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In
1998 Hurricane Mitch ravaged Honduras, inflicting severe
damage on the agriculture sector – losses of both
domestic and export crops were extensive: 58% of corn
output, 85% of bananas, 18% of coffee production was
gone. But this disaster produced another long-term
obstacle for Honduran farmers. The disaster exposed the
risks inherent in the agricultural sector, and Honduran
banks quickly moved to distance themselves from small
and medium farmers. Ten years later banks are still
reluctant to enter this market, due in part to
inadequate handling of the risk and debt forgiveness,
but also due to their lack of awareness of the
opportunities and profit that can be generated through
financing small and medium farmers.
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Win-Win Situation
MCA-Honduras
is working to re-establish the relationship
between the agricultural sector, especially
horticultural producers, and the financial
sector by creating credit products favorable to
both and thus supporting the economic growth of
Honduras.
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MCA-Honduras
is changing that. Through a technical assistance and
training program targeting financial institutions and
suppliers, farmers now have access to the financial
resources that their productive units need. Farmer
Access to Credit is an integral program that works with
diverse actors throughout the value chain: financial
sources, producers and buyers. MCA-H is building the
capacity of 11 financial and non-financial
intermediaries including several national banks to
strengthen and expand their credit departments, improve
their risk management tools, and adjust their financial
products to meet the needs and demands of the
horticultural sector, especially the beneficiaries of
the MCA-H Farmer Training and Development program.
“Since the project approached us we were interested in
the content of its ideas. The experience has been very
valuable, helping us to establish our credit processes
and new objectives for this area of the company” points
out José Jaar, Managing Director of Agropecuaria del
Campo (Farming of the Field), one of the MCA-H partners.
This company was created in Tegucigalpa, the capital of
Honduras, in 1994 as a small informal business and now
boasts three branches nationwide.
Formal agricultural credit based on land guarantees has
been the predominant mode of credit in Honduras. The
disadvantage of this type of guarantee is that thousands
of producers with high potential are prevented from
accessing financing to pursue their business plans,
because they do not own land, or cannot produce a title.
MCA-H, taking a different course, took on the challenge
of developing credit instruments based on different
types of collateral and with terms of credit extended at
least until the end of the harvest. This was a brand new
approach for agricultural input suppliers like
Agropecuaria del Campo, but the result has been a
gratifying success. Thanks to MCA-H, more and more banks,
input suppliers and micro-lending agencies are placing
their own and other resources, including MCA funds on
the order of $4.7 million, into agricultural financing,
constituting a real alternative for the producers.
José Jaar, like other program partners, expects to see a
significant growth in the number of farming clients,
especially those participating in MCA-H’s Farmer
Training and Development project, who are responding to
the demands of local and export markets. The transfer of
new technologies and empowerment of institutions taking
part in the MCA-H Access to Credit program is giving
rise to new, sustainable processes that are, slowly but
surely, producing results for financial institutions as
well as farmers.
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