Access to agricultural credit and microcredit is still a problem in many Southern countries. In Madagascar, innovative solutions such as digital microfinance and agricultural micro-insurance are being developed to support farmers.

© Bénédicte Desrus/AFD
© Bénédicte Desrus/AFD

Access to agricultural credit and microcredit continues to pose problems in many Southern countries, especially for the most vulnerable smallholdings. In Madagascar, the lack of rural infrastructure, high poverty level, and frequency of climate hazards (droughts, floods) further complicate the country’s agricultural development. Innovative solutions are, however, being developed. They include digital microfinance or agricultural micro-insurance based on meteorological data. These innovations particularly interest Serge Rajaonarison, Chief Executive Officer of the Caisse d’Epargne et de Crédit Agricole Mutuels de Madagascar (CECAM).


How do you account for the mismatch in supply and demand for agricultural credit and microcredit?

I am not sure that mismatch is the right term in the specific case of Madagascar. For the record, our network with 1,100 employees serves 208,000 clients via 233 outlets in 20 of the country’s 22 regions. Most of our clients are rice producers (a crop which accounts for 70% of agricultural activity in Madagascar) and livestock farmers. According to the Ministry of Agriculture, CECAM holds 60% of the market share for agricultural credit via microfinance.

In fact, our main problem is the lack of rural infrastructure and the adverse weather conditions. The Great Island, as it is justifiably nicknamed, is a vast territory where it is still risky to implement rural credits. Indeed, the South can be hit by droughts, while the North and Center regions suffer from floods.

There is very little agricultural and rural infrastructure. When it exists, it is generally not operational or lacks adequate maintenance. For example, off the national roads, the network of secondary roads remains very rough and uneven and is not always accessible when it rains. There is a lack of irrigation facilities, or they suffer from the siltation of rivers and poor operation of dams. Access to electricity, the telephone and new technologies remains limited. It would be better to use the term adaptation in Madagascar, rather than mismatch, in order to align supply and demand in agricultural credit and microcredit.


What are your average loan sizes and do you achieve good repayment rates?

Our average individual credit is about EUR 300. It can range from small amounts (EUR 15 for women’s groups) to a maximum of about EUR 25,000 to support the growth of professional and mature farmers.

In 2013, Cyclone Haruna destroyed the southern part of the island, leaving the population devastated. But we saw that women, even without shelter and resources, used part of the very little aid received from international organizations after the disaster to come and repay their debts. It was firstly to show their determination to meet their commitments, but also to not break the professional relationship gradually built up with CECAM.

For our agricultural credit and microcredit activity, we achieve repayment rates in line with international standards. This allows us to reinvest our operating surplus in our activities, by extending our areas of operation and offering innovative products. That being said, our own investment needs remain high: for example, we need to electrify our outlets with solar kits, and acquire technological solutions in order to provide an efficient local service.


How can risk management be improved?

Ideally, substantial investments would need to be made, with support from donors, to allow the State to build operational and sustainable infrastructure. Efforts have been made, but their results do not yet reach the rural majority.

Agricultural micro-insurance, which has yet to be developed in Madagascar, could safeguard at least part of the commitments of microfinance institutions (MFIs) and clients. This is an essential project.

Furthermore, we are thinking about diversification strategies to mitigate our risks. That being said, our main mission is to remain in rural areas, which account for 90% of our activities.


Which countries do you feel are models in terms of agricultural credit and microcredit?

Morocco, which we discovered during the second edition of the Technical Workshop for Decision-Makers in Agricultural Finance, organized in September by Agence Française de Développement (AFD) in Rabat. The Kingdom of Morocco makes interesting innovations in agribusiness and renewable energies with, for example, the solar power plant in Ouarzazate. The State supports farmers who want to innovate, thereby allowing them to switch to drip irrigation for a number of crops, which is a very positive point. Another sign of resilience is that the Groupe Crédit Agricole du Maroc (GCAM) at one point found itself in a difficult financial situation. But this bank is now very profitable, thanks to an appropriate strategic repositioning. It has reorganized its microfinance activity in order to safeguard its social mission.

In terms of rural microfinance, the same difficulties are to be found in many parts of Africa. By contrast, in France, agricultural credit is implemented in quite a comfortable way. In a region like the Picardie region, which I visited, all the structures and actors work together to achieve good results – not to mention the agricultural subsidies.


In your opinion, what are the three most promising innovations in microfinance?

The first concerns digital microfinance, which has a strong impact on financial inclusion. Microfinance operates using two rationales. The first is social and aims to serve people who are excluded from the traditional banking system. The second is economic and must ensure that the MFI remains viable. Digital microfinance could allow us to maximize the size of our target client base and therefore improve financial inclusion. This does, of course, require implementing substantial resources with donors to ensure that the opportunities offered by the new information and communication technologies are fully operational. The objective would be to invest in mobile banking solutions, for which we launched an initial experiment in 2011.

The second noteworthy innovation is agricultural micro-insurance using systems based on the meteorological index. If we accurately determine the areas and farmers affected by hailstorms, for example, we can subsequently compensate according to the losses caused. To my mind, this is an essential component of the innovation that needs to be implemented in Madagascar. The fact that impoverished women continued to repay their debts after the passage of the cyclone in 2013 shows us that agricultural micro-insurance can work. The aim is to pull smallholders out of the vicious circle of poverty, by ensuring that their means of production are sustainable.

Finally, financing the agricultural value chain continues to be one of our priorities. We are trying to find the right mechanism to improve the existing mechanism, with public-private partnerships. In the context of our international partnerships, on 21 November 2016 we signed an MoU with GCAM, in the presence of the President of Madagascar and King of Morocco, to share our expertise and build synergies between our actions. The aim is to maximize financial inclusion and allow an entire segment of the population left out of any economic dynamics to recover their dignity.

AFD and agricultural finance

The agricultural revolution, which is essential in Africa in order to increase productivity and incomes, but also to preserve natural resources and address a major population increase, will not come about without diverse financing methods and effective access to credit in rural areas. A number of studies highlight the fact that the mismatch between supply and demand for agricultural credit is one of the reasons for this low level of financial inclusion.

In view of this, Agence Française de Développement has been developing a range of tools in its countries of operation for several years. The aim is to support banks and microfinance institutions involved in financing agriculture and its related activities.

In addition to its range of financial tools (credit lines and technical assistance to partners), AFD wishes to support the development of this “community” of agricultural finance actors. It thereby offers its partners a unique framework to share experiences and good practices in terms of financing agriculture in Sub-Saharan Africa and the Maghreb region via face-to-face technical workshops (in Paris in 2015 and in Rabat in partnership with Crédit Agricole du Maroc in 2016), but also exchanges in digital form (webinars). Over the past two years, the exchanges of this “club” have focused on access to agricultural credit, innovations in agricultural finance (index-based micro-insurance, mobile banking, financing agricultural value chains, etc.), the role of financial institutions as vehicles for agricultural public policies, the social and environmental responsibility of financial institutions, and bank tools for monitoring the “climate” impact of investments.

Two institutions which are members of the club (Crédit Agricole du Maroc and Caisse d’Epargne et de Crédit Agricole Mutuels de Madagascar) have shared their views with iD4D about the difficulties they have experienced and the promising innovations they have implemented, or wish to implement, in order to address these difficulties.


To find out more about this subject:Le crédit à l’Agriculture, un outil-clé du développement agricole”, by the Foundation for World Agriculture and Rural Life (FARM).


The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.

I subscribe to the ID4D newsletter

Once a week, I receive the latest blog posts!