Green loans for farmers in Costa Rica and Nicaragua
ADA encourages vulnerable smallholders to adopt environmentally friendly practices. Together with its MFI partners, ADA designs green loans to promote sustainable agriculture and provides their farmer clients with the necessary training.
In this manner, ADA has supported nine microfinance institutions (MFIs) together with REDCAMIF, the regional microfinance network in Central America and the Caribbean, since 2019. For example, they recently assisted two Costa Rican and Nicaraguan MFIs in developing green loans to finance the adoption of climate-smart agricultural practices which not only protect the environment but also increase farming output.
As a first step, ADA financed market surveys to identify the needs of the MFI clients. Based on the survey results, ADA then guided the MFIs in defining the loan conditions, calculating profitability, mapping out the dissemination strategy, etc.
In addition to this financial support by the MFIs, the farmers are required to implement a guide on sustainable practices for agriculture, livestock farming and trade that was financed and coordinated by ADA. For example, part of the loan must be used to install water-saving irrigation systems, composters or biodigesters for processing organic waste.
Once the projects had been completed, ADA coordinated their evaluation alongside REDCAMIF and identified lessons learned and best practices.
Examples of project beneficiaries
Promoting the use of organic fertilisers and living fences in Costa Rica
Reyner Mata Quintana raises cattle and pigs and grows maize, beans and manioc. He received a green loan of USD 1,700 from the MFI FUNDECOCA, which he used to buy livestock and seedlings.
In addition, Mr Quintana implemented several sustainable practices, for example, he now uses organic fertilisers obtained from animal waste and excrement and has even created a fertiliser based on bamboo hormones (Bambusi). He also set up living fences from willow branches tied into trellises and planted directly into the ground, which quickly produce foliage.
Reforestation and solar-powered electric fences in Nicaragua
In Nicaragua, the MFI FDL mainly supports livestock breeders and coffee growers who struggle with the consequences of deforestation and a depletion of water resources. As part of the project with ADA and REDCAMIF, FDL not only rolled out green loans which are conditional upon the implementation of sustainable agricultural practices, they also developed a WhatsApp chatbot which helps farmers to receive expert guidance on these best practices and to communicate with the MFI. As a result, the farmers now communicate with technical FDL staff directly via WhatsApp instead of wasting time travelling to the branch.
For example, Leopoldo Duarte Picado used the loan by FDL to build part of his living fence and to plant special pasture for dairy cows and growing calves. He also has an electric fence which is powered by a solar panel on the roof of the barn. This living electric fence saves him a lot of money as he doesn’t have to pay labourers to cut trees and erect fence poles. Together with his son, he is also reforesting his property, which has resulted in improved air quality.