollars ($573,935.40, $556,583.44 and $ 500,002.44 respectively). All this income went back to stimulate the rural economy. Very few banks and micro finance institutions will be willing to extend such amounts of money to rural farmers.

Interestingly, Mbare agriculture market was also able to extend funds to what are normally considered low potential districts like Chimanimani ($107,118.60), Buhera ($43,831.25), Masvingo ($17,307.63), Gokwe South ($ 12,974.50), Chipinge ($ 9,290.54), Beitbridge ($ 8,856.00), Guruve ($ 6,698.98) and Chiredzi ($6,175.90). Also visible on the market were Mt Darwin, Rushinga, Mudzi and Gutu district where ttere are no banking services for farmers and rural artisans.

Availability of a ready market as a finance model in its own right

Zimbabwe has reached a stage where the market is a key determinant of success or failure. Availability of a market has become a finance model in its own right. If a market enables a farmer to meet the cost of production and remain with a profit from a particular market, such a market is as good as a finance model. If financial institutions and development partners are keen to finance agriculture they should do it via the market. By doing so, they will be financing production plus profit as illustrated in this scenario:

If a farmer takes 60kg of butternuts to the market at a production cost of $50 and sells the commodity at $65,s/ he gets $15 profit (30% plus profit). If you multiply that by 10 (months) = $150 which the farmer can re-invest in the land to increase production. Let us compare this farmer with another farmer who obtains a loan to produce butternuts. The farmer produces 60kg butternuts at a production cost of $50 and if s/he gets $15 profit, $10 goes to loan repayment and s/he is left with $5 x 10 (months) = $50. This farmer is trapped in poverty since s/he will continue borrowing.

If you want farmers to grow, encourage them to grow products that meet market standards and expectations. Extending loans to traders specializing in potato means the money will end up with farmers who specialize in potato production. These traders go and buy from farmers at prices that cover costs, leaving farmers with enough to increase production. Strong relationships are also created between farmers and traders because farmers will be assured of income while traders are assured of good quality products.

If a financial institution extends $10 000 to traders in Mbare, farmers end up with the $10 000 while traders will start selling commodities worth $10 000 which can end up growing to $13 000. On the other hand, the farmer has bought inputs worth $10 000 from the input supplier toward continued production. The trader has enough money to go back and buy from the farmer while the farmer continues to produce. Through a multiplier effect, the initial $10 000 injected in the market will generate business worth more than $30 000. Where a financial institution gives $10 000 directly to a farmer and the farmer buys inputs, chances are that the market won’t be able to buy the farmer’s produce because traders have no money. The farmer is unable to go back for more inputs because produce has not been bought. The whole chain collapses at once.

Financing rural areas through the market increases the multiplier effect of money more than would happen if funding is given to farmers without a clear sense of market dynamics. The market can easily direct financiers who to give loans. Those who bring commodities to the market and participate in the market clearly receive loans while those not participating cannot do so ahead of market actors. This is an example of a viable rural finance model.

Another variation of this model is target financing informed by the market calendar. In most cases traders order as per demand using market trends. They allow the market to be an assessor for the farmer. This is about financing the crop not the farmer. Often it is difficult for a commodity to introduce itself to the market and immediately start competing against commodities that will have established themselves in the market and have chosen their companions.

Financing via market as a national imperative

Injecting money in the market should be a national strategic imperative. If banks inject $5 million today, by year end it will be $150 million due to short cycle crop calendars and the diversity of commodities which will drive the multiplier effect of the injected money. Small pockets of money from micro finance institutions are important for short term problem solving but a strategic intervention at national level should see banks thinking big and using the market as a powerful business institution. Seventy percent (70%) of money injected in Mbare market can end up with farmers in Mutoko, Murewa, and Manicaland and Mashonaland West provinces. Sixty percent (60%) of money injected in Bindura market will end up with farmers surrounding Bindura market. The same for money injected in Masvingo, Mutare, Gweru and other areas, which ends up in the pockets of farmers in those areas. If bakeries can agree to sell a loaf of bread for a dollar for many years, why can’t banks agree to introduce one financial package for agriculture market towards reviving Zimbabwean agriculture? Unfortunately, each bank tries to create its own product and group of people to finance without looking at the bigger picture. Financial institutions urgently need to upgrade their skills so that they can be able to see both the fish and the water.

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How ‘informal’ agriculture markets generate and distribute power!

If you have become accustomed to think of power in terms of electricity or political power, evidence from the people’s market indicate you should think again. ‘Informal’ agriculture markets have remarkable ways of dealing with power. The market has become smart at distributing power among value chain actors such that no single agricultural value chain actor holds power forever.

1Power of the people’s market

Farmers hold power around production, use of land, inputs as well as ownership of livestock among other assets. Without these assets, the market will stop functioning. To that end, farmers have power to determine life in the market. On the other hand, by informing farmers about market expectations as well as sorting and aggregating commodities, traders have power to determine the value of farmers’ agricultural commodities. Through creative interaction and relationship building, traders and farmers do not just exchange commodities and money but power.

Not to be outdone in the power game are transporters. Transporters determine whether commodities will arrive on the market on time and in a fresh state. They also influence packaging. The size and number of crates of tomatoes a farmer can bring to the market depends on available transportation. However, some agricultural commodities influence transport choices. Commodities like peas certainly demand cold chain while some bulk commodities like potatoes coming from Nyanga to Masvingo or Harare can’t be viably transported in anything smaller than 10 -30 ton trucks. Still, other high value crops require careful handling, small trucks and specific ways of packaging.

Inputs providers and agro-dealers also have power to distribute inputs and influence production. This power is drawn from producers and the market. Without inputs there is no food on the market. The market also distributes power between local authorities (Harare City Council, Bulawayo City Council, Mutare City Council, Masvingo City Council, etc) and market committees. Local authorities have power to allocate market infrastructure while committees have power to organise traders and regulate the movement of commodities. The committees draw power from local authorities and vice versa.

Of course, we can’t ignore consumer power. Any market shock (positive or negative) reveals the power of consumers. A positive increase in consumer incomes translates to an increase in demand for commodities and sales on the market. Consumer tastes and consumption patterns can influence supply trends significantly. eMkambo has seen an improvement in the taste of small grains and nutritional awareness driving consumer demand for these commodities. At any given time, if consumer incomes increase, there is an effect on the operations of the market and value of commodities. The market often performs well during the festive season when civil servants receive their bonuses. As a result, the market draws bonus income to a central place and distributes it to other value chain actors. Transporters, vendors and those involved in packaging end up smiling all the way home.

In the market, power also travels from people to commodities and vice versa. Like people and institutions, some agriculture commodities and markets set the tempo and pace of the market. On the other hand, some commodities just follow the leader. In most markets such as Mbare, Bulawayo, Masvingo and Mutare, the tomato tends to be a leader because it is involved in the preparation of every food. If the tomato misbehaves or becomes scarce, other commodities like cabbages and fruits are affected not because they are of poor quality but merely because the leader is not behaving normally. The tomato can influence the performance of sugar beans in ways that ordinary farmers can’t understand. This power is also transferred to value chain actors so much that the economic performance of a potato on the market empowers potato farmers, traders, transporters, processors and input suppliers. Potato seed producers whose crop performs better on the market end up enjoying more seed sales when consumers testify to the superiority of their variety.

To sum it up: The market is at the centre of power generation and distribution vertically and horizontally, depending on value chain actors. Horizontal power sharing is with the market institution and other actors like traders while the vertical connection is with processors and policy makers. Downward integration is with transporters, agro-dealers and producers. All these power dynamics reinforce vertical and horizontal power integration within the market, contributing to sustainable markets.

So what?
Unless you have evidence in terms of figures, you can’t qualify the amount of power, produce or business generated from the market along the value chain towards economic development. The power of each commodity speaks to its position in national food reserves. Maize is not as powerful as other commodities like potatoes and thus should not be over-rated. Agriculture-based economic drivers can only be supported with evidence and statistics, especially from the market which is the ultimate barometer. The power of an agricultural commodity to be an economic driver can been seen by its numbers on the market. There is no doubt that potatoes and oranges are economic drivers in Nyanga and Mazowe districts of Zimbabwe respectively. Livestock is a key economic driver in Gwanda and Matobo districts of Zimbabwe. Numbers in the chart below illustrate the power of different commodity classes in the market.

Chart 1: Expected Revenue (E R ) per produce class in Mbare Farmers Market – January 2015


Monitoring and Evaluation (M&E) approaches by agriculture-related development organizations and financial institutions should strive to develop indicators from the market. Pertinent questions should include: How much volume of commodities from beneficiaries were traded on the market and how much income was generated by beneficiaries during the project life? Financial institutions should also be interested in a question like: Out of the US$300 million extended to the agriculture sector, how much volume of commodities was traded? It’s highly misleading to measure hectares of commodities financed because a lot happens between production and marketing with some of the losses difficult to account for. If the banking sector extended US$300 million to farmers, how much percentage of sales did this money generate?

Currently, most M&E approaches have no indicators from the market. Instead of baseline questions including a question on how much each household generates from sales of agricultural produce, conventional questions focus on: (a) own capital/savings, (b) loans from the bank, (c) from relatives or remittances. There is an assumption that poor people don’t need a market. Yet if you ask farmers you realize how far they have used their own means to start projects or uplift their status. If you ask rural people how they have acquired a plough or a scotch-cart, it is common to hear the answer being: “ I sold my cattle or my crops during a good season”. If you say to a rural woman: “How did you end up owning plates and pots among other cooking utensils?, the answer can be: “I sold my vegetables, goats, chicken and other things”. If you want to find out how they acquired clothes, the answer can be barter trade involving agricultural commodities such as chickens and groundnuts.

While in many districts of Zimbabwe development partners emphasize goats, sorghum and other commodities as economic drivers, the market shows 50% of the income that goes to Buhera is drawn from wild fruits like Mawuyu (baobab fruit), for instance. This shows Mawuyu is becoming a powerful economic driver. In addition, you don’t hear the role of Masawu in development interventions targeting Muzarabani and other areas where Masawu fruit is abundant yet the market shows the fruit’s exciting performance. Interventions that move people from subsistence to commercial levels have to be anchored on the market. The market can be a powerful baseline for each district or community and points to levels of resilience as well as sustainability strategies.

Lack of focus on market intelligence has resulted in financial institutions failing to make a mark in rural areas. Banks should focus on supporting commodities and farmers not farmers alone. If you want to effectively support farmers from Mutoko, the market can give you entry points to sustainable interventions. Don’t just focus on resources like land, water, labour, transport, etc. All these are important but not on their own because when farmers produce but fail to market, there is no improved livelihood. That is why in most communities, there is poverty in the midst of important natural resources. The market has power to draw commodities and people together in ways that minimize costs. Through the market, financial institutions can extend loans to farmers in groups which can easily manage each other.

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Why financial institutions need behavioural economics: Lessons from eMKambo Perishable Finance Models

In an effort to lure reluctant financial institutions into the agriculture sector, over the last two years we brokered business relationships between a sample of financial institutions and agriculture commodity traders. Dubbed eMKambo Perishable Finance, the initiative is still ongoing across five urban food markets in Zimbabwe where high frequent trading is a key feature. An instructive set of experiences and lessons has emerged from this business model.
While the conventional, brick and mortar banking model has traditionally thrived on command and control, the informal agriculture market has shown the wisdom of replacing this mindset with influence and respect. The most important thing when working with traders and other value chain actors in informal agriculture markets is building relationships and trust. Farmers and traders can only give you accurate information if they trust you.


Financial institutions have to understand typical behavior in informal agriculture markets like Mbare, Harare

Financial institutions that want to survive and thrive in the current network era should remove all structural barriers to learning fast. Banks should realize learning has become an essential part of doing agribusiness not expecting people to just repay loans without banks making an effort to understand commodity cycles fully. The expansion of mobile technology imply financial institutions have to grapple with innovative disruption coming from all corners. Coincidentally, economic value is getting redistributed to creative workers and then diffused through networks.

Farmers and traders may not have solutions to the world’s challenges like recession or the collapse of banking as an industry. However, their knowledge of their own cultural and socioeconomic realities is paramount in the creation of sustainable agriculture finance models. Without integrating the expertise of farmers, traders and other value chain actors, financial interventions in the agriculture sector are doomed to fall short of their full potential. Unfortunately, it seems prioritizing insights from farmers and traders often runs into financial institutions’ institutional, systemic and power barriers.

Looking back over the past two years of eMKambo Perishable Finance modelling, Zimbabwean financial institutions continue to be unaware of business models and structures in the agriculture sector. They continue deluding themselves into thinking that the agriculture sector is predictable. Confusing beautiful models with messy reality is the main reason why the majority of banks have become victims of non-performing loans.

As the cases below illustrate, leveraging behavioral and evolutionary economics will empower financial institutions with much clearer insights into the reality of agriculture markets. They will also probably gain a better understanding of how to add value through cognitive issues such as crafting appropriate agribusiness finance models. Very few financial institutions have grasped the complexity of agriculture production and marketing systems and how value migrates between farmers, traders and other market players. A new set of skills are needed if financial institutions have to fully participate in fostering agricultural ecosystems that collaborate and compete based on agriculture commodities.

Case Study 1: Still waiting for a bank loan disbursement approved 5 months ago.
Why need a loan?
For the past 10 years the business has been into trading of fruits and only 5 months ago it moved into specializing in onion trading. The former fruit business focus was more lucrative because not much capital for restocking was required and trading in a variety of commodities provided a fallback position in the event one of them does not perform well on the market. Like any other business factors surrounding trading space/premises, rentals included contribute to its success. A hike in trading space rentals resulted in the owner changing the premises sensing increased burden to the business. The new trading space however is not suitable for trading more perishable commodities like fruits as it is exposed to sunlight during the greater part of the day.

The new business is now into onion trading. Not much value addition is done to the onion between farmer and trader hence profit margins are maximized through bulk buying and selling. Therefore this new trading venture required more capital and the owner had to apply for a bank loan 5 months ago and up now she has not received the approved loan due to cash shortage experienced by banks. The business had applied for a loan of $250 at a monthly interest rate of 10% and to be repaid over 3 months in 6 installments. Using own capital, the business restocks 2 x 90kg bags at $40 per bag of onion bought from the farmers’ market. The stocks last within 2 days during good business days and not more than 4 days when the business is low. At maximum, 30% profit margin is realized after every stock run down and most of which goes towards payment of weekly rentals of $18.

Micro Financiers riding on Traders’ Desperation

Left with no option due to delay in loan disbursement, the business owner had to try her luck with Micro Financier and accessed a loan of $100 with conditions to repay $5 per day for 24 days. Despite quick disbursement and relaxed preconditions that only required one’s national identity number, passport size photo and proof of residence, this loan package proved to be a burden to the business and owner. The package does not give room for the business to reinvest the loan due to very short repayment period and daily reduction of working capital going towards loan repayment. Pressure is also put on business as on a daily basis pressure mounts to make sure the daily repayment due is made. Stress and embarrassment is then passed to the owner as he/she runs around to further borrow to repay daily rate in the event the business fails to make any sales on the day in question. The same pressure comes from Market Committees on a daily basis as Financiers report the defaulters and in most cases the committees threaten the owner that he/she will lose trading space as he/she is putting the market’s name in disrepute.

Case study 2: Financing Farmers through the Market – Loan Multiplier Effect

This trader has been in agro produce trading for the past 25 years. Some call them ‘Makoronyera’, a derogatory term referring to traders at Mbare Musika as tricksters. But if these traders are what they are called, why then do farmers and other value chain actors continue to work with them? What of banks, how do they view this crop of business people?

In November 2014, eMKambo facilitated a bank loan for the trader in question. This case study tried to track, to what extent a market loan goes on to support farmers in their agribusinesses. The trading business first received a loan of $250 to be repaid over 3 months in 6 installments. On a daily basis the business would purchase commodities worth at least $250 per day for the first 2 weeks according to the owner’s records. For the second forty night the loan amount was now buying commodities worth $250 less principal ($41) loan repayment amount , leaving $208. For the third forty night the business was now buying commodities worth $208 less $41 and so on. The table below shows summary tabulation of loan multiplier effect for the first cycle.


Upon repayment of the first loan the trader qualified for the second then third and finally fourth rounds. The table below shows how much in total the loan amount exchanged hands between her business and farmers in 12 months.


The above multiplier effect shows that 490 farmers received US$250 from one trader in 12 months. Loans advanced through eMKambo Perishable Finance account for less than 10% of the market demand which banks are failing to meet.

Case Study 3: Bank and Loan Purpose Defined from the Market

The trader and his/her own business plays a pivotal role in supporting other up and down stream growth of agriculture value chain businesses. Having started his trading business 5 years ago, as a young man, the business owner chose commodities to trade that are unique and serve a niche market. Such crops are broccoli, green beans, peas, green/yellow pepper and carrots among others. The business supplies food chain stores, high income families and hotels in Kariba and Victoria Falls through his networks with other traders in those towns. At any given time the business trades in at least 5 and not more than 10 vegetable varieties. According to the young entrepreneur trading in such a business is like a white collar job in the formal economy. The business requires one to be ‘smart’ in areas of planning, relationship building, negotiations, business ethics and product knowledge and presentation. The fact that not everyone goes for these products, the business needs to develop a very strong relationship with suppliers as well as the buyers. With suppliers they share best cropping calendars, volumes needed by the market specifically his business and supplier capacity to meet orders, market trends up to point of sale and during trading period. Production in this line of business is market oriented.

When do banking services become necessary?

According to the owner, for his line of business banking services become necessary when one intends to save for assets that require large sums of money. Plans that then follow after deciding to bank are that the business should not do unnecessary withdrawals from this account. The working capital in business is just to build up profits that are then saved in asset account. The business owner just opened a bank account when he had plans to buy a residential stand. Once the amount he was looking at to build was enough he withdrew all of it and bought a stand and to date whatever business surplus generated however small goes towards purchase of building materials without passing through the bank.

Why not use banking services for working capital and business transactions?

High value crops needs the business to have ready cash at any given time especially during supply shortages. Any hint or information of the availability of produce needs one to act promptly by either paying the producer via mobile phone or rush to the sources in person to make payments. Secondly the perishable nature of the commodities require that fresh produce is ordered on a daily basis and hence cash needs to be readily available to fulfill this purpose. The current capital/stock requirement for the business is between $800 to $1000 between one and two days.

Why applying for a loan?

The purpose of the loan is not just for the sake of business growth but to see something tangible come out of the business loan injection. According to the owner now that he had started a housing construction project the business needed to be boosted so that more income is realized towards purchase of building materials. The bank loan approved 5 months ago is yet to be disbursed.


Concluding insights

Financial services should match the velocity (speed at which money changes hands) among value chain actors, for instance, between farmers, traders and transporters. Otherwise the money misses the target and fails to meet needs. If you put $100 in the market, how many hands does the money change hands within the market?

The type of products that traders specialize in selling are determined by location, space of the stand from which they operate. This also depends on the capital used in the business in terms of the amount needed for purchase of stock as well as the revenue that comes from consistent selling of the product.

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