Up North: How Sahel Consulting is Including Low Income Women, One Community at a Time
A playbook on building sustainable financial inclusion interventions that work
How do you get poor people to open bank accounts?
It’s a multi-billion dollar question and experts are experimenting with different strategies.
However, everyone agrees there are ways that do not work.
Here’s an example:
In a bid to increase financial inclusion numbers to meet the 2020 deadline, in 2018, the Central Bank of Nigeria ‘ordered’ microfinance banks to open 64 new accounts at each branch.
Every month.
The math makes sense - with over 900 microfinance banks and 2 branches per bank (averagely), we have 1800 branches x 64 customers x 12 months = 1,382,400 customers in a year.
(Un)fortunately financial exclusion is not a math problem, it’s a human problem.
Banks have no control over how many customers they onboard because they cannot force people to open bank accounts (same way a telco cannot force people to buy SIM cards). It rests entirely on the customer’s volition. And that volition is influenced by many factors - cost, convenience, jobs to be done, even level of financial literacy.
If people are not opening bank accounts, there’s usually a good reason why.
For example, in Northern Nigeria one of the major causes of exclusion is the massive land mass and sparse distribution of banks and financial service points (like POS agents, ATMs etc).
Little wonder the north is home to about 26.7 million excluded Nigerians. Cultural, religious and gender norms also disproportionately restrict northern women’s mobility, participation in labor markets outside the home, and education (PDF).
So, how do we get low-income citizens to open a bank account (and use them)?
Today, I want to cast the spotlight on an organisation that is crushing financial inclusion up north.
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Sahel Consulting is an agricultural consultancy firm tackling problems in the agriculture and nutrition industry. The organisation does this through research, policy advocacy and direct partnerships with public and private stakeholders.
One of their successful projects, and the subject of today’s newsletter, is the Advancing Local Dairy Development in Nigeria (ALDDN) project.
ALDDN is transforming Nigeria’s dairy sector by helping local dairy farmers to improve the quality and volume of their milk production and selling it to *milk processors who tend to import the milk they use.
*Milk processors are companies that bulk purchase raw milk and process them into other dairy consumer products.
But wait.
To understand the complexity of what Sahel has achieved, let’s do a quick review of Nigeria’s dairy industry.
Got milk?
For decades, experts have highlighted the immense opportunity for import substitution in Nigeria.
Import substitution is a trade and economic policy that advocates replacing foreign imports with domestic production. The idea is that by blocking importation of goods that can be produced locally and supporting local producers to meet internal demand (and surplus for export), it can catalyse the economy of an emerging market like Nigeria.
The dairy sector is an ideal prospect for import substitution.
Nigeria has the 6th largest cattle herd in Africa with an estimated 20 million cattle, mostly concentrated in Northern Nigeria.
Unfortunately, saying the local dairy industry is underdeveloped would be putting it mildly.
Nigeria imports at least 60 percent of its dairy products, spending about USD1.5 billion (NGN622 billion) annually. Only 5% of local milk production is sold commercially to milk processors. The rest is produced and consumed for subsistence or sold in informal markets (as wara or fura etc).
The sector’s underperformance is due to several reasons:
Productivity Issues: The average volume of milk produced by pure breed or Freisian cows (the standard bearers for milk yield) is about 30 liters per cow per day. Nigerian cows yield between 0.5-1.5 liters/cow per day. There are many factors responsible for the huge gap: inferior cattle breed, poor animal nutrition, and outdated farm management practices. The milk quality (amount of protein and fat it contains) is also pretty low.
Infrastructure: Collecting, aggregating and transporting large volumes of milk is difficult due to limited cold chain infrastructure.
Gender issues: This is a complex one.
Dairy farming among the Fulanis (the major pastoralists in Nigeria) is mostly a ‘female’ business.
Sociocultural and gender norms means women have limited ownership and control over land and cattle. And so while the Fulani men own the cows and get to herd them, the women are said to "own" the milk and have the responsibility of milking the cows, churning the milk and selling it in the market.
This is a problem because of the restrictions on women’s mobility and access to formal markets. Not owning the cows also means they have no collateral to apply for loans to grow the business.
Cash based systems: Northern women are highly excluded from formal financial systems, having no bank accounts and so mostly operate in cash. This is unfortunate because milk processors (companies who bulk purchase raw milk and process them into other dairy consumer products) refuse to do business with suppliers without bank accounts. In the last newsletter where I shared Janet’s story, I spoke about how limiting cash based systems are in the 21st century:
“Having survived without banking systems for so long, [excluded people] have developed their own systems of storing and moving money around their communities by using crops, livestock and cash. While these solutions may be adequate within their community, it falls apart when interacting with the larger economic system which is increasingly becoming digital.”
As you can tell, this is a problem with multiple layers and requires synchronous interventions.
Enter Sahel Consulting’s Advancing Local Dairy Development in Nigeria (ALDDN) project.
Here’s ALDDN’s value proposition: help local dairy farmers increase the volume and quality of milk they produce. This makes them attractive suppliers to milk processors, who can then meet their raw milk needs locally instead of importing.
The second half of the value proposition is that ALDDN will help integrate the local dairy farmers into the banking system to make them eligible for payment.
The ALDDN project operates across four states in the north - Kaduna, Kano, Plateau and Adamawa.
Great things come in small packages
One of the brilliant strategies employed by the ALDDN program is enrolling dairy farmers in local community groups and clustering them by gender. So there are women-only self-help groups and men-only self-help groups. Group members are regularly trained on farm management best practices, basic bookkeeping, and even income diversification.
The genius of the clustered self help groups is, it offers the women leadership opportunities as members take turns to lead sessions and champion projects, which has knock-on effects on their self confidence and agency. This has led to increased participation of women in household decision making.
They are also supported with input financing.
These interventions have produced exponential gains in the volume and quality of milk the farmers produce. Sahel Consulting also brokered a relationship between the local dairy farmers and local milk processors like L & Z Integrated Farms, Arla, and Sebore Farms.
Every month, the processors visit the communities to buy up all the milk from the local farmers.
Show me the money!
Okay, so you've trained the farmers. You've provided financial support and their milk production has surged by as much as 600%. Now it's time for them to get paid.
This is another tricky part.
There are psychological barriers to embracing new technology (remember how people struggled with ATMs when they were first introduced?) And when the new technology is supposed to help you manage something as important as your livelihood, some handholding goes a long way.
For financial inclusion, that handholding comes in the form of financial literacy trainings and support.
This is where partnering with the right financial service provider became critical. A project like this needs financial service providers who understand the importance of financial literacy (because not every FSP is big on it).
Fortunately for Sahel, they found a few partners (such as Sterling Bank, Softcom and Hope PSB) who fit the bill.
These partners not only open bank accounts for the farmers but also deliver a series of financial literacy trainings in the clustered self help groups. At these trainings, members participate in teaching sessions, product demonstrations and Q&As in the local language.
The true method of learning is to experiment
“We commenced a five-year project just to prove that a private sector-led dairy development initiative can work in Nigeria.”
The ALDDN program is an experiment but has it been successful?
See for yourself.
And that’s the story of Sahel Consulting’s financial inclusion efforts through the ALDDN project.
I’m excited because this ‘experiment’ can be replicated across other states by other public and private sector leaders. Not only that, the lessons and strategies can be replicated across other agricultural sectors like seed and grain production (millet, rice, corn etc), meat production (beef), as well as other local value chains like manufacturing and construction, forestry (wood, pulp and paper), and education.
Epilogue
“Success is a bunch of little things done consistently over a period of time”
Financial inclusion is difficult. But when we pull it off, the benefits are huge because financial inclusion is also big business. If done right, it presents a win-win scenario for customers, the private sector and the government.
However, it requires significant investment, experimentation and patience to work.
Sahel Consulting has given the ecosystem a playbook that works. It's now up to us to adapt and scale it.
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What an enlightening article. The message was well conveyed and the style of writing deserves a thumbs up.