U Thaung Yin remembers a time when many in his village were at the mercy of moneylenders and middlemen. The cycle goes like this:
- As the farmers in the village prepare for the growing season, a lack of alternative loan sources compels them to borrow from exploitative moneylenders.
- With the loans due for repayment at harvest season, they are pressured to sell to opportunistic middlemen, when paddy prices are at their lowest.
To make matters worse, the farmers have low bargaining power because a lack of storage facilities and poor farm-to-market infrastructure render them reliant on others to get their produce to market.
Under GRET Myanmar’s Rice Bank Inventory Credit Scheme, U Thaung Yin saw his village transformed. “After four years on the scheme, the farmers in the village are now more independent and less fearful of pressure from the large rice millers,” he said.
The scheme provided a means for the farmers to organise into peer-led, self-help groups known as Inventory Credit (IC) Committees. U Thaung Yin, who oversees his village’s IC Committee along with other elected committee members, said the scheme works in three parts:
- With the opportunity to pledge paddy as collateral, farmers stand to borrow from the IC Committee at an interest rate of 2.5% per month, versus the 10-20% charged by moneylenders.
- Next, instead of selling paddy right after harvest, farmers store them with the IC Committee for 5-8 months. During this time, market prices for paddy would have risen 25-100%, depending on market conditions.
- Finally, with support from GRET staff, the IC Committee helps farmers negotiate prices with rice millers and traders, and organise collective sales. The sale proceeds are used to repay the loan, interest, and storage cost, and farmers retain the balance as income.
Through facilitating collective bargaining and market access, the scheme reduces farmers’ reliance on intermediaries and allows them to earn higher, fairer prices for their produce. U Thaung Yin added that the farmers in his village now obtain 50% of their financing needs from moneylenders, down from 80% previously. With partners like GRET Myanmar, LEAP201 creates economic opportunities for smallholder farmers – through integrated solutions which look at agriculture value chains in their entirety.