' lHllllillllllllllillillllllllllllill!llHIlHHllllllllHllll % 3 1293 10459 “92:32 _ its» Lied/kink .54 Y *z’T-rf‘fl SCI? Um? ~ This is to certify that the dissertation entitled An Economic and Institutional Analysis of Formal and Informal Credit in Eastern Upper Volta: Empirical Evidence and Policy Implications presented by Edouard Kouka Tapsoba has been accepted towards fulfillment of the requirements for Ph.D degree inAg. Economics 6v? (Eden—«x Major professor Date 9/11/81 MS U i: an Affirmative Action/Equal Opportunity Institution 0-1277 1 RETURNING MATERIALS: 1V1£3I_J Place in book drop to LIBRARIES remove this checkout from a“. your record. FINES will be charged if book is returned after the date stamped below. U 10: ‘.K' 5"“,47: W."\.}‘;-_ 0 Qf' .4 '1 1-. AN ECONOMIC AND INSTITUTIONAL ANALYSIS OF FORMAL AND INFORMAL CREDIT IN EASTERN UPPER VOLTA: EMPIRICAL EVIDENCE AND POLICY IMPLICATIONS By Edouard Kouka Tapsoba A DISSERTATION Submitted to Michigan State University in partial fulfillment of the requirements fOr the degree of DOCTOR OF PHILOSOPHY Dapartment of Agricultural Economics 1981 ABSTRACT AN ECONOMIC AND INSTITUTIONAL ANALYSIS OF FORMAL AND INFORMAL CREDIT IN EASTERN UPPER VOLTA: EMPIRICAL EVIDENCE AND POLICY IMPLICATIONS By Edouard Kouka Tapsoba The purpose of this study was to analyze the economic and institutional constraints on the performance of the government agri- cultural credit program and the informal credit system in the Eastern Region of Upper Volta. The purpose of the government (fOrmal) credit program was to encourage farmers to shift from hand hoe cultivation to animal traction (donkeys and oxen) cultivation in order to increase fbod production and the welfare of small farmers. The study was undertaken in the Eastern Region of Upper Volta as part of a broader micro economic survey of 480 small farmers which was carried out by a multidisciplinary team over a 12-month period (April 30, l978-May l, l979). Repeated interviews were used to col- lect input-output data on a weekly and monthly basis from the 480 farmers over 52 weeks. In addition five sets of monthly and one-shot credit questionnaires were administered to the same 480 farm house- holds. Both traditional farmers (TRAD) and farmers receiving loans for animal traction equipment (ANTRAC farmers) were included in the survey. The 1978-1979 survey revealed that organization and operational deficiencies of the EORD credit program resulted in untimely delivery of credit in kind to ANTRAC farmers. While the nominal interest rate on government loans was 5.5 percent, the real cost of borrowing for short term borrowers was estimated to be l2.3l percent. Only 2.3 percent of farmers perceived the low nominal interest to be an important advantage of the EORD's credit program.' The average annual real cost of lending of the EORD was estimated to be 25 percent of the total loan portfolio outstanding over the l977-l980 period. The impact of medium term credit as measured by the technical and economic effects of animal traction at the farm level was modest. The survey results revealed that acreage effects were only higher for donkey farmers and the yield effects were insignificant between ANTRAC and TRAD farmers except for minor crops. Animal traction farmers experienced severe cash flow problems because of the slow learning curve associated with using animal traction equipment and high cash expenses associated with animal traction. But the results were affected by a drought suffered by donkey farmers during the year of the survey. The repayment of loans from the EORD credit program has been poor. The overall collection ratio declined from 42.7 percent in l976-l977 to 25 percent in l979-1980. The poor loan repayment was due to late delivery of credit items by the EORD, unwillingness and indifference of some farmers who did not feel obligated to repay ORD's loans, death or sickness of farmers and draft animals and poor yields. The survey revealed that the major function of the informal credit system was to provide short term (i.e., fOur months on the average) cash and in-kind loans to farmers to fulfill social obliga- tions, to meet household expenses, including the purchase of food and fer trading. It was f0und that the informal credit system had two types of loans: non-commercial and commercial. Nhile commercial loans involved interest charges, non-commercial loans played a role of mutual assistance among farmers and did not bear interest. The survey revealed that the average interest rate in the com- mercial segment of the informal credit system was Zl percent per month but village money lenders also provide some non-commercial loans with no interest or with negative interest rates. The repay- ment rate fOr all cash borrowings in the infbrmal system was 72.2 percent. The survey revealed that there was no widespread hoarding of cash and that farmers were saving or investing their excess cash mostly in cattle. Specific recommendations for lowering the cost of ANTRAC to farmers were: (1) cost sharing among several users, (2) extending the period of repayment from five to seven years for oxen traction and from four to five years fbr donkey traction with two years and one year grace respectively. In terms of improving repayment of loans, repayment in kind should be considered, and cash crops such as cotton should be promoted. To improve the EORD credit delivery system, there is a need fbr better coordination of various credit operations, and improvement of procedures and bookkeeping. A more effective training program for farmers should be established including functional literacy to help farmers understand the credit policy. Finally the EORD should readjust the interest rate upward to l2-l3 percent to keep pace with inflation. Tb my late father, Landaogo Tapsoba, who taught me to always reach for the stars, and to my beloved mother, Tinkouma. ii ACKNOWLEDGMENTS I wish to thank the late David Hallender who established initial contacts with the Department. I cannot thank enough the man who subsequently took over and was instrumental to my coming to MSU and who, in his capacity of serving as my Major Professor and Chairman of the Guidance Committee, fulfilled his responsibility beyond all expectations. Nor can I find the right words to express my gratitude for his continual guidance and tireless support through- out this tremendous experience, and for taking the time to help in the entire revision of the manuscript. So, I just say: "Thank you Professor Carl K. Eicher." I am also indebted to the members of my Guidance and Thesis COImri ttees: Dr. John. Brake, who graciously offered to continue to serve from a distance as Thesis Director, and who helped shape up the major structure and content of the dissertation, Drs. Lester Manderscheid, Eric Crawford, Paul Strassmann for their helpful com- ments, Lawrence Officer, Warren Vincent, Peter Matlon and Vernon Sorenson for their intellectual stimulation. All errors and omis- sions are my own. Special appreciation is extended to the African American ”St" tute and the Department of Agricultural Economics for funding “0' Course work and research, the staff of both CENATRIN in Ouagadou- 90u and the Computer Center at MSU for helping in data processing. iii Special thanks are extended to: Lucy Hells who patiently typed the first draft with a good sense of humour, Janet Munn for her thought- fulness, Pat Eisele and Debbie Andrews who gave a hand when I was "under the wire" and Kathy Baker who did a splendid job in typing the final draft. I thank the Director of the Eastern 0RD, Luc Lompo, my long time companion Ismael Ouédraogo, my colleagues of the MSU team in Upper Volta: David Nilcock, our "Enlightened Leader," Greg Lassiter who helped in data preparation, Vince Barrett and Tom Stickley for the good working relationships. lie are all grateful to the enumerators, supervisors and field extension agents for their dedication and to the farmers of Eastern Upper Volta who were patient enough to stand the boredom of repeated interviews over a twelve-month period. To my friend David Hilcock who shared my ups and downs over the last seven years, I wish to express my deepest gratitude. I would like to pay special tribute to my cousin, General Bila Zagré, for both material and moral support during this difficult ePlsode of my life. To my wife, Antoinette, who suffered quietly several months of loneliness and whose understanding made this dream come true, I just say: "Silence is Golden." Although this may seem ""Usual , I would like for once, at this important turning point of "IV life, to express a personal pride for having the courage to stay, ‘0 fight, to win. iv TABLE OF CONTENTS PAGE LIST OF TABLES ....................... x LIST OF FIGURES ....................... xv LIST OF ACRONYMS ...................... xvi CHAPTER I. INTRODUCTION .................... l l. Background ................... l 2. Problem Setting and Need for Research ...... 7 3. The Objectives of the Study ........... 10 4. Organization of the Study ............ ll II. LITERATURE REVIEW .................. l3 1. Introduction .................. 13 2. Major Issues in Formal Credit .......... l4 3. Major Issues in Informal Credit ......... 20 III.. RESEARCH METHODOLOGY ................ 25 1. Study Site ................... 25 l.l Pupulation and Settlement Patterns ..... 26 l.2 Natural Environment and Farming Characteristics ............. 28 2. Methods of Primary Data Collection ....... 30 2.1 The I978 Farm Survey ............ 30 2.2 Administration and Supervision of the Study .............. 31 2.3 Sampling Procedures ............ 34 2.3.l Definition of a Farm Household . . . 34 2.3.2 Village Sampling .......... 34 2.3.3 Farm Household Sampling ....... 39 2.4 Survey Instruments, Sample Distribution and Interviews ............. 4T 2.4.l Survey Instruments ......... 41 2.4.2 Sample Distribution and Interviews . 44 CHAPTER IV. 3. 2.5 Data Coding, Verification and Processing . . Summary ..................... AGRICULTURAL CREDIT IN UPPER VOLTA: HISTORICAL PERSPECTIVE AND CURRENT PROGRAMS .......... 1. 2. 4. The 2.l Colonial Era ................ The Post-Independence Period SATEC's Credit Experience ......... 2.2 The National Development Bank-ORD's Joint Venture .............. 2.3 The Matourkou Credit Experience ...... The 3.l 3.2 2.4 Other Current Credit Programs ....... Eastern ORD's Current Credit Program The Eastern ORD's Credit Program: Sources of Funding ........... The Eastern ORD’s Credit Program Administration ............. 3.3 Criteria fOr Selection of Borrowers 3.4 Procedures of Credit Provision ....... Summary ..................... ANALYSIS OF THE PERFORMANCE OF THE EASTERN 0RD CREDIT SYSTEM .............. 1. 2. Defining Performance Criteria .......... Organizational and Operational Efficiency 2.1 2.2 in the Eastern 0RD Credit System ....... Efficiency in Coordinating Various 0RD Services .............. The 0RD Real Cost of Lending ........ 2.3 The Farmers' Real Cost of Borrowing Repayment Performance and Related Issues 3.1 3.2 3.3 3.4 The Collection Ratio ............ The Percentage of Portfolio in Arrears . . - The Proportion of Borrowers Meeting Repayment Obligations ---------- Causes of Loan Repayment Delinquency and of Poor Repayment Perfbrmance . . . . 3.4.l The Farmer's Responsibilities . . . . 3.4.2 The ORD's Responsibilities ..... 3.4.3 Natural Causes ........... 3.4.4 Embezzlement of Repayment Funds . . . Farmers' Understanding of the Credit Program 4.1 and Their Perceptions of Its Advantages and Disadvantages .............. Farmers' Understanding of the Credit Program ............. vi PAGE 44 45 76 76 79 79 83 95 105 107 112 116 117 118 118 119 119 120 120 CHAPTER VI. VIII. . vac—x- m.‘.=$.::.'_‘,;_’_: 3* 4.2 Farmers' Perceptions of the Advantages and Disadvantages of the 0RD Credit Program ............. 5. Impact of Credit on Production and Income 5.1 Potential Problems in Evaluating Agricultural Credit Impact ....... 5.2 The Impact of Credit on Production and Income of Farmers in the Eastern 0RD . . 5.2.1 Acreage Effects .......... 5.2.2 Yield Effects ........... 5.2.3 Income Effects ........... 5.2.3.1 Value of Crop Production . 5.2.3.2 Cost Effects ....... 5.2.3.3 Cash Flow Analysis 6. Equity Issues in the Eastern 0RD Credit Program ............... 7. Summary .................... DESCRIPTION OF THE INFORMAL CREDIT SYSTEM IN RURAL EASTERN UPPER VOLTA ............. 1. Lending in the Infbrmal Credit System ..... 1.1 Cash Loans ................ l.2 Loans in Kind ............... 2. Borrowing from the Infbrmal Credit System . 2.1 Borrowing in Cash ............. 2.2 Borrowing in Kind ............. 3. Reliability of Data .............. 4. Summary .................... ANALYSIS OF THE STRUCTURE AND PERFORMANCE OF THE INFORMAL CREDIT SYSTEM AND FARMERS' ATTITUDES TOHARD CREDIT AND SAVINGS ............. 1. Role and Purpose of the Infbrmal Credit System . 1.1 Seasonal Patterns of the Value of Credit Transactions .......... l.2 Seasonal Variations in the Value of Borrowings fbr Various Purposes . . . . 2. The Structure of the Informal Credit System . . 2.1 Structure of the Overall Informal Credit System ............. 2.2 Structure of the Non-Commercial Segment of the Informal Credit System ..... 2.3 Structure of the Commercial Segment of the Informal Credit S stem ....... 2.4 Characteristics of Farm ouseholds and Credit Transactions ........ vii PAGE 126 129 129 132 135 136 136 138 143 150 152 159 159 159 164 166 166 174 177 178 CHAPTER VIII. 3. Performance of the Informal Credit System . . . . 3.1 Operational Efficiency and Lending Procedures in the Informal Credit System ................. 3.2 Real Cost of Borrowing in the Commercial Segment of the Informal Credit Segment 3.2.1 Number of Visits and Distance Traveled ............. 3.2.2 Interest Charges and Interest Rates .............. 3.3 Repayment Performance of the Infbrmal Credit System .............. 4. Some Insights into Farmers' Attitudes Toward Credit, Availability of Credit in Rural Areas and Practices Against Delinquent Borrowers ............. 4.1 Purpose of Borrowing ............ 4.2 Availability of Financial Resources and Production Credit .......... 4.3 Farmers' Attitudes Toward Credit Conditions ............... 4.4 Measures Against Loan Delinquencies and Default in the Informal Credit System . . 5. Some Insights on Farmers' Attitudes Toward Investment-Savings and the Issue of Savings Potential in Rural Areas ....... 5.1 Farmers' Attitudes Toward Investment- Savings ................. 5.2 Non-Credit Sources of Cash ......... 5.3 Farmers‘ Attitudes Toward Modern Savings Institutions and Their Potential Response to Varying Interest Rates . 6. Summary ..................... SUMMARY AND POLICY IMPLICATIONS ........... 1. Summary ..................... 2. Policy Implications and Recommendations ..... 2.1 Improving the EORD's Existing Credit Program ............. 2.1.1 Developing and Extending a Profitable Technological Package to Farmers ........ 2.1.2 Improving the 0RD Credit Delivery System ......... 2.1.3 Improving Farmers' Technical Train ng and Understanding of the Cre it Program ........ viii PAGE 202 203 203 204 204 210 216 217 218 220 222 224 224 226 230 235 240 240 253 253 254 259 261 CHAPTER PAGE 2.1.4 Improving Repayment Perfbrmance . . . 262 2.2 Lessons from the Infbrmal Credit System: Alternative Lending Programs and Policies fOr Savings Mobilization . . . . 264 2.2.1 A Hungry Season Lending Program . . . 265 2.2.2 Alternative Lending Program for Livestock Raising ........ 267 2.2.3 Mobilizing Savings ......... 268 3. Need for Further Research ............ 268 APPENDIX I : FORMAL CREDIT: OTHER INDICATORS OF LOAN REPAYMENT PERFORMANCE ............ 269 1. The Aging of Arrears ........... 269 2. ‘The Repayment Index ........... 271 APPENDIX II : EORD: AVERAGE ANTRAC AND TRAD HOUSEHOLD CROP PRODUCTION IN 1978-1979 ......... 274 APPENDIX III: INFORMAL CREDIT: NUMBER OF CASH BORROHERS AND CASH BORROHINGS ........ 275 BIBLIOGRAPHY ........................ 277 ix TABLE 3-1 3-2 5-2? 5-23 5-4 5-5 5-6 5-7 5-8 LIST OF TABLES Distribution of the FOurteen Field Supervisors fbr the 1978-1979 Farm Survey by Sector ....... Location of Sample Villages and Regions of Surveyed Animal Traction Farmers, 1978-1979 Farm Survey Distribution of the 480 Sample Agricultural House- holds by Agroclimatic Zone, Village and Sub-Sample Amount of Loans Distributed to Farmers in the Eastern 0RD by Source of Funding, 1975-1980 ..... Number and Value of Short Term and Medium Term Loans in the Eastern 0RD, 1975-1980 ......... Number and Value of Loans fer Oxen and Donkey Traction in the Eastern 0RD, 1975-1980 ....... Eastern ORD: Reasons Why 32 Farmers Did Not Use Animal Traction Equipment During the First Year , , , The Eastern ORD Budget by Source of Funding, 1977-1980 ...................... The Eastern ORD Budget from l977 to 1980 ...... Eastern ORD Estimated Lending Cost Per lOO CFA of Total Loan Portfolio Outstanding, l977-1980 ..... Eastern ORD Estimated Lending Cost Per Unit of Loans Outstanding, 1977-1980 ............ Eastern ORD: Distance Traveled by Farmers to the Residence of the Extension/Credit Agent ....... Eastern ORD: Number of Visits by Farmers to the Residence of the Extension/Credit Agent ....... Calculation of Actual Interest Charges for a Short Term Loan ................... PAGE 32 37 42 63 65 66 81 89 90 92 98 99 102 5-19 5-20 5-21 5-22 5-23 Eastern ORD: Items Sold by Farmers to Repay Short and Medium Term Loans ............. Eastern 0RD Credit Repayment Perfbrmance: Collection Ratio Indicators fOr 1976-1980 ...... Eastern ORD Credit Repayment Perfbrmance: Percentage of Portfolio in Arrears 1976-1980 Eastern ORD: Farmers' Perceptions of the Purpose of Loan ................... Eastern ORD: Farmers' Knowledge of the Credit and Cash Value of Animal Traction Equipment Items . . Eastern 0RD: Farmers' Knowledge of the Cost of Items Purchased with Short Term Credit ....... Eastern ORD: Farmers' Perceptions of the Length of Time far Repayment of Short Term Loans ...... Eastern ORD: Farmers' Perceptions of ORD Credit Program Advantages ................. Technical Characteristics of Farm Households in the Oxen and Donkey Zones, 1978-1979 ....... Average Value of Crop Production and Price/Kg by TRAD and ANTRAC Farmers in Oxen and Donkey Zones, 1978-1979 ...................... Summary of Sources of Income and Efficiency Measures fbr Farm Households, 1978-1979 ....... Farm Household Annual Income Statement: 1978-1979 Annual Cash Flow Statement for the Average TRAD and ANTRAC Farmers, 1978-1979 ............ Monthly Cash Flow Statement for Traditional Households, 1978-1979 ................ Monthly Cash Flow Statement for ANTRAC Households, 1978-1979 ...................... Distribution of the Number and Annual value of Cash Loans Granted by Household and by Zone, 1978-1979 ...................... PAGE 106 108 113 121 123 124 125 128 134 137 139 141 144 147 148 160 '[ABLE 6w2 Number and Value of Cash Loans Granted by Farmers by Category of Recipients .............. Number and Value of Cash Loans Granted by Farmers to Relatives and Non-Relatives ........... Number of Loans in Kind Granted by Farmers by Type of Commodity .................. Distribution of the Number and Annual Value of Cash Borrowings by Household and by Zone, 1978-1979 ...................... Sources of Borrowed Funds Received by Sample Households ..................... Use of Borrowed Funds by Purpose .......... Distribution of Borrowed Funds by Purpose and by ANTRAC/TRAD Households .............. Number of Borrowings In Kind Received by Farmers by Source .................. Eastern 0RD: Total Value of Cash Borrowings in the Informal Credit System by Period and by Purpose ..................... Frequency and Percentage Distribution of the Number of Cash Loans and Cash Lenders: Overall Sample ....................... Frequency and Percentage Distribution of the Number of Cash Loans and Cash Lenders: Non- Commercial Segment ................. Frequency and Percentage Distribution of the Number of Cash Loans and Cash Lenders: Commercial Segment ................. Distribution of the Number of Cash Lenders by Size of Cash Loan Extended: Commercial Segment ....................... Number of Cash Loans and Cash Lenders and Distribution of Lenders by Number of Loans at the Village Level .................. xii PAGE 162 165 168 173 176 195 196 TVABLE 17-7 7'-'l 2 77-—'I.3 77-— I ll Number and Percentage Distribution of Net Cash Lenders and Net Cash Borrowers by Zone: TRAD vs. ANTRAC Sub-Samples ............... Number and Percentage Distribution of Net Cash Lenders and Net Cash Borrowers: TRAD vs. ANTRAC Sub-Samples ........... - ...... Number and Percentage Distribution of Net Cash Lenders and Net Cash Borrowers by Household Size: TRAD vs. ANTRAC Sub-Samples ......... Interest Charges and Interest Rates on Individual Cash Borrowings: Commercial Segment of the Informal Credit System ............... Interest Charges, Interest Rates on Individual Cash Loans: Commercial Segment of the Infbrmal Credit System ................... Eastern ORD: Rate of Repayment of Loans Extended in the Infbrmal Credit System ....... Eastern 0RD: Rate of Repayment of Borrowings in the Informal Credit System ........... Number of Cash Loans Extended by Large Cash Lenders and Repaid or Not Repaid at the End of the Survey ................... Measures Taken by Lenders Against Delinquent Borrowers ..................... Percentage Distribution of Farmers by Various Forms of Savings Investments with Different Amounts of Cash on Hand .............. Percentage Distribution of Farmers by Source of Liquidity Used to Acquire Cash ......... Percentage Distribution of Farmers by Their Estimation of Amount of Cash on Hand by Health Class .................... Percentage Distribution of Farmers by Amount of Potential Deposit in a Bank Located in the Village and Sub-Sector Headquarters ........ xiii PAGE 198 200 201 205 212 223 229 TABLE PAGE 7-20 Percentage Distribution of Farmers by Potential Savings Deposit by Level of Interest Rate ...... 234 1 I-A EORD: Average ANTRAC and TRAD Household Produc- tion in 1978-1979 of Nine Most Important Crops by Zone ....................... 274 1 I I-A Informal Credit: Distribution of Cash Borrowers by the Number of Cash Borrowings .......... 275 I I I-8 Informal Credit: Number of Cash Borrowers Relative to Number of Sampled Farmers ........ 276 xiv LIST OF FIGURES FI GURE PAGE .3-1 Population Density in the Eastern 0RD ........ 27 23-2 Map of Sampled Villages, Eastern ORD ........ 38 Al-l Organization Chart and Extension Network of the Eastern ORD, 1978-1979 ............. 60 77-1 Seasonal Variations of the Value of Cash Loans and Cash Borrowings of Farmers ........... 184 :7'——2 Seasonal Variations of Cash Repayment Received and Made by Farmers ................. 185 77--3 Seasonal Variation of Quantity of Grain Borrowed by Farmers ................. 188 xv .'.‘II ‘o .I ‘I '11 u“ ’0 l\(:F: [\I:I)I .IIPI‘TWRAC l\() l\\/\I' ESIRIF’ EBCZIID £31)l=hl\t £31.1U' (3I\ISIIJI (ICIIZLJEK (ICICIIEZ C(Z[)l:t coo-s cop CE NATRI N (3F=[)C[ (Zhl(21n\ (erss EECJIQLE) '=F\() FFEEIN|‘J LIST OF ACRONYMS Agricultural Credit Fund Association Frangaise pour 1e Developpement Inter- national (French Association fbr International Development) Animal Traction Accounting Office (EORD) Autorite des Vallees des Voltas (Volta Valley Development Authority) Bureau of Agricultural Production (EORD) Bureau of Community Development (EORD) Bureau pour 1e Developpement de la Productions Agricole (French Agricultural Development Agency) Bureau of Livestock and Veterinary Care (EORD) Chilalo Agricultural Development Unit Caisse Centrale de Credit Agricole (French Agricul- tural Credit Fund) Caisse Centrale de Cooperation Economique (French Central Fund fOr Economic Cooperation) Comite Permanent de Coordination du Developpement Rural (Permanent Coordinating Committee of Rural Development) Credit and Cooperatives Sub- Section (EORD) Caisse de Prevoyance Sociale (Special Rural Credit Fund in colonial period) Centre National de Traitement de 1'Infbrmation (National Computer Center) Compagnie Frangaise des Fibres Textiles (French Cotton Corporation Caisse Nationale de Crédit Agricole (National Agricultural Credit Agency) Coopération Technique Suisse (Swiss Technical Cooperation) Eastern 0RD Food and Agricultural Organization FOnds d' Equipement des Nations Unies (United Nations Equipment Fund) Fonds de Developpement Rural (Rural Development Fund. Horld Bank) Individual Medium Term Credit Card Individual Short Term Credit Form Less Developed Countries Michigan State University Medium Term (Credit) xvi IVDB (3RD SAED ESIXTEC 15!:CP ES'T 'TTZI‘D [JPUIJP (JE;I\ID National Development Bank Organisme Régional de Développement (Regional Development Organization) Société Africaine d'Etudes et de Developpement (Private Research Consulting Firm) Société d'Aide Technique et de Cooperation (French Rural Development Agency) Small Farmer Credit Program Short Term (Credit) Traditional United Nations Development Program United States Agency fbr International Development Communanté Financiére Africaine The CFA is the currency unit in West and East Francophone Africa (except Guinea, Mali and Mauritania). At the time of the study the exchange rate was $1 USA = 230 CFA. mm. millimeter ha. hectare kg. (or KG.) = kilogram km. = kilometer xvii CHAPTER I INTRODUCTION 1. Background Upper Volta, with a population of over 5.6 million and an area a: 5; large as that of the state of Colorado (274,000 square kilometers), 1’s; a land-locked country in Nest Africa which is among the 25 poorest na tions in the world. The economy is based almost entirely on agri- c:e:‘l ‘ture where 85 to 90 percent of the population live and produce over 80 percent of the Gross Domestic Product. Historically, Upper Volta has been self-sufficient in staple food production. But the drought of 1968-74 and lagging food pro- duc tion during the 1970's have focused policy attention on the need 1:0 ‘i ncrease food production. Sorghum production averaged 714 thC>usand tons1 a year over the 1964-67 period but declined 28 percent to 515 thousand tons during the 1959-72 period [FAO, 1977]. The FAO ‘EES‘EZ‘iInates that sorghum production was 738 thousand tons in 1975 but i t fell to 650 and 600 thousand tons in 1976 and 1977, respectively. The FAO estimates that millet production was 383 thousand tons in 1 975, 350 thousand tons in 1976 and 330 thousand tons in 1977. Act=iur¢er the 1972-74 period, actual food imports would have been even '1.an'r~ger. Faced with this fbod crisis, the Voltaic government's prime objective has been to increase food production both to keep pace W‘i tli rapid population growth as well as to ensure a reliable food Surplus. But in order to increase agricultural production in Upper "<>" 'ta where most of the rural population is still at the subsistence 1 £2Veal, a whole range of interlocking constraints must be addressed. T""ese constraints can be overcome through (1) improvement of infra- ss'tl‘“1Jcture, (2) technological change, (3) institutional innovation and (4) economic incentives. The majority of farms are small family holdings ranging from :3’ 1:0 5 hectares. The main agricultural activities consist of the r"‘Oduction of staple food crops (sorghum, millet, corn and rice), Cash crops (cotton, peanuts and sesame) and livestock (cattle, goats, \ 1The exchange rate was about 220 CFA/$1 U.S. in 1977. 3 sheep, chickens, etc.). In addition, apart from the densely populated central Mossi Plateau, agricultural land generally is not a constraint and there is no host of landless laborers. But the ‘ shortage of family labor constitutes a serious bottleneck especially during the weeding period [Za11a, 1976]. In order to attain its national goals, the Voltaic government, since 1965, has pursued a regional approach to rural economic and social development. Thus, the country has been divided into eleven Organismes RéLionaux de Développement (0RDs). The Eastern 0RD ( EORD), which is the focus of the analysis in this study, was among the last to be officially established in 1974. The 0RDs have been en trusted with a wide range of responsibilities, including agricul- tu re extension, veterinary care, community development activities ( Functional literacy, women's projects, etc.), irrigation projects, 1 n frastructure (feeder roads), marketing, and the provision of 1 nputs and small agricultural implements such as animal drawn plows, carts and other accessories. To achieve production goals, most 0RDs have developed agri- cu‘l tural credit programs which provide both short term credit for Seasonal inputs (fertilizers, pesticides, insecticides, improved Seeds, etc.) and medium term credit for animal traction equipment 301111 short and medium term credit are highly subsidized. There has been considerable experience with rural credit programs in the last fifty years in Upper Volta. But credit pro- grams during the colonial period were generally unsuccessful .1 \ t: 1See Chapter IV for a historical overview of agricultural "edit in Upper Volta. 4 After independence in 1960 and with the establishment of the 0RDs, credit has been promoted by the government as a means to accelerate agricultural production. The various credit programs carried out by the 0RDs have produced mixed results depending on the economic environment, and the type of crop(s) grown. Although credit programs have been successful in some predominantly cash crop areas (such as ‘i n Western Upper Volta with cotton schemes financed by the World Bank) the results for food crop production have generally been less 5 uccessful . Cash crop prices have been relatively more attractive ( even guaranteed for cotton) than food crops, and farmers were a s sured of selling their products in a well organized marketing system. From the mid 1960's to the mid 1970's, the different 0RDs had their own credit programs which they operated independently from one ano ther. But since 1975 the Ministry of Rural Development has set general guidelines and uniform terms of credit for the 0RDs to Fo‘l “low: 5.5 percent interest and, for medium term credit, 11 four or ‘F‘i ve year term with one year of grace.1 Today, the government is in the process of establishing a specialized national lending institu- t“ on, the Caisse Nationale de Crédit Agricole (CNCA) devoted to agricultural credit. Over the years, agricultural planners have encouraged the ado ption of animal powered mechanization as a means of increasing aSli‘icultural productivity. This strategy has been based on a number of premises. First, in breaking an observed labor bottleneck, this \ 1A four year term for donkey traction and a five year term for (”Sen traction. 5 time saving technology would permit an expansion in acreage [Jones, 1970; Peacock et al., 1966; Garin, 1966]. Second, in allowing better and more timely preparation of seed beds and weeding operations, it would have significant impact on yields [Vidal et al., 1962; Dennison, 1961; Charreau et al., 1971; Kline et al., 1969; Ramond et al ., 1973]. The combined effects of both acreage expansion and yield increases were assumed to increase production. In addition, the use of seasonal inputs, especially fertilizers and the overall i ntegration of animal and crop production, have been seen as addi- t‘i onal factors which would contribute to increasing agricultural production. The rate of adoption of animal traction and the use of improved seasonal inputs, however, have been rather modest. Given tha t the potential effects, both in technical and economic terms, are promising, the assumed explanation is that low adoption rates a re due to capital shortage at the farm level. A complete donkey tr‘a ction package, for example,‘requires an initial investment of 60 . 000 CFA, whereas a complete oxen package requires as much as 1 20 .000 CFA or more [ORD de 1'Est, 1979].- Hence, agricultural Credit has been introduced to alleviate this assumed financial Constraint. Numerous credit specialists point out that although credit can be a very powerful tool for agricultural development, it should not be considered in isolation but rather viewed in relationship to other institutions and to the overall policy environment [Jones, 1 971; Oweis, 1973]. Moreover, a credit program may collapse as beautifully as it was designed if the local socio-cultural and EC'C! Caro: It vy On 6. e . .l '. '. on“ :3," I‘.‘ l'.‘ 1!: 6 economic environment is not taken into account. Social scientists contend that socio-cultural institutions should be understood prior to the launching of credit programs [Jones, 1971; Gillette et al., 1973; Donald, 1976] because a Gourmanche farmer is not the same as a Babe farmer, nor is a Mossi farmer exactly the same as a Lobi 1 Farmers from different ethnic groups have different cus- farmer. toms and they are guided by different social structures and economic opportunities. These differences must be taken into account and credit programs should be tailored to fit the local environment. The numerous failures of small farmer credit programs in the developing world are hard to explain in the midst of widespread use 0 1" subsidized interest rates for production credit. As mentioned ea r-lier, the cause of this "high mortality rate" among small farmer credit programs may stem from the fact that these programs have been conceived, designed and implemented based on a dubious theoretical foundation. For example, as one reviews credit programs in the Thi rd World one notes that most development specialists design cred- 1 1‘- programs based on economic theories and models which rely heavily on the direct transfer of the so-called "modern" institutions to a Suhsistence or near subsistence setting. This practice has recently Come under heavy fire by many economists. For example, Adams [1978, p - 547-560] observes that: Economists are . . . handicapped in the analysis of rural savings behavior by the incomplete, and to some extent inappro- priate theoretical tools at their disposal. There are serious shortcomings in consumption theory when it is applied to rural \ U 1Gourmanche, Bobo, M0551 and Lobi are all ethnic groups in ‘pper Volta. The Gourmanche constitute the predominant ethnic group '1 the Eastern ORD. 7 behavior in LDC's. . . . Most consumer analyses to date, for example, have assumed that consumption and investment decisions were made by separate decision-making units . . . however, rural consumption behavior can only be explained by analyzing the firm- household as it simultaneously makes consumption, investment and savings decisions. 2. Problem Setting and Need fer Research There has been little research on the use of agricultural (:I’Edlt at the farm level in Upper Volta except far ad hoc reports ;>v~epared to support requests for foreign assistance. In some 0RDs, :SLthh as the Eastern ORD, large credit programs were instated in the '11‘i7! ‘farm credit. Chapter IV will provide an overview of Upper Volta's 1"" Storical experience with agricultural credit and describe the functioning of the EORD's current credit program. The performance of the EORD credit system is analyzed in chapter V using both secondary information and farm survey data. Re-Dayment performance will be analyzed using appropriate indicators. 1FE‘EE degree of farmers' understanding of the credit program and their t’EPY‘ceptions of its advantages and disadvantages will be addressed. 1r"€2 impact of medium term credit on production, and income will be aInfillyzed using technical efficiency measures and costs/returns clel"ived from farm budgets. This chapter will also address the Qtunity issue. 12 Chapter VI will provide a detailed description of the infbrmal credit system. Cash and in-kind credit transactions will be described in terms of number, value, sources, terms and purposes. An in-depth analysis of the structure and performance of this informal system as well as farmers' attitudes toward credit and savings is presented in Chapter VII. Finally, Chapter VIII will present a summary of the major findings of the study and their policy implications. CHAPTER II LITERATURE REVIEW 1. Introduction Over the last ten or fifteen years both multilateral and bilateral lending institutions have drastically reoriented their policies to focus their attention on the rural poor. As a conse- quence small farmers credit programs (SFCPs) have been increased in almost all Third World nations. This injection of financial resources has been assumed to be a critical factor in increasing For example, Whitaker [1973] reports that a 9!“ 1 cultural production . 1 was spent during the 1960-69 decade, almost one billion U.S. dollars on various credit programs in the Third World by international lend- ‘ing institutions. Ladman and Adams [1978] report that the total amount of agricultural loans disbursed in eighteen Latin American countries was $3.282 billion in 1960, $6.316 billion in 1968 and $8 -789 billion in 1973. T.W. Shultz's Transforming Traditional Agriculture [1964] pro- v1.flled evidence from village studies in India, Guatemala and other countries that traditional farmers were "efficient but poor." shultz hypothesized that the introduction of new technology and i "Vestment in human capital would provide profitable income streams \ B IThis amount was provided by the Inter-American Development ahk (IDB), the World Bank and USAID. 13 14 which would increase output and earnings of farmers in the Third World. The Shultzian hypothesis provided a solid foundation fbr the provision of credit to small farmers because it was assumed that the availability of credit would enable farmers to finance the acquisition of new technology. The rationale behind the provision of credit to farmers was based on the assumption that there was a lack of such resources for acquiring both durable assets (machinery, various implements, draft animals, etc.) and working capital for seasonal it1puts (fertilizers, improved seeds, pesticides, insecticides, etc.). Shul tz's emphasis on investments in human capital was advocated to ensure that the farmer was properly using the new inputs. 2. Major Issues in FOrmal Credit Scholars have advanced numerous ideas about the function and ro'l e of agricultural credit in the development process. According to Le'l e [1974], an agricultural credit system "must" facilitate the free transfer of resources among sectors, among regions and across income '31 asses in order to bring about an efficient allocation of scarce "eSources. In addition, it was assumed that a credit system was needed to finance technological change and mobilize savings from the i "Cr-eased incomes generated by the expansion of agricultural produc- t1(In. Jones [1971] contends that agricultural credit can (1) mobi- 1 ‘2e loanable resources from the economy; (2) supply these loan funds fOI" the purchase of productive assets; and (3) provide technical assistance, if needed, at the farm level (including financial and '"Elviagerial assistance). Galbraith [1952, p. 32] argues that ". . aQricultural credit clearly does become a strong force for further . 15 improvement when a man with energy and initiative who lacks only the resources far more and more efficient production is enabled by the use of credit to eliminate the one block on his path to improvement." In a survey of agricultural credit in Africa, Miller [1977, p. 5] contends that provided that the proper conditions exist or can be created, ". . . well-managed production credit can give agricul- tural development a strong boost by accelerating the rate of adoption of improved technology by farmers who would otherwise be prevented from using it." In an insightful article, I.J. Singh [1973] observes that the rol e of credit changes over time depending on the technological phases in agricultural development with three different roles for agricultural credit. In the first phase of pre-availability of new technologies the role of credit is to (1) drive interest rates down; (2 ) reduce small farmers dependence on moneyl enders; and (3) reduce the monopoly profits of moneylenders. In the first phase, Singh Coutends that these activities can be carried out without resorting ‘30 subsidized credit. The second technological phase is the transi- t" On period to the adoption of new technologies. The role of credit 1" this stage is to (1) provide large amounts of loanable funds to meet a substantially rising demand; which would (2) prevent interest "a tes from soaring, and hence hampering the adoption of new technol- °91es; (3) tie credit to a new technological package;and (4) estab- 1 1 Sh local rural credit institutions that would bring about compet- 7 t1 ve conditions in rural capital markets. In the third phase a f’12er new technologies have been adopted the role of the credit t)“Ogram is to (l) strengthen credit institutions; (2) mobilize Sir D Ev III |a, “ 16 savings from the expanded farm earnings; and (3) make rural loan associations self-supporting by a slow phasing out of the initial special program and thus letting the newly developed rural financial markets take over. Although Singh's three-step credit story is theoretically very appealing it nevertheless raises some practical questions about the kind of credit to be extended and the form in which loanable resources are to be provided to farmers in each phase. In the first phase, for example, it is not at all clear what kind of credit should be extended to farmers in the absence of new technologies. If credit is not made available for consumption purposes, it is difficult to envision how rural interest rates can be reduced. In reviewing the literature, one is surprised to find how little research has been done on the measurement of the extent of achievement 0‘? the goals assigned to credit institutions. Although an increase in farmers‘ income is an important objective, not much has been done to generate "before" and "after" facts that would give an idea of how much progress has been made toward reaching this goal. Another obsliective is to get small farmers out of the "clutches" of the ex17"loitative practices of money lenders; yet little, if any, has been Clone to document how various programs have helped reach this objective.1 Turning to some organizational and operational problems of formal credit institutions, Brake [1973] has pinpointed a number of \ R0 1The few studies of money lenders are as follows: Africa: 8 l>erts [1973], Matlon [1977]. Asia: Long [1973], Barto‘T—fn 19 7], o:‘rcrorf [1973], Kyu [1973], Sac—Toy 1972], Harriss [1980], and GI hers. Latin America: Nisbet [1967], Norwell and Wehrl y [1973], adhart U973], etc. l7 serious difficulties, including the lack of adequately trained personnel well fitted to the program under consideration and exces- sive levels of decision-making. These shortcomings have often resulted in high administrative costs, untimely provision of credit and lack of clientele participation in the decision-making process, especially at the local level. French [1973], like others, has pointed out that better per- formance could be achieved by formal credit organizations through simplified procedures; better communications and coordination within the institution; better working relationships and closer linkages with other organizations engaged in complementary activities (exten- sion and marketing) as well as with farmers themselves; and finally, by making program objectives and strategies more coherent. There have been numerous studies of the causes of low repayment r‘a tes of formal lending institutions. Major causes of delinquency ancl/or default have been reported to be related to both borrowers' attitude toward repayment and ineffective collection procedures of 1 ehding institutions. On the borrower's side, research does not seem to support the hypothesis that non-repayment is strictly related to “ “Come. For example, Gordon [1976], Miller [1977] and Vogel [1977. T973] report on many cases where borrowers had sufficient income to repay their loans but they chose not to do so. They also report high ‘19 fault rates among rich farmers. Hence, a number of reasons have been advanced [Boakye-Dankwa, 1979] to explain non-repayment, includ- ing farmers according low priority to repaying public credit institu- tions compared to private lenders; farmers impressions that public 1 0ans are gifts by government in exchange for political support; 18 farmers initially intending to repay but ending up defaulting because they witness others getting away with it, etc. Turning to the lender's side, Von Pischke [1976] and others note a number of factors related to the credit institution which affect delinquency and default, including untimely provision of credit and collection of repayment; poor recording of repayment and bookkeeping; lack of sanctions against delinquent borrowers; corrup- tion within the credit institution itself; political pressure which diverts loans from target groups; lack of farmer education as to the consequences of default; and measurement difficulties that make repayment problems hard to manage. Although delinquency (or repayment) may be an important indica- tor of the financial viability of a credit institution, delinquency is by no means the only criterion of the performance of a credit Pro gram. Tinnermeier and Dowswell [1973] and others, have argued that a credit institution may still be very ineffective even though the delinquency rate is zero. Alternatively, a program with high de‘l inquency may still have some beneficial results, including farm- Ers participation, knowledge and use of new inputs, formation of new farmer organizations, a larger marketable surplus, and higher insti- tutional effectiveness. Equity questions involving who benefits from the infusion of credit and the accompanying technology and change effects have weeently emerged as important issues in credit research. In a study of the credit program of the Chilalo Agricultural Development Unit (CADU) in Ethiopia, Holmberg [1972] and Cohen [1972] report that the Very success of the program in increasing production and income l9 resulted in large scale mechanization which led to the displacement of tenants. More recently, Ladman and Tinnermeier [1981] in their study of the political economy of agricultural credit in Bolivia, reported that credit was used as a political tool with the result that the elite have greater access to credit and a disproportionate share of the increase in income streams. In the Philippines, Sacay [1973] reported that although small farmers (under 3 hectares) con- stituted 73 percent of the farmer population, they received only 1.6 percent of total production credit. In setting up agricultural credit programs, Third World coun- tries have used highly subsidized interest rates as a means to encourage the adoption of credit. (But nunerous scholars have criti- cized these policies on several grounds. For example, Adams [1980], Gonzalez Vega [1976, 1977], McKinnon [1973], Shaw [1973],and others, have argued that subsidized interest rates are counterproductive beCause concessional and/or fixed interest rates discourage savings and capital accumulation, bring about the fragmentation of financial markets and introduce efficiencies in the allocation of resources. They also assert that these policies often exacerbate distortions in 1 “Come distribution and asset ownership. Hence, they advocate 1" exible and positive real rates of interest in order to mobilize savings and provide adequate returns for lending institutions. Adams [1977] has, more recently, argued that negative real rates of 1 "terest have increased the dependence of rural financial markets of Th‘ird World countries on funds from central banks, governments and from foreign donors . E \n V!‘ 'I\ l». I .3. 20 3. Major Issues in Infbrmal Credit In the first chapter we pointed out that many development specialists believe that understanding local institutions is a pre- requisite fbr the design of sound farmal credit programs. For example, Tinnermeier and Dowswell [1973] think that social change requires ". . . an insightful understanding of the environment in which the individual and also the credit institution operate." Gotsch [1972] suggests that the characteristics of new technologies, local institutions and existing social structures be taken into con- sideration in designing credit programs. Brake [1973, p. 216] recommends that "the credit institution should fit the purpose, situ- ation and culture." Brake also contends that a credit program is not likely to perfbrm well in a society where there is no penalty fbr delinquency or default. The main reason why studying informal credit institutions is important is to gain hard facts about the attitude and behavior of small farmers in their traditional ways of doing things which in turn may help design more effective farmal credit programs. For example, there is a wide range of conflicting views and opinions among development experts on the key issue of savings potential in rural areas. While some economists, such as Adams [1973], believe that there is a large potential, others, such as Davis [1973], think that there is a limited scope fbr rural savings mobilization. There is also a widespread belief that infbrmal moneylenders charge exploitative or usurious rates of interest due to their monopolistic [upsition in the rural financial market [Nisbet, 1967]. Yet farmers 21 still borrow extensively from moneylenders and traders despite the availability of subsidized government credit. Research on infbrmal credit is growing in popularity. For example, Nisbet [1967] interviewed two hundred farmers in Chile and faund that 45 percent of them borrowed from the fermal credit market whereas 44 percent were doing business within the informal credit market and 25 percent were using both systems. The percentages add to more than 100 percent because some farmers were participating in both markets. Nisbet also fOund that 74 percent of infbrmal borrow- ers were landless or owned less than 12.5 acres. Nisbet also reports that the interest rate was related to farm size, with smaller loans carrying a higher rate while the highest interest rates were paid by non-land owners. A major conclusion of Nisbet's study was that usurious interest rates were charged in the commercial segment of the infbrmal credit system (i.e., moneylenders, shopkeepers, merchants, etc.). The high interest rates were attributed mostly to market imperfections. The lender was either an oligopolist, a duopolist or simply an outright monopolist within the area he was operating. Efforts by state lending institutions to break these monopoly forces were not success- ful. Also, farmers used the infbrmal credit system because they were reluctant to submit themselves to the paperwork required by farmal lending procedures; they were distrustful of the personnel employed by government institutions and skeptical of the new inputs offered them through the fbrmal credit program. Nisbet's study has shown how an informal credit market can be dominated by a handful of lenders exercising monopoly powers. Nisbet has also documented the failure 22 of state lending agencies to introduce competition in the financial market of rural Chile due to the bureaucratic nature of their opera- ting procedures. Roberts [1973] carried out a one-shot credit survey in Zambia in November 1969. Since most loans were used fer mechanization purposes (especially plowing which took place in November and December) it was assumed that such expenditures would have been incurred by the end of November. Roberts assumed that infbrmation collected on private lending and borrowing in November would give an indication as to the extent to which these loans were going to be used over the entire year. The major findings of Roberts' investiga- tion were that some farmers borrowed from informal lenders to meet unanticipated emergency needs (machinery repairs, legal fees, ill- nesses, etc.). Also private lending and borrowing was not a major factor in productive investment within the sample. Although Roberts made an effort to trace the origin of borrowed funds and uses of these funds, there are some shortcomings in his study. Far example, farm expenditures in November accounted for only 16 percent of total farm expenditure in 1968 and 1969. Further, the amounts borrowed and lent for family purposes in November of 1969 were only 4.7 per- cent and 8.9 percent, respectively, of the overall cash expenses of the sample farmers on farming goods and services during the preceding year. Roberts' research also included a savings component; he pre- sented evidence to support the hypothesis of high saving potential 111 rural areas of Zambia. In his three-year study involving a sample of 239 rural families, he showed that, on the average, ‘. _- Q...—_ ,1! n? 9». 23 sampled farmers saved 30 percent of their income over that period.1 Peter Matlon's study [1977] of small farmers in a Moslem area in Northern Nigeria revealed that most borrowing occurred from mid- May to early August which also corresponded to the period of acute cash shortages, especially among lower income households. The study showed that repayments were made far the most part, during the major harvest period. Fer example, 66 percent of all loan repayments occurred between early August and early February. Matlon found that, on a value basis, 61.6 percent of all cash loans were utilized in production activities and 38.3 percent were used for consumption pur- poses. A total of 19.9 percent of the consumption loans were used for facd purchases and the rest far non-food consumption, holidays and ceremonies. Matlon reported that the mean annual interest was only 11.4 percent fer loans repaid in cash and as much as 142.2 percent far cash loans repaid in kind. No interest was charged the poorest 40 percent of households mainly because the Moslem religion in this region had a built-in system to help shelter the poor. This finding does not support the hypothesis that low income farmers are always charged high interest rates in informal credit systems due to higher service costs and higher risks. This review has pointed out major lines of research on both formal and infbrmal credit and stresses the need fbr comparative studies of both types of credit systems. To the author's knowledge, ¥ 1These findings were reported by Dale Adams [1973], The Case ‘for VoluntarygSavings Mobilization: Why Rural Capital Markets Flounder, p. 320. 24 a comparative study of both the formal and infbrmal credit has not been conducted in Francophone West Africa. The only published report on informal credit in rural Upper Volta is a preliminary survey con- ducted by SAEDI[1975] about the conditions for diffusion of farmal credit in the EORD. The only analytical paper on fermal credit to date in Upper Volta is Eddy and Baker [1980] study of Matourkou's credit program. This review has pointed out the obvious need far both descriptive and analytical studies of the formal and infbrmal credit systems in Upper Volta. 1SAED: Sociéte Africaine d'Etudes et de Developpement. CHAPTER III RESEARCH METHODOLOGY The objective of this chapter is to describe (1) the study site, and (2) the methods used to design, organize and carry out the farm- level survey and the special study of credit. 1. Study Site This study was undertaken in the Eastern Region of the country. The Eastern Region is an administrative unit officially known as the Dgpartement de l'Est (Eastern Department). The Eastern Department, one of the eleven in the country, is administered by a Eréjgt_who is the government's highest ranking official in the region. He is tech- nically responsible to the Ministry of Interior. Each region has a rural development institution, the ORD, which is under the control of the Ministry of Rural Development.1 The ORD is managed by a Director appointed by the government. The EORD is divised into eight sectors2 which are subdivided into sub-sectors. The region is divided into extension zones. Each zone is made up of several villages. Although, theoretically, the ORD provides extension service coverage for the entire region, large L 1A complete description of the ORD system will be provided in Chapter IV. 2The eight sectors are: Bogande, Diabo, Comin-Yanga, Matiakoali, Diapaga, Pama, Kantchari and Fada N'Gourma. 25 26 areas of the ORD are not covered by extension agents because of high supervision costs and poor transportation and rudimentary communica- tion systems. 1.1 Population and Settlement Patterns The Eastern Region covers a large area and represents about 20 percent of Upper Volta's total size. The EORD is the largest ORD in the country and it is about as large as the entire neighboring coun- ' With 400 thousand inhabitants (i.e., less than 10 try of Togo. percent of the country's total population) this region has a low population density relative to other 0RDs.2 Some areas of the ORD have less than one inhabitant per square kilometer [Savonnet, 1968]. A number of reasons have been advanced to explain this low population density. The most common reason is the lack of water during the dry season. Other reasons are the floods in the rainy seasons due to flat land and poor drainage and also disease infestation, especially "river blindness" (Onchocerchiasis), which is severe in some southern parts of the region. The population is unevenly distributed throughout the region (see Figure 3-1). Major population clusters are found in the north- ern part around the Bogande area, in the east around Diabo, in the south of Comin-Yanga along the Togo border, around the west of Kantchari to the Niger border and to the south of Diapaga around the Gobnangou plateau. The population is clustered along the ORD ¥ 1Togo has 56 thousand square kilometers. 2The center of the country has 25 or more inhabitants per square kilometer. 27 >1? 9'1 1-1 8] '/,"',// '- /,/,, . '1, x rr'g" I ', //:,",/ l’-’/./»,’,"“ , / I - , ,’/ /,’ I , ’/ . . ’ z ’ _’ , 'r."(’1’.'l l/.V.."\ /, ’ ,~ ,/,, . ,/’ I] ,1 ’ .’ "- ' //- I , . . . _ , , , . r ' - . ,,.,,_ ~ airs. so! ,, -»,, ze .. a, ,1, . . , r .' . 1 ../MW, -\- ,1, ..o l .. ' V ’ ‘ , , v - _ ./ I ' V/ér2;',7.l,j ’./ .1). ”.1 , / / , ,x/ / I .m r . 1,21" ‘13." '1 a [I ‘ ‘ ~"0/‘/, ~' / ’ _‘ I /, \ ’ ’ . . a . // / .mt/r ., ,’ 2/ ‘ /"," /‘/ , 1" / '/ / ,m. . .._._ , , . -/- '// . “In, .I ‘- ~44 — \ I, /. . V\ g.‘ ~.;- / / ,’ //;.’/ 5f, )1. \ \ .Tomburyo ‘ . ,r- \ a: L, 17 ’o—,\ \ ‘- Mion Density by Canton (um/sq. tun) . M or villages 0-4.’ with hometown”: Density 0' Canton Motion 5 ~93 £2! (persons/sq. km) 1:] C] [::]uo-Ms [:I [:1 FIGURE 3-1 Population Density in the Eastern ORD (1975 National Census) 13°- “'4 28 boundaries whereas the center is sparsely inhabited. In l968 it was estimated that a large proportion of the pe0ple were living in widely scattered villages. Fifty-seven percent of the population lived in small villages of 250 inhabitants or less [Eicher et al., l976]. The uneven distribution of population has some important implications. First, the dispersed population makes it difficult and costly to pro- vide agricultural inputs and marketing services. Moreover, the poor road infrastructure is a serious problem during the rainy season when many zones are isolated from the ORD's headquarters in Fada N'Gourma. The clustering of population along the ORD's borders is a second major problem. Over the years, strong economic ties have developed between these population clusters and the neighboring regions and/or countries leaving the center more or less isolated economically. The cluster/border effect is illustrated by the large volume of marketing transactions taking place between the Bogandé area and the Koupéla and Kaya 0RDs to the west, and between the southern and eastern areas with Togo, Benin and Niger. Though it makes economic sense to develop infrastructure that would fbster these ties, it may not be politically acceptable. l.2 Natural Environment and Farming Characteristics The natural environment is very heterogeneous. Annual rainfall ranges from slightly over 500 mm. in the north of the Bogandé area, to l200 mm. in the southern part. Arable land also varies from the light sandy soils in the north to the potentially more fertile heavy- deep-clay-like soils in the south. This diversity has implications fior- the design of animal traction packages. 29 Cropping patterns in the Eastern 0RD fbllow soil and rainfall variations. But the most predominantly grown crops are the basic staple food grains--sorghum and millet--which are grown everywhere in the region. Differences in cropping patterns are a function of the combination of these two crops and other minor crops which are grown together as crop mixtures or intercropping. Major cash crops grown in the north (Bogandé zone) are peanuts1 (or groundnuts) and sesame, though the latter is relatively less important. Although peanuts are also grown elsewhere, rice, cowpeas and cotton constitute the major cash crops in the south, especially around the Diapaga and Comin-Yanga zones. Other minor food crops include corn, ground peas, okra, red pepper, manioc, etc. Yams are grown exclusively in the south (Pama, south of Diapaga to the Benin border) as food/cash crops. There is a large variation in the size of farms according to different surveys. Fbr example, the 0RD estimates show that the average farm size in 1975 was around 15 ha [0RD de l'Est, l975]. But in l974, SAED estimated the average size to be 7.0 ha. A year later, in 1975, SAED reported that average farm size was 4.2 ha [SAED, l975]. In l978, SAED conducted a more indepth study, including the measure- ment of fields, and arrived at a figure of 2.44 ha fbr the average farm size [SAED, l978]. The discrepancy of these figures illustrates the unreliable data base fbr the region. 1It is estimated that the Bogandé-Piéla area accounts for as Inuch as 75 percent of the entire region's peanut production. 30 2. Methods of Primary_Data Collection 2.l The 1978 Farm Survey This credit study was part of a broader and more comprehensive multidisciplinary technical assistance and research program under- taken over the l977-81 period in the Eastern ORD by a team of the Department of Agricultural Economics of Michigan State University (MSU) under a USAID financed contract. The MSU contract team was charged with (1) providing technical assistance to the EORD in the areas of supervised credit, marketing, animal traction and range management, audio-visual; and (2) setting up a minimum infbrmation system that would provide the 0RD with badly needed basic data for policy decisions. The MSU multidisciplinary team was composed of (l) a marketing economist, (2) a production economist, (3) an animal traction specialist, (4) an audio-visual specialist, and (5) a credit specialist. The author was brought in as a short-term researcher on credit. At the outset, it is worth mentioning that the overall research effort was the first of its kind ever conducted in the region (even in the country), at least in terms of scope and depth. Hence, the research team and the Director of the 0RD believed that the research program should be as comprehensive as possible in order to provide a wide range of information on farmers' activities, attitudes, and behavior and understanding of the ORD's various programs. The credit study was an integral part of a broader farm management1 survey2 which covered a lZ-month period beginning on May 1, 1978. 1For detailed presentation of different methods of farm level 31 2.2 Administration and Supervision of the Study The administration, supervision and actual data collection required the combined effort of twenty-eight persons, including the fbur MSU team members and the author. The field staff was composed of (l) f0urteen enumerators who had at least six years of fbrmal education; (2) five supervisors recruited with most of them having ten years of fbrmal schooling; and (3) nine sector-level statistical agents who had at least ten years of fbrmal education and three to six months training in agricultural statistics. All of the statisti- cal agents had been working for the 0RD fOr three to seven years. The office staff was made up of a typist and two statistical clerks. The clerks tabulated data and assisted in measuring fields. The training of enumerators, design and testing of questionnaires, listing of household heads, selection of sample farmers and transport of enumerators to assigned villages took three months (from February to April 1978). The nine statistical agents and five supervisors made up the field supervisory team. The members of the field team were distrib- uted in the eight sectors of the 0RD along with the enumerators they were overseeing (see Table 3-1). Although at first glance the number of supervisors may appear unusually high, the work load and the data collection, see Dunstan S.C. Spencer, "Micro-Level Farm Manage- nnnt and Production Economics Research Among Traditional African Farmers: Lessons from Sierra Leone." African Rural Employment Paper No. 3, Department of Agricultural Economics, Michigan State Univer- sity, September 1972. 2More extensive description of the survey can be found in: Michigan State University Contract Team, USAID Integrated Rural Development Project, 0RD de 1'Est, Fada N'Gourma. Upper Volta, S_i_x Month Report, December l977-May 1978, August 1978. (.7 32 TABLE 3-1 Distribution of the Fourteen Field Supervisors fOr the 1978-1979 Farm Survey by Sector Number of Enumerators 0RD Sectors Number of Supervisors Supervised Bogande 2 3 Diabo 2 2 Diapaga 2 3 Comin-Yanga l 1 Fada N' Gourma l 2 Kantchari 1 1 Matiakoali 1 1 Pama 1 1 Headquarters in Fada 3 - Total 14 14 5': a» ti-A a... C" ,;F\ . 33 enormous responsibilities they were expected to assume justified this number. The responsibilities of supervisors were as follows: 1. assisted interviewers in arranging an interview schedule in sample villages in order to minimize travel distances and time; 2. checked data recorded for mistakes, completion and con- sistency; 3. attended interviews to make sure questions were well under- stood in local languages; 4. carried out preliminary tabulations; 5. disseminated new questionnaires and information from the research team; 6. measured fields, laid out yield plots and helped inter- viewers weigh yield samples; and 7. visited interviewers at least three times a week and resolved problems with reluctant farmers. The overall survey supervision was the responsibility of the MSU team members, including the writer. All team members traveled extensively, visiting each enumerator and each supervisor at least once every two or three weeks. 0n the average, two of the five team numbers were on the road on a given work day. Given the large size of the 0RD it was estimated that about 40 percent of their work time was devoted to riding. la.- . .:n 34 2.3 Sampling‘Procedures 2.3.l Definition of a Farm Household Since the farm household was the primary unit of analysis there was a problem of defining what a farm (or agricultural) household meant. Generally in Upper Volta villages are made up of clusters of compounds. Each compound is composed of several housing units pro- viding shelter to one or more nuclear families of the same extended l family. These nuclear families may perfbrm farming activities either together or separately. The farm household was defined as the family production unit which farmed at least one major field and controlled the grain output of that unit. Moreover, all farm management decisions of the household were assumed to be made independently of other households. With such a definition a farm household may consist of one or more nuclear families (but rarely unmarried individuals) depending on whether or not the above criteria were met. 2.3.2 Village Sampling As was seen earlier, the Eastern Region2 is heterogeneous both in terms of rainfall and in terms of cropping patterns. The objec- tive of the village sampling procedure was to attempt to include the most important farming systems in each major ecological zone. At the same time there was the concern of choosing villages in clusters to —___ 1An extended family may be made up of brothers, uncles, sons along with their wives and children. The older brother, in addition to being the head of his own household, is also the head of the com- Pound. The French word concession is translated into compound. 2Eastern Region and Eastern 0RD are used interchangeably. 35 minimize the travel time of enumerators (about 25 km radius).1 Delimiting such clusters was difficult due to the general lack of secondary data and the inconsistency of the data. Fer example, the village lists of the 1975 National Census were not identical to the villages of the administrative units of the ORD, nor did they coin- cide with villages on the most detailed maps available (1:200,000). To get around these obstacles, villages were selected by using the fbllowing method. First twelve "zones of interest" were chosen according to the fbllowing criteria: 1. distribution of population in the region; 2. ecological zones defined by the ORD's Bureau of Agricul- tural Production according to rainfall, cropping patterns and soil differences;2 3. zones where animal traction was used intensively (Piéla, Diapangou, Diabo, Ougarou/Matiakoali and Diapaga; 4. size of the sector; and 5. accessibility by supervisors on motor bike. The second step consisted of listing all the villages contained in each "zone of interest" using the 1975 census village lists. The last step consisted of randomly selecting two villages from each non- animal traction zone. Only one village was randomly selected in the other fbur animal traction zones, except in the Logobou zone where two random villages were chosen. In addition to these random sample 1Enumerators traveled by motor bikes. Some of them had to cover as many as 30-35 km from one village to the next. 2The different ecological zones were previously established by an FAO agronomist. J. Denis, Determination de Zones homogénes en vue de 1' installation d'un re’seau d'Essais Multilocaux. 0' n' Phi a \I up“ ' d l\1 .1. .c I! uiI .f‘ 36 villages, one village was purposively selected in each of the feur animal traction zones and three villages were selected purposively in the fifth zone (i.e., Diabo zone). In total, there were twenty randomly selected villages on a subjective stratification basis. Seven animal traction villages were purposively selected according to the number of animal traction farmers. Although villages were chosen from each "zone of interest" on an equi-probability basis, there was no attempt to use probabilities proportional to their size. The subjective stratification factors were described earlier without taking size into consideration. The reason why it did not appear necessary to use size either as a stratifying factor or as a variable upon which to compute propor- tional probabilities for village selection was based on the assump- tion that village size, within the same zone of interest, did not have a significant bearing on farming systems (or cropping patterns) given the sparse population settlement patterns described befbre. This hypothesis could be tested using production data. Table 3-2 presents the list of the twenty randomly selected villages and the seven purposive villages. Villages where enumera- tors were residing are also indicated in this table. Because animal traction farmers in the sample more often come from a region rather than from specific villages, purposive villages are listed as regions on Table 3-2. Hence, this table shows the population figures fer the random villages but not fer animal traction regions. A map showing random villages as well as purposive villages (or animal traction regions) is presented in Figure 3-2. 37 TABLE 3-2 Location of Sample Villages and Regions of Surveyed Animal Traction Farmers, 1978-1979 Farm Survey “Zone of Interest" Region of Surveyed Animal Traction Population of ' Sector (Sub-Sector) Village Farmers 1975 Census aogandé Gbanlamba 1160 Komboassi* 1119 aogandg Mani Lanyabidi 161 Bonbonyenga* 604 Piéla Dabesma" 234 Piéla Region - C Diabo Monkontor§* 377 Diabo Lantaogo Region - Diabo I Region* - Diabo 11 Region - Logobou Namponkoré* 2138 Kindikombou* 2032 Logobou Region - Diapaga ' Partiaga Bomondi* 1063 Foanboanli/ n.a. Dubcaali Yondé Ouobgo" 527 Comin-Yanga Kondogo 302 Diapangou Tilonti* 402 Diapangou Region - Fada N Gourma Botou Botou'* 600 Ougarou 547 Kantchari Mantchangou* 525 Kantchari Moadagou 235 Ougarou Poniokonli* 315 Ougarou/ - Matiakoali Matiakoali Region Patna Pama Tindangou* ' 462 Puma Kpajali n.a. SOURCE: 1975 National Census *Denotes residences of fourteen interviewers. 'Horth of Fada bNorth of Fada cHot applicable; 1975 census data missing because of confusion over names of villages. 38 8:83! Sign l.l-II :99: i8.» .95.! use...» 9 con...» 355 can...) 2:382: .38» I .3.» ‘8 5.8.0 I ' I I 2:28 Sim-I‘ll] 22.2.2 5:55.." 2:3,. 13.... .. H Mm... . 0:0 53.53 5 «~05? 332%. no .2: 3.... I mum 25¢ H... Ln 4 p... L 39 2.3.3 Farm Household Sampling Households in the twenty random villages were selected on an equi-probability random sampling basis. The sample frame used in this exercise was provided by the 1975 census household list. How- ever, these lists had to be updated and checked for missing or new households. To update the household lists in the twenty random villages, four teams conducted meetings in the proposed villages to be included in the survey. Compound heads attended these meetings and assisted in drawing up final agricultural household head lists. Since the 1975 census used the narrow nuclear household, an adjustment was made to get the kind of households that would confbrm to our operational definition. The resulting list contained either independent nuclear households or farming households consisting of several nuclear house- holds. The survey team incorporated new households that had settled in the village since the 1975 census in the lists before the sampling took place. Although the 1975 census turned out to be fairly accu- rate, there were inconsistencies in the spelling of names. Migra- tion, death and fragmentation of compounds affected about 5 percent of the households listed in the 1975 census. The redefinition of households according to our criteria reduced the number of house- holds in the 1975 census by 10 to 15 percent. The updating exercise was not a time consuming process because it took place during the slack (dry) season when farmers were more or less idle, and only the names of heads of households were updated. Thus, the procedure of using village meetings turned out to be an extremely efficient 40 method of both updating the list of household heads and drawing the sample on the spot. Eighteen1 farm household heads were selected in each of the twenty random villages from April 23 to May 5, 1978, during a meeting of the village. From an urn containing numbered tickets correspond- ing to the village household heads' numbers, a village representative2 randomly drew the sample farmers. In the five animal traction regions, household heads were selected on a purposive basis. Sector chiefs in collaboration with their sub-sector chiefs and extension agents, on our request, pro- vided the list of the "best" animal traction farmers. The reason why a random sampling procedure was not used was simply due to the fact that animal traction technology was relatively new. An evaluation of the animal traction based on the average adopter, with one or two years of experience, would not reflect its potential. Eighteen animal trac- tion farmers were chosen from the lists in each of our animal traction regions. Due to a long history of intensive animal traction in the Diabo region, eighteen traction farmers were chosen from each of three animal traction sub-regions (Diabo I, Diabo II and Lantaogo). In summary the 1978 MSU farm level survey included 486 agri- cultural households selected from 27 villages and regions in the Eastern 0RD. Of these 486, 360 farmers were selected on a random sampling basis to cover the principal agricultural systems of the 1Except in the village of Botou where 19 farmers were selected. In the village of Kpajali all the 17 households that made up the village were selected. 2To avoid any problem with local protocol the village chief usually drew the sample. 41 entire region and 126 animal traction farmers were purposively chosen to evaluate the ORD's animal traction and credit program. In addition, 120 randomly selected households and 42 "best" animal trac- tion users were chosen to obtain seasonal labor profiles. 0f the 486 farmers, only 6 dropped out of the study during the 12-month survey period. Of the six, three had passed away, one had moved out of his village and two had quit farming. Hence, the final sample of 480 farmers was made up of 355 randomly selected farmers and 125 animal traction farmers. The distribution of sample villages and farmers is recorded on Table 3-3. 2.4 Survey Instruments, Sample Distribution and Interviews 2.4.l Survey Instruments The basic survey instrument used in this study of credit con- sisted of 5 special questionnaires which were designed to collect supplementary infOrmation from the same sample of 480 farmers includ- ed in the farm management survey. The first credit questionnaire was administered to all 480 farmers on a monthly basis fer the entire 12-month period because it was assumed that farmers do not borrow or lend every day or every week and that a monthly interview was ade- quate to capture credit transactions. This monthly questionnaire was designed to collect data on: -—I O lending in cash and in kind; 2. borrowing in cash and in kind; 3. repayment of borrowed cash and borrowings in kind; and 4. repayment received fer both loans given in cash and in kind. Information was also collected on the amount of the loan, terms, ‘42 TABLE 3-3 Distribution of the 480 Sample Agricultural Households by Agroclimatic Zone, Village and Sub-Sample Number of Households in Each Village or Region ZONE VILLAGE Animal Traditional Traction , Gbanlamba 13 ' Bogande Komboassi ‘8 ' Lanyabidi 18a Mani Bonbonyenga 18 ‘ Dabesma 18 - Piela Piela - 18 Monkontoré 18 - Lantaogo - 18 ”“110 Diabo I - l7 Diabo II - 18 Namponkoré 18a - Logobou Kindikombou 18a - Logobou - 18 Bomondi 18 “”1993 Dubcaal 1' 13 ’ Ouobgo 17 Vonde Kondogo 18‘_ Tilonti 18 - Diapangou Diapangou - 18 Botoub 18‘ B°t°"b Ougarou 19a Mantchan on 17 Kantchari Madam" 18 Peniokonli 18 - 0093")" Ougarou - 18 Tindangou 16 P404 Kpajali 16 Total 355 125 .Village chief included as a non-randomly selected household head. “ bNorth of Fada 43 interest charges, distance where transaction took place, gifts to lender or from borrower and category of lender. The second credit questionnaire was a one-shot questionnaire administered to all 480 farmers at the end of the lZ-month farm management survey in order to obtain information about loans out- standing at the end of the 12-month period. The third one-shot ques- tionnaire was designed to obtain infbrmation needed to cross—check the accuracy of the data obtained on the monthly credit questionnaire and to gain an understanding of farmers' attitudes toward modern banking practices, savings in formal savings institutions, and penal- ties imposed on people who do not repay their debts to informal lenders. This questionnaire was also designed to collect data on sources of cash (other than credit) to meet emergency needs, and forms in which liquidities are invested (or saved). The fburth questionnaire was a one-shot questionnaire and was administered to the sub-sample of 125 animal traction farmers. It was designed to obtain information on farmers'understanding of the medium term credit terms, costs and purpose. This questionnaire was also designed to collect data on hidden costs such as gifts to extension/credit agents, distance traveled for loan application and the number of visits to extension/credit agents. The fifth questionnaire was a one-shot questionnaire adminis- tered to all 480 farmers to obtain information on reasons fbr not adopting the animal traction technology, farmers'perceptions of the advantages and disadvantages of the EORD credit program and alter- native informal sources of credit for agricultural production purposes. 44 2.4.2 Sample Distribution and Interviews Each of the fburteen enumerators was assigned two villages or regions (i.e., 36 households in total) except in the Logobou zone where three villages were a joint responsibility of two enumerators. All households (both randomly and purposively selected) were inter- viewed once a month far most of the input-output and credit data (borrowing and lending). In each village six out of the eighteen households were interviewed weekly to get household member and field specific labor time data. Thus, each enumerator interviewed twelve farmers on a weekly basis1 and twenty-feur on a monthly basis. 0n the average, then, each enumerator was handling eighteen interviews weekly. 2.5 Data Coding, Verification and Processing The data on the monthly credit questionnaire were precoded and directly typed onto the computer at the Centre National du Traitement de l'Infbrmation (CENATRIN), a computer center located in the capital city, Ouagadougou. The fbur one-shot questionnaires were coded at the EORD headquarters in Fada. Initial verification for errors were done both in the field and in Fada. Final clean up, validation and creation of files were carried out at CENATRIN. Preliminary data analysis started at CENATRIN, but more indepth analysis was subse- quently carried out at Michigan State University using mostly SPSS.2 1The six households which constituted the weekly sample were randomly selected in the random villages. The first six of the list were selected in each village. The six best animal traction farmers were selected for the intensive weekly interviews. 2SPSS: Statistical Package for the Social Sciences. 45 The farm management and credit surveys were carried out without any major obstacles. Inasmuch as farmers are suspicious of surveys because of the fear of getting tricked up fer tax purposes, the data collected were acceptable given the sensitive and private nature of the questions asked. Inaccuracies that may have occurred were more often due to weaknesses of enumerators than the reluctance of farmers to answer questions. The only major problem encountered was at the beginning of the survey when two villages categorically refused to participate. These two villages were immediately replaced in order that the survey could start on schedule.1 Village chiefs were all included because they could exercise pressure on those farmers who may have been tempted to drop out.2 3. Summary This credit study was the first of its kind ever conducted in Eastern Upper Volta and it was a part of a farm management survey of 480 farmers which was carried out by an MSU multidisciplinary team over a lZ-month period in 1978/79. The purpose of this credit study was to provide a sound information base about the EORD formal agri- cultural credit program including: 1. farmers' real costs of participation in the credit program, 1The two villages that refused were Ougarou and Feanboanli. This Ougarou is not to be confused with the Ougarou listed on the twenty random villages. 2See.Table 3-3 fer villages where village chiefs were included as non-randomly selected household heads. 46 2. farmers' understanding of the objectives and conditions of the fermal credit program, 3. the impact of credit on production and income of farmers, and 4. the distributional effects of the formal credit program. The second purpose was to gain an indepth understanding of the opera- tion of the infbrmal credit system, including: its function, role and purpose, structure, operating procedures, and performance. This study seeks to generate a broad knowledge base that will be useful in improving the perfbrmance of the EORD's fbrmal credit program and useful in the design and implementation of alternative lending programs in the 0RD. Five special credit questionnaires were administered to the sample of 480 farmers and sub-samples in order to supplement the farm management data collected over a lZ-month period, April 1978- May 1979. The first credit questionnaire was a monthly questionnaire which was administered to all 480 farmers over the same 12-month period to record lending and borrowing transactions in the infbrmal credit system as well as repayment and other related information. The second informal credit questionnaire was a one-shot questionnaire administered to all 480 farmers at the end of the survey in order to obtain infermation on loans outstanding at the end of the 12-month period. The third infbrmal credit questionnaire was also a one-shot questionnaire administered to all 480 farmers. This questionnaire was designed to provide useful infbrmation on farmers' attitudes regarding various aspects of banking, credit, investment and savings. 47 The fourth credit questionnaire was a one-shot formal credit questionnaire administered to the sub-sample of 125 animal traction farmers. This questionnaire was designed to obtain infbrmation on farmers' understanding of the medium term credit program and to collect data on hidden costs such as distance traveled fer loan applications and number of visits to credit agents. The fifth credit questionnaire was a one-shot fbrmal credit questionnaire administered to all 480 farmers. This questionnaire was designed to obtain information on reasons fbr not adopting the animal traction technology, farmers' perceptions of the advantages and disadvantages of the EORD credit program and their perceptions of availability of alternative infbrmal sources of credit fer agri- cultural production purposes. FOurteen enumerators were hired and trained fer the survey. They were supervised by five supervisors and nine statistical agents who were responsible for checking data fer errors, consistency, measuring fields, placing yield plots, and carrying out preliminary data tabulation. Data coding and verification were perfbrmed at the EORD headquarters in Fada. Data validation, processing and initial preliminary analysis were carried out at the computer center (CENATRIN) in the capital city, Ouagadougou. Final indepth analysis was carried out at the MSU Computer Center. CHAPTER IV AGRICULTURAL CREDIT IN UPPER VOLTA: HISTORICAL PERSPECTIVE AND CURRENT PROGRAMS The purpose of this chapter is to provide a historical perspective on past and present agricultural credit in Upper Volta with emphasis on the Eastern 0RD in order to see what lessons can be learned from past successes and failures. This chapter will review the early colonial experience and then the various credit programs that have been established during the post-independence period. 1. The Colonial Era Upper Volta has a relatively long history in agricultural credit. Early experiences go as far back as the late 1920's under French colonial rule when French credit institutions were transferred to Upper Volta, and in other French colonies. The credit system 1 was a three-level private introduced by the French colonial rule organization with the following structure: 1. mutual organizations were set up at the village level; 2. mutual organizations were organized into local credit unions; and 3. central credit unions were organized by bringing the local credit unions together. 1For'more infbrmation see: Guy Belloncle, Le Crédit Agricole Dans LesfiPays d'Afrique d'Expression Francaise au Sud du Sahara, Rome:' FA0,Tl968. 48 49 But, for various Operational and managerial reasons, this three- tiered system was dropped after a few years. The second colonial attempt took place in the early 1930's when colonial authorities resorted to a public credit system known as the Caisse Centrale de Credit Agricole (CCCA). The CCCA relied on the Societés de Prevoyance1 (SDP) to provide credit at the vil- lage level. The prospect of success seemed a little better than the previous system but the CCCA was soon overcome with problems. Fer example, the colonial rulers did not fully understand the under- pinnings of local institutions. The CCCA stated that only farmers with a state title (proof of legal ownership of land) to serve as collateral would be eligible fer a loan. Obviously this requirement disqualified virtually every farmer because agricultural land was (and still is) under the collective ownership of the community as a whole and the individual farmer only had a right to use it. The third colonial experiment was an attempt by the SDP to extend credit for agricultural production although this was not their main purpose. The SDP was the first credit institution in Upper Volta to provide peasants with improved seeds, pesticides, small implements and equipment. Credit was provided through the £92! Commug, the resources of which were made up of contributions from individual members. In addition, and more importantly, loanable funds were obtained through public subsidies and by loans from the CCCA. 1Societés de Prevoyance: the main purpose of this institution was to purchase, store and resell grain to pe0ple both in rural areas and in the cities. 50 Although the SDPs were very close to farmers, they ended up experiencing extremely high default rates. The unfavorable default rate depleted their common fund and they had to request more sub- sidies to survive. But, the SDP credit program collapsed after a few years. The SDP credit experience was an important phase in the credit history not only of Upper Volta but also of most Francophone African countries. It left deep marks in these countries, especially in the peasants' minds. First, the SDP provided loans to peasants to help them get through the "hungry season."1 Second, peasants perceived credit to be an avenue fbr "free" equipment loans because they were not forced, in any way, to repay their loans. After these first three failures, it was felt that there was a need fer a fresh approach. The fburth experiment then, was an attempt by the French Caisse Centrale de la France d'Outre Mer to establish a second generation of credit unions called Mutuelles de £1533 (MC). These MCs were created in the late 1940's and early 1950's based on assumed cooperation of Africans especially at the village level. Village credit cooperatives were established based on three principles: first, the principle of unlimited joint lia- bility among individual members; second, the principle of limiting the cooperative to a restricted well-defined geographical area; and the third principle was that credit would only be extended fer pro- duction purposes. A program fer the utilization of credit funds was part of the credit system. A structure was set up to make sure IThe-"hungry season" is that preharvest period when food stocks are at their lowest point. 51 that the money was used fer the intended purpose. Thus, supervised credit was born. Unfbrtunately, after a few years, the MC experi- enced heavy losses due to loan repayment delinquencies and default. The joint liability and collective responsibility, which was sup- posed to exercise peer pressure on delinquent members, did not work. 2. The Post-Independence Period After independence in 1960, three major French agencies were involved in agricultural development in general and in agricultural credit in particular: Sociéte d'Aide Technique Et de Cooperation (SATEC), Compagnie Frangaise Des Fibres Textiles (CFDT), and Burggu_ Pour 1e Developpement de la Production Agricole (BDPA). Although these three agencies were engaged in providing agricultural credit, SATEC and BDPA were the only ones which were concerned with improving fbod crop production. SATEC's credit experience has been well docu- mented. 2.1 SATEC's Credit Experience SATEC started an agricultural credit program in Upper Volta in 1961 with activities concentrated in the central and northern parts of the country. The objectives of SATEC were to increase food crop ‘ A typical SATEC pack- production and the cash income of peasants. age included the fbllowing: a donkey, a harness, and a plow, fer a total value of 12,500 CFA. The loan was to be repaid over a feur- year period with a 5 percent interest rate. According to SATEC, the introduction of animal traction was assumed to have an acreage effect 1These are the same objectives pursued by the present Eastern 0RD credit program. 52 of 60 percent and a yield effect of 20 percent. SATEC estimated that the expected increase in gross revenue would be just about 100 percent (from 14,960 CFA to 29,680 CFA) [SATEC, 1964]. Such a per- fermance would be very attractive to farmers as annual loan repayment was only 3,670 CFA. Credit was extended to farmers through village cooperatives serving as intermediaries between the lending institu- tion and the individual farmer. These cooperatives were more or less organized along the same lines as the MC described earlier. A total of 545 village cooperatives were set up and 8,700 loans distributed between 1962 and 1965 totalling 103,303,000 CFA. Repayment perfbrmance fbr SATEC's program was rather good in the first two years but in the third year (1964-65) the default rate jumped to 46 percent. Several explanations seemed to be important in explaining the increased default rate. The first and perhaps the most important reason was the poor organization and the lack of educational and training components in the village cooperatives. If a peasant obtained a loan then he was arbitrarily assigned to a cooperative in a village sometimes located far away from his home. The lack of a cash crop was a second reason. This is understandable because it is well known that farmers are extremely reluctant to sell their grain fbod crops to repay loans because fbod production is kept to meet family consumption needs for the current year and to augment stocks for bad years. The third reason was linked to the date of annual repayment of loans. The June 30 date coincides with the beginning of the hungry season when fbod stocks are at a low point and cash on hand is scarce. As repayment continued to worSen, SATEC resorted to local government authorities to help collect delinquent 53 loans. These authorities used threats and other means of pressure to secure repayments. It is reported that a number of farmers sold goats, sheep and chickens to repay their loans. Those who could not repay their loans migrated to other regions or fled to neighboring countries. In summary, village credit cooperatives did not live up to expectations. 2.2 The National Development Bank- ORD‘S Joint Venture The National Development Bank (NDB) was created in the mid- 1960's by the government of Upper Volta. Although the N08 focused on non-agricultural activities, it was nevertheless entrusted with agricultural credit responsibilities in collaboration with the 0RDs. The 0RDs were to serve as intermediaries between the bank and the village group organizations (or village pre-cooperatives). The 0RDs were entrusted with the responsibility of selecting farmers for loans. The 0RDs required a potential borrower to devote a certain portion of total cultivated acreage to cash crops because it was assumed that it would increase the income flow and repayment prospects. In addition, the 0RDs were supposed to process loans, provide inputs such as traction equipment, provide technical assist- ance and collect the payments fer the N08. Although it was assumed that the N08 would experience a number of organizational and operational problems in the beginning of its credit operations with the 0RDs it turned out that those problems were extremely hard to overcome. Credit was subsidized with the interest rate set at 5 percent. As the default rate increased, the N08 found itself in an uncomfbrtable financial posture. To make bad 54 things worse, the relations between the N08 and the various 0RDs participating in the credit program were strained. Furthermore, even though the N08 was not the only one to be blamed in its failure to develop a viable agricultural credit program, there were serious reservations about its genuine commitment to the agriculture sector. The N08 made its most important loans to urban businesses, including industrial schemes, private businesses and government civil servants because it was easier and less risky. The N08 perceived its agricultural credit program as a burden imposed upon it by the government and did everything to prove or to substantiate its allegations that agricultural credit was not working. In any event, the N08 gradually phased out its direct agricultural credit activities but it still provides loans directly to the 0RDs. The lesson to be learned from the National Development Bank's credit experience is that a credit institution with multiple responsibili- ties should not be entrusted with the responsibility for extending credit to the agricultural sector because there will be an unavoid- able tendency to channel a disproportionate amount of loans to the less risky industrial/urban sector. 2.3 The Matourkou1 Credit Experience The Matourkou credit program was set up as a joint project financed by the United Nations Development Program (UNDP) and by the government of Upper Volta with technical assistance from the Food and Agricultural Organization (FAO). The Matourkou credit program 1Matourkou is the name of the village in Western Upper Volta where the headquarters of the credit program is located. 55 is probably one of the few, if not the only credit program for fbod crop production that was relatively successful. But, one cannot jump to the conclusion that it could be duplicated elsewhere in the country for a number of reasons that will be examined below. The Matourkou credit program covered six villages in the west- ern region of the country.1 The project was not only concerned with credit activities, but also with land settlement and the training of extension agents. Farmers participating in the program were given eight hectares of land; six of the eight hectares were to be gradu- ally brought under cultivation over a four- to five-year period. The remaining two hectares remained in fallow in any given year on a rotation system. The credit program extended medium term loans over a seven-year period with a two-year grace period and a 5 per- cent interest rate. In addition to the medium term credit program, short term credit is provided for fertilizer, seeds and so fbrth. The short term loan was due at the end of each growing season. The medium term loan repayment started in the third year. But, interest was charged from the first year the loan was made. Farmers were required to pay 1,000 CFA for credit application fee and 1,500 CFA insurance for a pair of oxen. This fee is part of the short term liability. Although the Matourkou credit system was designed as part of the extension component of the project's overall concern with the development of the villages, each borrower was individually liable fbr his loan. A binding contract was signed between the farmer and the project. 1For infbrmation about the Matourkou credit program see H. H. A. Peeters, Le Systeme de Credit Matourkou, Ministere du Plan, du Developpement Rural, de L' Environnement et du Tourisme, August, 1974. 56 Major characteristics of the Matourkou credit program include the following: first, there was no collateral required to be eligi- ble in the program; second, the traction equipment and draft animals could be repossessed in case of default; and third, the project relied heavily on the will of the farmer to achieve a better stan- dard of living. The credit was designed to help anyone firmly committed to improving his well being. Two criteria were used to evaluate the perfbrmance of the credit program: (1) the demand fer credit, and (2) repayment rate. According to the project director, the availability of loanable funds could hardly keep pace with growing demand. The repayment rate, at times, was higher than 90 percent fbr farmers with three to five years experience. The repayment rate was 57 percent in 1971; 48 percent in 1972; and 109 percent in 1973 and 87 percent in 1974. The repayment rate of 109 percent is due to the dubious practice of transferring unpaid short term loans to the medium term loans out- standing. It would have been more accurate to use collection ratios which excluded repayments fer arrears. The project director contends that the Matourkou credit program has increased farm income. For example, he reports that net revenue per hectare has increased from as low as 2,800 CFA the first year to as high as 33,000 CFA [Peeters, 1974] in some villages over a three- year period. Net income per farmer increased from 19,600 CFA the first year to as high as 109,500 CFA the third year. But one does not know whether the increase in net revenue per hectare was due to an increase in yields or prices or both. 57 The Matourkou credit experience is regarded as one of the rare successful credit programs in Upper Volta which lends for both cash and food crops. But, a word of caution is in order as Matourkou's case is rather unique in many respects. Fer example, through a functional literacy program, illiterate farmers are helped to under- stand the credit program, including the terms, interest rates and how to compute the amounts of installments. Today, farmers manage their credit accounts by themselves. Moreover, the Matourkou credit experience is also unique with respect to its intensive extension services. Matourkou has one trained, competent and highly motivated agent per village. The extension service is one of the most impor- tant strengths of the Matourkou credit program. Another unique feature of the Matourkou credit program is the favorable market out- lets which are available in the nearby industrial city of Bobo. Fer example, cotton is bought by CFDT, corn by the brewery, peanuts by the oil company, etc. Finally, in contrast to the Eastern ORD, all six villages are accessible by a year—round road network. Despite the apparent success of the Matourkou credit program the program has not been sufficiently documented. Technical data of the impact of credit at the farm level are not available and no effort has been made to evaluate the performance of the program in terms of lending cost. In conclusion, the Matourkou credit experi- ence should be carefully studied and components of the program such as the farmers training component should be considered by credit agencies in other parts of the country. 58 2.4 Other Current Credit Programs Other examples of successful credit programs in Upper Volta are all geared to the promotion of cash crops, especially cotton. The state cotton corporation Société des Fibres Textiles (SOFITEX)1 is a vertically integrated operation which provides short and medium term credit to farmers to grow cotton. SOFITEX operates through the ORD's structure. Repayment is almost automatic because the credit payment of a farmer growing cotton is deducted from the sale of cotton purchased by SOFITEX. The Volta Valleys Authority's (AVV)2 credit program was based on the Matourkou credit experience. The only difference is that the AVV credit program involves a 7 percent interest rate (instead of 5 percent) and no grace period fer medium term credit repayment. Cot- ton has been introduced as the major cash crop and accounts for about 40 percent of the five to six hectares allocated to each family [Murphy and Sprey, 1980]. Major fecd crop (sorghum) yields have (SOFITEX replaced CFDT in 1979. Although SOFITEX operates across the entire country, its activities are concentrated in the Hauts Bassins 0RD (Bobo) and the Volta Noire ORD (Dédougou) which produce 90 percent of the national cotton output. Since the mid- 1970's the World Bank has been financing a cotton production project in both 0RDs. 2The AVV was created by the government in 1974 and was entrusted with the responsibility of resettling 120,000 families on 400,000 hectares over a fifteen year period. The project is an out- growth of the "river blindness" eradication program jointly financed by the World Bank, UNDP/FAO, the Horld Health Organization and the government of Upper Volta. Up to 1979, 1,826 families were reset- tled, which is far below the predicted number of 9,700 to 13,700 families. Funding for the AVV project is provided by various inter- national donors and the government of Upper Volta. It is estimated that the average cost of resettling one family is about 12,500 dollars U.S. 59 been irregular and at times lower than those of traditional farmers. Farm income has been stable in general but has not improved signifi- cantly over the years as expected. Repayment of loans has been fairly high due to the sale of cotton. In 1976, overall repayment was 82 percent [AVV, 1977]. 3. The Eastern ORD's Current Credit Program The creation of the ORD's system in the mid-1960's was based on an economic philosophy of decentralization of decisions at the regional level to faster local participation in the definition and implementation of those objectives compatible with the characteris- tics and natural endowment of the region. When the 0RDs were first established they provided extension services and limited agricultural inputs to farmers. But, over the years, the responsibilities of the 0RD have expanded to encompass such activities as marketing, veter- inary services, animal traction, irrigation schemes, feeder road infrastructure, credit and functional literacy. In 1974, in a major reorganization, the Ministry of Rural Development increased the ORD's control over previously autonomous services such as livestock, water and forests. In addition, a new rural development strategy was put fbrward--Community Development-- which was designed to help enhance local participation in the iden- tification of and solution to local problems. In this strategy the village was singled out as the basic "cell" of development programs. Created by Presidential decree in 1968, the Eastern 0RD did not become a fully established institution until 1974-75. In 1980 the 0RD had five bureaus and twenty sections and sub-sections at the headquarters level as shown in Figure 4-1. 60 who-chases. ZOEthxwl' ”COhOum man .9. m:0»0wml.'_ <2UD(~MZ°U ea... .3 E. _ _ T a ”IO—how” a azfixzalaou —— 9:22.: —mnzflduw_¢2£ —( >dt£3m Kwr" ”0(dd.> 2915 0.20203 azuzaosguo 02.5283 mafizaolv a 02225.. £235.58 a uozSE mzu mo xcozpmz copmcmuxm can pause coppm~pcmmco 32.122 .95 95:3 Te 55w E A mw>z v mZO_» — .330) 4(833 — 5593 T 9.30:0 mutaa; — 33.3...» T 1.6525 __ 85a 7 ZOZUDOO¢$ 23.: a wanS—uou’ mwiwzun Dun—(DES. ”41:: 0.30208 01 rcuzz.u Egg jmozgg g L JOKrZOU uncwnwo tO.~UDOO¢t xgpmeu 295:5sz a mxcoi 3:5: 202.0300"... a<¢3fi50§0< >¢ .N XUOhmuZJ _ _ L L _ h5¢ua Dam—u ”cup c<§ can consaz ommptmmmp .oxo :smumou mg» cp mic m4m Longs: ospa> consaz m=~m> gmaszz page» covpumch Aegean co'uomgh cmxo ommF-m~m~ .omo ccmpmmu mgu c? cowuuueh Amxcoo use :mxo com memo; mo mspa> use emasaz ma¢ m4mcouc' as» ou use ‘9': app-snag: a. uouv:n onuasop oz»- .omnmn covueoxm.— ow «cause ow uonogm «asap nomusm at «once; “hump unavam .unm.— 0v ago "muaaom oo— n.~ 3., e.a e.o_ m.e 4.33 m..~ m.m e.~ 3.. aoeueaecaa me~.~o~.~a~ coo.OQQ.A. ooe.mme.__ ~F~.nmN.~m coo._eo.nm ooo.oop.em eoap.om~.amn ooo.oep.oa moo.eno.e~ moa.~ee.o~ ooo.ooo.an om\ohm_ oo_ a.e n.F «.3 “.0 m.~ -- “.0, m._~ -- ~.m. euaeeeucea ooo.oe~.emm coo.~mm.e~ coo.o_m.m coo.m~m.o_ ooo.oo_.mm ooo.~em.m -- ooo.ooo.~e coo.eem.em -- ooo.n~n.okp m~\meo~ oo_ m.__ m. m.m a.~ _ -- -- -- m.me 3.. m.o~ eueueeucea Feo.pom.o_e coo.mmp.~e ooo.ooo.~ Noe.ame.e~ ooo.omo.o_ -- -- -- oo~.-o.eo_ ooo.ooo.mp coo.mom.-_ m~\-a_ Beech :zma owe mom o .F 5:... t Pem.mme.wop cmm.mep.eN~ mma.aop.oep meaeeaxu.me.eeeeao .- ooo.em~.oee coo.Pem.mm ooo.opm.ea eeaea.=am .n -- -- ooo.oom.~m account“ a mapeeee> .~ ooo.om~.mpm ooo.epm.mm amo.~mm.mmp woe.ep*=m .F 5:... co ooo.emo.mwa coo.mma.mee mmo.~ae.em~ “ceasemaseH .~ aFeA.Ao~.AmA omm.ea~.emm F~¢.Pom.opa peuaem _eeae om-mhmp mk-memp mA-AAm. A mo accuse; op .mwwcopom mucomu n.a.» mo ucmucoa o— as wouosrumu mumou ucrucop pouch .m co_aa=u.mn .mmpcupmm —F:m emaum arvocu mcoucmsaumo: mapa .Apco mopeupmm macmon vpurw mo «coonoa up «a vouaevumm mumou mcpvcop punch .< :owuusu—mu .omuaump ecu msumsmp .wn-nnm— emanam ago van camp .mucaouu< upvugu cxo "mumaom ~.mp ~mw.apn.mp ovu.nom.ah owxaso— c.om pom.mmm.o— saw.w~m.¢o msxmn¢p o.n~ mo—.mmm.m— osp.nmo.~m mnxssm— am copuaau—m N.NF mon.~mp.o— oe~.nom.an omxosm— m.op po-.ooo.o— umm.wsm.vm ms\m~mp m.mp moo.~ma.w m~—.nmo.~m m~\nnmp .< eceuaeuem Aoca mcoop sump acosm we amass: + mcpvcuumpso mcaop ecu» Earuws mo amass: n mccop mo soassc peach» .cmmp .mpcaouu< neumco axon "mumzom “mo.m ~mm.mpm.mp comp omamnmp ~mm.~p pom.mmm.mp oopp o~-msmp mmm.o mop.mmm.mp mmwm wnnsnmp Ao m.m oom.s N.N omm.m m.c new.m o.N oes.p N.om uu_¢ o.— mNm ~.o pm N.P oom.p —.o mm e.No coauou o.o mom e.o amm c.o an o.o o c.5m mammom P.P «No.9 n.o NNN m.N NNN.e m.o omN e.NN aceoaaom O.“ epo.o . —.m «Pm.o N.e mom.m _.o Nm_.m N.mN muuasoo N.. mpp.p P.P Nma w.o emN.p n.p mop.— o.mm was: «Leeann n.NP Nmm.Fp e.PF Nom.m m.m eNm.¢ n.N Fum.— o.m¢ nuacecsocm m.n Nam.N m.N oNn.N m.e NNNLo —.m nmo.N o.mm u~_uz o.mo N¢P.po m.No mom.Nm m.m~ neo.ao~ m.¢m n.a.Ns pououaam N..P osm.op ¢.N Nmp.o o.o ep o.o o m.me aweo—z N.¢p men.n_ m.m~ Fms.mp o.mp opo.mN a.¢p NmN.Np m.me uopppx o.mm m-.~m n.0m eme.om n.am mme.ow a.ae P~m.am m.me eeeaeom amoucoucoa uuuco>< mmaa-mea. .moeeN aoxeoa an. eoxo e. «pom m4m< h 138 the relative importance of the different crops. Prices used to value production are weighted average sales prices, or "realized prices" at the farm level during the 1978-79 season. Millet and sorghum are the most important crops. The sources of income and efficiency measures for farm house- holds are presented in Table 5-19. The total annual net value of crop production in oxen zones is shown to be 78,622 CFA for TRAD farmers and 146,220 CFA for ANTRAC farmers. In donkey zones, TRAD farmers have a net crop production value of 75,572 CFA as opposed to 71,099 CFA for donkey traction farmers. Although oxen households have higher net incomes, they also are 67 percent leggeg_than their TRAD counterparts. Likewise, donkey households are 28 percent leggeg than TRAD households in donkey zones. Thus, when net crop production value is computed on a per person basis, the oxen house- holds have a 4.5 percent higher value of net crop production than TRAD farmers. But, donkey households have a 11.9 percent lower net value than TRAD counterparts. Net production revenue per ectij_does not show significant differences between ANTRAC farmers and TRAD farmers. Donkey farmers had lower net crop revenue per ectij_than TRAD farmers but the effects of the drought makes this comparison meaningless. 5.2.3.2 Cost Effects The impact of ANTRAC in terms of cost is significantly more important than that on revenue. Contrary to common belief, ANTRAC is not a low cost technology in a context of subsistence agriculture as it brings about a number of production costs significantly higher than those known to TRAD agriculture. 1139 .>~ enacts» a mucocogaou oEoucv cones No Eam osu we oeou:~ seem uozo ”Pompu .P. oo .eooecem ace .oeo soscem seem "mouse” ace.m_ moo.wp mom.m~ ope.mm oceooox toe oEooe~ epoeomsoz ooz mae.- mmo.FN oem.Fm eoa.em .c.oo<= coa oceoea epoeomsoz ooz em~.m Pea.m Pwo.m_ 330.“. eomeoa Lea oeooen e_oeon=o: ooz mmo.~. 3am.np aom..~ emm.m_ ocaoooz oeooem scam ooz ~me.ep mem.o~ ema.m~ mea.m~ .e_oo<. coo oeooem seem so: Nee.o moa.m www.mp Nam.PF camcoa coo oeooem scam ooz _NN._. 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More importantly, Table 7-5 shows that, in value, the bottom 83 percent of the bottom small lenders, provided less than 40 percent of all loanable funds. The top 17 percent of large lenders provided about 61 percent, with the top 5 percent providing about 25 percent of all loanable funds in the commercial segment. Although the above evidence suggests that loanable funds are concentrated in the hands of a few lenders in the commercial segment, another way of checking this finding is to examine the structure of this credit segment at the village level. Inasmuch as most cash lending transactions take place within the village, the structure of the commercial segment may vary widely from one village to the next. Table 7-6 shows that in 8 villages out of 27 there were no cash 1 In addition, three villages accounted for about commercial loans. 50 percent of the total number of loans. These three villages (Namponkoré, Bomondi and Ougarou) are also those which display some degree of concentration of cash loans extended. In Namponkoré, for example, one lender provided almost 50 percent of the total number of all cash loans distributed (7 out of 16 loans). Two lenders have provided 75 percent of all loans (11 out of 16 loans). In Bomondi, two lenders provided all 13 loans. In Ougarou, two lenders extended 1Lending transactions in some villages were not picked up due to enumerators weaknesses especially in Piela. But, in general, villages where MOSSIS are the predominant ethnic group, these kinds of transactions are practically nonexistent (Tilonti. 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