Promoting Financial Stability In Cocoa Communities

Progress Blog
Promoting Financial Stability In Cocoa Communities

By Wilberforce Amoh, Project Officer at Mondelēz International's Cocoa Life Program - 09/24/15

Cocoa farmers face several challenges to achieving financial security, including inconsistent earnings due to fluctuating crop yields and prices, as well as the seasonal nature of harvesting cocoa and low overall incomes.


Farmers also contend with both regular and unexpected expenses, such as festivals and funerals. Also, a lack of financial literacy means there is not a culture of saving in the cocoa communities. These factors make banking institutions reluctant to extend loans. Banks and microfinance companies also find it very expensive to deal with rural communities because they only have small amounts of money to save. Farmers who do seek capital may feel obligated to call upon a local person of means, and these unregulated loans can carry very high interest rates, further diminishing farmers' profits.

In keeping with our mission to improve cocoa farmers' livelihoods, Cocoa Life has worked with CARE International and other NGOs to introduce Village Savings and Loan Associations (VSLAs) in cocoa-farming communities. Members of a VSLA make small, regular monetary contributions to a shared pool, from which they may each take out low-interest loans—up to three times the amount of their contribution—after three months. At the end of a one-year cycle, the sum of the pool is disbursed to the members, and a new contribution cycle begins. Members also establish a dedicated insurance fund meant to help with emergencies, such as illness and accidents.

The pioneering CARE/Cocoa Life program began as a pilot in 2012 and has since been scaled up to all our operational areas. In December 2012, there were 58 VSLAs in Ghana, with a total of 1186 members. As of August 2015, there have been 217 VSLAs implemented across 60 communities in Ghana and 132 VSLAs across 11 communities in Cote d'Ivoire—involving more than 7,600 members. Cocoa Life partners World Vision Ghana and VSO International have also been instrumental in facilitating communities’ adoption of the approach.

"The success of a holistic program like Cocoa Life is that it seeks to improve the whole socioeconomic ecosystem for cocoa farmers and their communities. Access to finance is a key factor to ensuring thriving livelihoods and empowered communities, especially when it comes to smallholder agriculture."

Christine Svarer, head of Women’s Economic Empowerment and Private Sector Engagement at CARE International UK.

The Cocoa Life program has seen CARE's Village Savings and Loan Association (VSLA) model successfully bring communities together, while enabling the development of a savings culture, increased literacy levels, and improved management skills. Most importantly, it is a key driver to empowering women economically. These women are not only achieving improved productivity on their farms but a better quality of life for their families.

Members of VSLAs use the funds for a broad range of investments including: start-up capital for new businesses, expansion of existing businesses, starting new cocoa farms or rehabilitating old cocoa farms, hiring laborers, or using the social fund to help with emergencies such as illness, hospitalizations, or a death in the family.

About 70 percent of participants in these VSLAs are women. One woman I know of used microloans from her VSLA to open a shop that helped her family during a time when their cocoa farm was underperforming, and her success has allowed her children to attend school.

Then there is Mary Adjei, whose family lived hand-to-mouth until participation in a VSLA in Otwebediadua allowed her to properly maintain her farm, pay for laborers, and send her grandchildren to school.

In addition to the VSLA programs, Cocoa Life is partnering with commercial microfinance organizations such as Advans in Cote d’Ivoire. These organizations often offer larger loans than VSLAs, and can serve as an introduction to the more formal lending economy for families in the cocoa communities.

"This is our first partnership with Mondelēz. hey connected us to well-structured cooperatives, motivated farmers and facilitated the contact also with the help of Ecom. The results demonstrate the effectiveness and relevance of the partnership: 410 producers have saved for a total of 21.7 million FCFA of savings collected (33,000 euros), which is 30% above their target. The cocoa farmers are also satisfied. The project significantly helped many farmers to better manage their income, savings and access their savings when they need it (for example start of the school year). It also facilitated their access to credit for the purchase of fertilizers, allowing them to increase their yield. All wish to repeat the experience. This partnership is a great example of a win-win situation for all stakeholders (farmers, cooperatives, exporters and Mondelēz), helping to improve the living conditions of the cocoa farmers."

Gregoire Danel-Fedou, Director General of Advans Côte d’Ivoire

The VSLAs and commercial microfinance organizations serve not only the cocoa farmers, but the entire cocoa community. Members include many people from all different professions. Initial training of participants focuses on financial literacy such as how to access loans, pay them back, and use them to start a new business or improve an existing business. They're empowered to acquire the property, technology, and farming equipment that they really need. Entire communities are gaining financial skills—they are developing a culture of earning and saving. Ultimately, our goal is to build thriving, resilient, and self-reliant communities. When these communities are thriving, cocoa production thrives as well.