USAID Honduras Alianza para el Corredor Seco
Partnerships with Honduran Financial Institutions Spur Credit to Smallholders
In Honduras, it’s exceedingly difficult for smallholder farmers to obtain loans without mortgage guarantees or credit history. To address these challenges, ACS is introducing innovative credit programs across target communities to improve access to critical finance. From September 2015 to June 2018, more than 5,100 small-scale farmers accessed more than $5.9 million in financing thanks to project support.
Through relationships with major players in the Honduran financial industry, such as the Honduran Association of Banking Institutions (AHIBA) and Vision Fund, Fintrac is helping farmers access lines of credit they would not be able to receive otherwise. By providing ongoing training and technical assistance to smallholders, we help them improve productivity and incomes to make them more attractive borrowers and promote long-term relationships with lenders.
We also provide direct support to informal lending institutions such as cajas rurales, or small community banks, by training them in organizational management and basic accounting. The community banks can buy inputs in bulk for sale to members at low prices. We are also supporting cajas rurales in implementing a maize pledging scheme through which producers are granted loans using grain as a guarantee. The borrowers pay a small fee to cover operating costs, such as storage, treatment, and handling.
For Margarito Amaya, a coffee farmer in the department of Lempira, ACS support has truly been life-changing. Margarito has been growing coffee since 1995, struggling to make ends meet as a day laborer during the off-season. Coffee crops require year-round investment but only pay seasonally, making it difficult to move above subsistence-level farming without diversifying farm assets.
What Margarito needed was access to credit, something he’d struggled with because all he had to offer as a guarantee were future coffee harvests. And in a tough year, such as 2013, he was barely feeding his family let alone guaranteeing loans to invest in new farm activities. “2013 was a hard year. I was about to lose the farm because of [coffee] rust, we made it but only barely,” he said.
ACS worked Margarito to complete a loan application with AHIBA, and he received a credit line of $1,700 to purchase a dairy cow. With training in good animal management from ACS, Margarito is now averaging 17 liters of milk per day, which he sells to local markets for added income. He also processes and sells by-products such as curd and cottage cheese. Thanks to this new income, he was able to pay back his loan ahead of schedule, and has obtained additional funding to purchase another cow and to hire labor for his coffee harvest.
The majority of our client farmers use the funds as working capital or to purchase improved inputs. More than a quarter of loan recipients have been women.
Margarito, for one, is thrilled with his new farming activities. He continues to receive training in livestock management and knows how to detect and prevent illnesses and other issues. “Livestock is my passion,” he says. “I do not even mind getting up at 4:00 in the morning!”
Access to credit is helping Honduran farmers try out new technologies, diversify into high-value crops, and invest in their farms to further increase production, income, employment opportunities, and food security.
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