bpTT’s experience with community level microfinancing and its role in enabling resilient food systems
Claire Fitzpatrick speech at the National Food Systems Dialogue in Trinidad and Tobago, 16 June 2021
Salutations & Introduction
Ladies and Gentlemen
Good morning and thank you for the invitation to participate today.
Of the many actors involved in food systems, the UN has noted that small farmers are at the lowest end of the food systems and are most vulnerable – and this is particularly true for female farmers.
Small farmers face barriers to access the credit required to grow and this limits the pace at which the UN’s goal to end hunger can be achieved.
Today I will be sharing bpTT’s experience with our MIPED programme, which, through microfinancing, supports food production and enables sustainable livelihoods, particularly for small farmers, including women.
As context, in 2002 we sought to identify social investment programmes that would uplift our fenceline communities
of Mayaro and Guayaguayare.
A baseline study revealed several areas of concern, including the need for job creation and enterprise development.
We considered many approaches to help address these issues but wanted a solution that was sustainable that could have material impact.
The outcome was MIPED, the Mayaro Initiative for Private Enterprise Development, as a community based microfinancing organisation, modelled after the Grameen bank.
The program is rooted in the belief that access to credit is an effective weapon to fight poverty, enable employment and achieve enterprise development.
MIPED’s mandate was to provide a revolving loan facility to residents of Mayaro, Guayaguayare and environs – later growing to include the community of Rio Claro.
The revolving loan facility began with seed capital of TT$7.5million from bpTT and, as at the end of 2020, has provided over TT$119million in loans.
MIPED continues to operate as a non-profit organization, with all operating profits being reinvested.
Given the abundance of arable land in the catchment area and the coastline nearby, loans related to agriculture and fishing have been a feature of MIPED’s client base.
Over the life of the program, 43% of loans taken were for agriculture and 6% for fishing.
Taken together, 49% of MIPED’s loans have gone directly into primary food production – valued at approximately TT$55m.
MIPED does not measure the business output of its clients so we cannot quantify the impact in terms of food production.
However, gender participation, job creation and client sustainability act as a proxy for MIPED’s contribution to food systems.
In the areas of agriculture and fishing: In terms of gender participation – 73% of the loans were to men and 27% to women.
In terms of job creation, we estimate the creation of at least 900 jobs in agriculture & fishing.
In terms of client business sustainability, just over 80% of MIPED’s loans for agriculture and fishing are to repeat borrowers, suggesting that a substantial number of the food production businesses operate beyond the initial loan period – a sign that they produced food sustainably.
But MIPED is not strictly an agricultural loan facility.
Beyond agriculture and fishing, the remaining 51% of MIPEDs portfolio has financed businesses involved in services (20%), retail & distribution (18%), food & beverage retail (7%), and various others (6%).
In these businesses we noticed better gender participation – 50:50 males to females.
We estimate 1500 jobs were created and, in terms of client business sustainability, 70% of the loans in these categories were by repeat borrowers – suggesting a similarly high level of sustainability beyond the initial loan period.
Some may be interested in what makes the MIPED model work. In our view, it has worked for a number of reasons:
Firstly, MIPED has a well-defined governance structure – It is a subsidiary of bpTT with operational oversight provided by a competent board, and corporate oversight from bpTT.
Secondly, it meets the needs of an underserved group – it targets the unbanked and unbankable – who, as a result, cannot access conventional credit.
These clients place a high value to having these credit facilities, so they prioritize honouring their debts.
MIPED enjoys a very low rate of default compared to conventional banks as a result.
Thirdly, the program accepts forms of collateral not used by conventional lending agencies, effectively lowering the barrier to credit.
Lastly, it is community based – with activities concentrated within a small geography and staff coming from these very communities.
This has allowed the MIPED team to develop strong personal relationships with clients and they are able to leverage the relationships for marketing new loans and for collections.
Key Insight - The impact of MIPED is on both the supply and demand side Now, it is somewhat obvious to say that microfinancing has a role to play in the development of food systems.
It is clear that loans to farmers and fishermen have improved the supply side of food systems.
However, because food systems are market driven – relying on buyers and sellers to be sustainable – the demand side of food systems is important when considering models for microfinance.
The FAO stated that food insecurity is a symptom of poverty, since in the absence of effective demand, there will not be sufficient incentive for the farmers to continue to produce.
The opposite also holds true – a resilient food system, is a symptom of prosperity.
That is to say, prosperous households create the effective demand that drives the investment in food production.
With that in mind, we can see that MIPED’s support of non-agriculture businesses indirectly enables the food system.
By financing small and medium sized community businesses outside of food production, the resulting multiplier effect from those businesses increases the demand for food.
This enables sustainability.
Hopefully, this insight can aid in the design of other microfinancing solutions.
As I close, I acknowledge that food systems are complex and the MIPED model is not a silver bullet for microfinancing.
However, MIPED makes for a useful case study in private sector involvement in microfinancing to improve food systems and bpTT would be more than willing to share what we have learned along the way.
I congratulate the UN Country Team and the Ministry of Agriculture, Land and Fisheries for coordinating this event.
Please enjoy the rest of the day and I thank you for the opportunity.