In Cameroon, Low-Interest Loans Enable Produce Merchants to Sow Profitable Investments

Locked out of bank loans by stringent conditions, small-scale traders in Cameroon are growing their businesses with loans funneled by their unions from nongovernmental organizations. These loan programs free traders from having to buy produce on credit and repay their wholesalers the same day.

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In Cameroon, Low-Interest Loans Enable Produce Merchants to Sow Profitable Investments

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BAMENDA, CAMEROON – It’s a busy day at the food market in Bamenda, the capital of Cameroon’s Northwest region. The tomato section, a sector of simple wooden stalls, is especially busy. Some traders sell their tomatoes from their stalls; others sell from raffia baskets or plastic sheets spread on the ground.

It is a rainy day and there is mud everywhere, but the weather doesn’t interfere with trading. At the far end of the market, four men are loading tomatoes onto a truck destined for neighboring Nigeria.

Esther Ndasi, a tomato trader for more than 20 years, is sitting in her stall full of tomatoes. Business has been good since she and other tomato sellers formed the Tomato Union four years ago, she says.

The union borrows money from the nonprofit Interfaith Vision Foundation Cameroon, or IVFCam, and then lends it to members. Before the sellers started getting the loans in 2012, doing business was difficult, Ndasi says.

“Before the union, I would go to the bush and borrow 30 baskets, highest, of tomatoes from the farmers,” she says, “come and sell, and then go back and pay the farmers.”

When farmers refused to give her tomatoes on credit, she went home empty-handed.

“I couldn’t blame them,” she says. “They too were doing their business, and they sometimes needed ready money.”

Ndasi could not get credit from a bank because she could not meet the loan requirements, such as having a business account, documentation and collateral, she says.

These days, however, Ndasi gets monthly loans of as much as 300,000 Central African francs ($530) from the Tomato Union. She repays the loans in small weekly installments of at least 75,000 francs ($132). The loans enable her to buy tomatoes in cash.

“With the union and loan from IVFCam, I go to the bush with ready cash, buy about 100 baskets of tomatoes with no problem,” she says.

Many small-scale traders in Bamenda have been unable to get credit because banks attach stringent conditions.

In recent years, several nonprofit organizations have begun offering credit to help traders grow their businesses. One group of traders has grown large enough to lend its own funds to members.

Banks require traders to meet some tough requirements.

National Financial Credit Bank, for example, only lends to business people who have banked with National for at least six months, says Humfred Eseni Banjong, manager of National’s Nkwen neighborhood branch in Bamenda. In addition, an applicant must have operated his or her business for at least six months to be eligible for a National loan.

Before approving a business loan, normally at an annual interest rate of 15 percent, the bank assesses the stability of the applicant’s business by examining the businessperson’s deposits, savings and withdrawals, Banjong says. The bank takes at least a week to examine a loan application; during the examination, a bank representative pays a couple of surprise visits to each applicant’s business site.

These conditions make it hard for many small-scale traders to secure loans from the bank, he says.

Over the past six years, many nonprofit organizations have begun offering loans to small-scale traders in Bamenda, says Cordelia Ndagha, the Mezam divisional delegate in the Ministry of Women’s Empowerment and the Family.

Ndagha does not know exactly how many NGOs are providing business loans. In addition to IVFCam, the organizations include Haven of Hope, Women’s Initiative for Health Education and Economic Development Cameroon and Hope for Women.

Haven of Hope, which opened in February 2014, offers interest-free loans to teenage mothers.

Bamenda orange seller Martha Ndifor, a 19-year-old mother of one, obtained a loan from Haven of Hope in April 2014.

Before getting the loan, Ndifor paid 3,000 francs ($5) a week to rent a wheelbarrow from which to hawk her oranges. She would buy 64,000 francs ($115) worth of oranges from other traders and repay them at the end of the sales day.

Ndifor sells oranges for 50 francs (8 cents) to 75 francs (13 cents) apiece.

The organization loaned Ndifor 64,000 francs ($115) that she used to buy a wheelbarrow and a bag of oranges.

“Haven of Hope brought hope to my hopeless life,” she says, strain showing on her face.

Ndifor now makes loan payments at her convenience instead of in a rush, she says.

Beneficiaries of the NGO repay their loans as they’re able, Haven of Hope administrative assistant Maurice Mokenyu says.

The organization’s executive director, Gladys Ndang, puts up the money for the loans, making the lenient repayment policy possible, Mokenyu says.

The policy may change if the organization seeks money from other sources, he says.

Six teenage mothers have received Haven of Hope loans so far.

Back in the tomato market, traders are counting their blessings.

The founders of the traders union initially intended only to share ideas, clean the market and start a welfare fund, union President Richard Sama says. Through the loan program, the union has achieved much more.

Sama’s business has grown tremendously, he says.

Before the union began offering loans, Sama bought no more than 50 baskets of tomatoes a week.

“Now I buy 200 baskets,” he says.

Since 2012, the 66-member union has received loans totaling 8 million francs ($14,000) from IVFCam; it borrowed 5 million francs ($8,800) in 2014 alone, reflecting the loan program’s success.

The union borrows the money at a rate of 3 percent a year and lends it to members at a rate of 2.5 percent per month. Although the union has two years to repay a loan, it now pays off each loan within a year.

The loans have empowered the produce sellers in the union.

“Every member can proudly say business has been booming because of the loan,” Sama says.

Bamenda traders who do not belong to a lending organization feel left out.

Susan Teneng, a vegetable seller, wishes the nonprofit organizations would lend money directly to individual traders. Lacking capital, Teneng buys vegetables on credit and pays her supplier after she sells them.

“Business is hard with the system of buying tomatoes on credit and paying suppliers on the same day,” she says.

Having seen tomato union members grow their businesses, Teneng wishes she could get a long-term loan.

“Doing business will be easier if I get a loan which I can pay over a long period of time,” she says.

IVFCam chooses to lend to groups because it is harder to obtain loan repayment from individuals, Chief Executive Officer Anne Stella Fomumbod says.

Traders who need loans should join existing groups or form new ones, she says.

IVFCam has loaned money to 40 groups of small-scale traders since 2012.

Fomumbod created the IVFCam loan program after realizing that small-scale traders were unable to grow their businesses because they couldn’t borrow from banks.

Fomumbod calls on other nongovernmental organizations to lend money to small-scale traders who otherwise can’t get credit.

“If more and more organizations embrace the revolving-loan scheme idea, small-scale traders will witness an improvement in their businesses,” she says.

Sama also urges small-scale traders to form credit groups like the Tomato Union.

“Most organizations give out their money to groups and not individuals,” he says. “I keep advising business people like me to come together and form groups so that they can benefit from such loans and improve on their business.”

After paying off its latest loan from IVFCam, the union plans to start lending its own funds. It built up the loan fund by lending money at a rate higher than the rate at which it borrows.

The union borrows money at a rate of 3 percent a year and lends it at a rate of 25 francs (4 cents) per 1,000 francs ($1.75) per month.

The Tomato Union is also looking for other large investors.

“If a bigger loans opportunity comes up, we’ll receive it with joy,” Sama says.