income generation projects

Background:

Rainfall in the Iganga district is plentiful, which contributes to the high fertility of the land in the area, and the vast majority of the population engages in agriculture to earn a living. Despite favourable climatic conditions for a wide range of lucrative crops and animal husbandry projects, the average income for rural households in the region remain some of the lowest in the country at approximately $65 per month.

While the structures of NGO and private sector microfinance efforts in Uganda have provided opportunities for urban and semi-urban populations to attain the start-up capital needed to establish small business ventures that are based on rapid turnover of goods and stock items, these structures are not adequate to facilitate economic development in rural areas. Crippling interest rates, lack of microfinance institutional attention to the enterprise selection process, lack of adequate training to undertake productive ventures, and the lack of will to supply start-up capital for agricultural ventures have left the vast majority of Ugandans (over 90% of the population resides in rural areas) bereft of needed financial services.

Conversely, a number of NGO and government programs have worked to develop village expertise with sustainable agriculture and animal husbandry, but do not have a mechanism through which villagers may attain the start-up capital necessary to employ these skills. They also have not incorporated basic business skills training that would enable villagers to select enterprises based on cost-benefit analyses and the strengths of the community.

Uganda Village Project has worked to develop a microloan program with our partner organization, Caritas-Uganda. The critical points of our program structure are as follows:

1. Loan capital will be allotted specifically for rural enterprises rather than urban small businesses.

2. The team will facilitate discussions in which village groups will generate their own cost-benefit analysis for several enterprises.3 Upon comparing the inputs and outputs involved with each venture, villagers will be able to make an informed decision about the best and most manageable enterprises for them (after the exercise, they will also be able to compare their figures with those calculated by the team.)

3. Upon choosing an enterprise, Caritas-Uganda will provide technical training on the best managerial methods for the agricultural or animal rearing project that the village group has selected.

4. Because of the substantial poverty in the villages, farmers often face many immediate problems and may divert loan money for uses other than business. The team will address this issue by giving the loan capital in terms of inputs (seeds, transport, tools, spray cans, etc,) rather than providing cash directly.

5. Loan inputs will be extended to groups rather than to individuals, and will be overseen by a village loan committee.

6. In contrast to traditional microfinance programs that demand repayment after the first month of the loan, the team will require monthly payments to begin after the harvest begins, which is usually approximately four months later after the distribution of loan capital.

7. Women will comprise at least 75% of the loan beneficiaries.

8. In order to curb the expenses that are traditionally incurred by traditional microfinance institutions, the team will employ a number of methods to reduce operational costs and interest rates:
1. Caritas loan staff will synchronize their activities with the extension workers, so that extra fuel and vehicle expenses will not be incurred.
2. The village loan committee will be responsible for timely collection and shall deposit the funds directly into Caritas’s account, rather than have a staff member visit simply to handle a financial transaction.
3. Because the entire group share one or two common enterprises, they will be able to take advantage of bulk rates for inputs, and collective marketing will enable them to command a higher market price for their goods.
4. As opposed to the traditional microfinance rates of 48%-72%, an interest rate of 10% will be sufficient for program sustainability.

9. A list of contact information for buyers of a variety of commodities will be developed by student volunteers and given to farmers, and mechanisms to equip farmers with up-to-date market information will be developed. These factors will bolster the marketing and negotiation positions of the farmers.

10. With proper implementation, the farmer stands to gain a potential ten-fold increase in his/her annual income. The team will facilitate a series of focus group discussions to discuss budgeting and planning to ensure that each of the farmers caters for household expenses, savings, and reinvestment.

11. Rather than looking to us for another loan, group members may now have the capital that they need to expand on their current enterprise, or take on additional agriculture and animal husbandry projects. They will also have the skills needed both in enterprise selection from their cost-benefit analysis figures, along with technical training in order to carry on effectively. Self-sufficiency is within the realm of possibility.

Goat Rearing
Through a grant provided by Berkeley's Bears Breaking Boundaries initiative, in 2007 we will be providing goats to families in need through the program structure outlined above.

The families have been selected on the basis of economic hardship, number of children, whether the family has the resources to rear the goats, and whether the family has latrines and other sanitation equipment (to encourage the use of these amongst the villages).

We are supporting 10 families through this grant, and the goat offspring will be given away to widows in the community who are next on the waiting list.

For more information on this program and a detailed description of the financial and logistical issues addressed by the program, please contact us at info@ugandavillageproject.org