2. 08/08/14 2
Agenda
Overview of the small holder tea sector
value chain
Greenland Fedha Limited at a glance
Why Agricultural Lending Business (ALB)
Design of the ALB in GFL
Role of technology in ALB
Role of Farmer organizations in ALB
GFL performance as at June 30th
2014
Lessons learnt,
3. 08/08/14 3
Overview of the small scale Tea
Sector Value chain
There are over 565,000 small holder
tea farmers who are also shareholders
of the tea factories
Average farm size per grower is 0.2 Ha
(0.5 acres)
Average productivity per farmer is
2,100 kg of green leaf per annum
Average production per tea bush is one
kg per annum.
4. 08/08/14 4
Tea Value chain cont’d….
Tea green leaf is marketed through
factory companies, which are owned by
farmers.
There are 54 factory companies, each
with about 5,000 – 20,000 small scale
tea growers
Tea is processed and packaged in bulk at
the factories
Made tea is sold through tea auction and
direct sales abroad, and some locally.
5. 08/08/14 5
Greenland Fedha at a Glance
Greenland Fedha Ltd (GFL) was
registered on 24th
August 2009 under
Companies Act
Company is wholly owned by KTDA (H).
GFL is a non deposit-taking MFI
GFL mandate is to provide a variety of
affordable financial services to low
income households in the tea sector in
Kenya
Membership to GFL is voluntary.
6. 08/08/14 6
Target Market
The main target market is the low and
middle income households in the tea
Sector.
Other customers include the employees
in the tea factories.
7. 08/08/14 7
Products and Services
Greenland Fedha Ltd (GFL) has developed
loan products along the tea value chain which
include:
Producers’ loans
Working capital loans – that cater for farm inputs
such as farm labour wages, fertilizer, lease
payments
Angaziwa loans - Solar home energy lighting
products
Personal protective equipment loans
Education loans – ensures quality education for the
families
8. 08/08/14 8
Products and Services
Processors and packers loans
These loans target the employees in
tea factories who are involved in
processing and packaging of tea.
9. 08/08/14 9
Why Agricultural Lending Business
25% (141,250) of the small scale tea
growers marketing their tea through KTDA
have no access to financial services. They
receive their payments in cash.
Reduce high cost of borrowing for the
farmer
Poor governance in some SACCOs has led to
huge financial loss by farmers
Access to financial services through SACCOs
has been on the decline from 13% in 2006
to 9% in 2012 (FinAccess 2012)
10. 08/08/14 10
Design of Agricultural lending business
GFL accepts green leaf that is produced and
delivered to the tea factories as collateral for
loans.
The loan repayment is adapted to the payment
seasons, some monthly others annually.
The company uses the tea factory companies
as a channel to reach the farmers.
GFL is also using mobile banking for loan
application and disbursement as a means to
increase reach to the tea farmers.
The loan recovery is through a check-off
system.
11. 08/08/14 11
Lending Methodology
GFL uses individual lending
methodology.
GFL accepts green leaf production as
collateral for loans.
Farmers pledge household and/or
business assets as additional collateral
The methodology requires a minimum
of 3 personal guarantors
12. 08/08/14 12
Risk Mitigation
All loans are insured.
The insurance covers the outstanding
loan balance in event of death or
incapacitation of a borrower.
The loan insurance does NOT cover the
borrower OR his/ her business
Financed assets are insured separately.
13. 08/08/14 13
Mobile Banking – PESA ULIPO
GFL is also using mobile banking for on-
line loan application and disbursement as
a means to increase reach to the tea
farmers.
These are emergency loans
The customers can access low value
loans of between Kshs 500 – Kshs 5,000
through their phones.
This service has helped reduce the cost
of access to credit and created
convenience
14. 08/08/14 14
The role of farmer organizations
The primary farmer organizations that
GFL works with are the factory
companies which are under KTDA.
Factories are owned by the small scale
tea growers.
Services provided by F.O.s include:
Provide information about the farmers e.g.
productivity
They organize for farmer forums
Channels of distribution
Recovery of loans through factories
15. 08/08/14 15
Performance of GFL as at June 30th
2014
Cumulative no. of loans disbursed
209,667
Cumulative Value of loans disbursed Kshs
6.1 Billion
Average loan size Kshs 29,000
Outstanding portfolio Kshs 1.83 Billion
Portfolio at risk 2%
16. 08/08/14 16
Lessons Learnt
Agricultural lending is a profitable
business.
There is need to adapt the loan products
to the farmers income seasonality and
cash flows
Check off system has been critical to our
success
17. 08/08/14 17
Lessons Learnt Cont’d…
The use of mobile banking technology
has enabled GFL to deepen market
penetration and reduced the cost of
lending for farmer and company.
18. 08/08/14 18
Our Aspirations
To reach 60% of the market in the small
scale tea sector by 2015.
Transform to a micro finance bank to be
able to offer a wider range of financial
services
Diversify to other value chains in the
agricultural sector.