Credit Access in Mali
Mali is a landlocked country located in West Africa with a population of approximately 18 million people. While the national poverty fell from 55.6 percent in 2001 to 43.6 percent in 2010, Mali remains 175th out of 188 countries on the United Nations Human Development Index.

Diagnosing the Problem

Credit access in Mali stands out as one the leading impediments to economic growth. A smallholder farmer is refused a loan seven times out of ten because of the high risk and unpredictable nature associated with the agricultural sector. This difficulty accessing credit is only further compounded by the fact that about 80 percent of the entire labor force actively participates in farming.

Credit serves an important role in the growth of developing countries’ economies. Increased credit access in Mali is essential for allowing farmers, businesses and consumers across Mali to utilize investment capital and thus help expand economic activity. If 70 percent of farmers are refused loans from the start in a country where 80 percent of the workforce is engaged in farming, significant economic growth becomes nearly impossible.  

Moussa Sylvain Diakite, a mango producer and exporter in Bamako, explains this discrepancy noting that “Malian banks have a commercial focus and not an agricultural one which is why they struggle to accompany agricultural activities.”

Improving Credit Access in Mali

One of the leading initiatives to improve credit access in Mali is the Agricultural Competitiveness and Diversification Project. Led by the Malian government and the World Bank, the program hopes to provide financial support to both individual Mali farmers seeking credit and commercial banks. By enfranchising Mali farmers and reducing risk for commercial banks that offer them loans, the Agricultural Competitiveness and Diversification Project will help scale agricultural production and the number of small and medium enterprises throughout Mali.

Above all, the Project works to “reduce the risk of investing in agriculture endeavors through technical assistance, new technologies, and greater knowledge of the supply chain and key actors,” according to World Bank Agribusiness Specialist Yeyande Kasse Sangho.

Benefits of Greater Credit Access in Mali

Researchers who partnered with Soro Yiriwaso, a microfinance institution in Mali, conducted a two-stage randomized evaluation in 198 villages in rural Mali. The findings point to agricultural lending as an effective means of increasing investments in the agricultural sector, as well as increasing profits and yields.

Village households which were offered loans spent about $10.35 more on fertilizer and $5.08 more on herbicides and insecticides than the households in villages that did not get loans. These loans also contributed to an increase in the value of agricultural output by $32. Many of these households also received grants invested 14 percent more on inputs than households that did not receive grants. Those households also saw output and farm profits increase by 13 percent and 12 percent, respectively.

As the relationships between farmers and commercial banks strengthen, credit access will only continue to spread in Mali and enable further economic growth. With continued efforts and projects as the ones mentioned above, there’s significant hope that the focus on credit access in Mali will serve as an example for the economic development of other impoverished regions.

– McAfee Sheehan
Photo: Flickr

Conflict Fuels Poverty in Mali
Over the past year, Mali has been experiencing ongoing-armed conflict in its northern regions, threatening to reverse the progress made in the fight against poverty. In the last decade, poverty in Mali at the national level has been reduced from 56% in 2001, to 43% in 2010. Mali was regarded as a model of African democracy until the military seized power in March 2012. Taureg rebels declared the independence of the ‘Azawad state’ in the north, which was quickly taken over by al-Qaeda allies.

According to the World Health Organization (WHO), over 400,000 people have been displaced, of which over 200,000 are internally displaced and over 145,000 have been forced to take refuge in neighboring countries. The influx of these refugees into these host communities has put further strain on the already fragile countries. However, the food crisis in northern Mali is preventing many refugees from returning to their homes.

Agriculture is the major contributor to economic growth in Mali. It is dominated, however, by rain-fed agriculture, and therefore vulnerable to environmental and climate changes such as drought, floods, and desert locust invasions. The conflict in Mali came on top of a drought, which hit the Sahel region of Africa last year for the third time in a decade. Food security and nutrition have deteriorated significantly resulting in hunger for hundreds of thousands of people.

The violence in the conflict region makes it difficult for assistance to reach those in need. One in five households faces extreme shortages in northern regions with food consumption deteriorating significantly. Even before the crisis, around 15% of children in Mali suffered from acute malnutrition, a problem that has been worsened by these recent events. About 69% of Mali’s population lives below the national poverty line, so most must face extreme food shortages from an already difficult position.

Malian authorities are working to resolve the conflict with the Taureg rebels to end the crisis engulfing the nation. The UN Refugee Agency warned that increased international aid is “vital to prevent a worsening of the humanitarian situation across the Sahel region.” There is agreement among most humanitarian organizations in Mali that the humanitarian situation is at crisis point and deteriorating. Despite the scale of needs and the seriousness of the situation, the humanitarian response remains largely underfunded. The most urgent needs are food, shelter, clean water, health and education.

Ali Warlich

Sources: BBC, WFP, UNHCR
Photo: Rescue