(Business in Cameroon) - Managing Director of Crédit du Sahel, Daniel Kalbansou, made sure to specify that the framework used by the microfinance establishment he leads is legal. “I would like to state that regulations governing the microfinance sector in Central Africa allows such institutions to make 20% of their sales via activities other than savings and loans,” he indicated in an interview with Business in Cameroon.

With this loophole gaping before microfinance establishments, Crédit du Sahel, a micro bank active in rural areas in northern Cameroon found a means of guaranteeing the reimbursement of loans granted to small farmers: the production-based loan guarantee method.

“We realised that the non-payment of advances extended to small farmers isn’t always the result of ill will on their part […] After harvest, with the combined effect of increased supply and the need for income, small farmers are often obliged to sell their produce at prices that fail to cover their expenses, including their loans,” explained the Crédit du Sahel Managing Director.

In addition, the system his microfinance institution put in place, “finances the purchasing of inputs to increase production and also helps to get back the production which, in turn, helps us to be reimbursed.” In practical terms, the production is kept “as a guarantee for two to three months, after which, prices are generally higher again. We then sell the produce harvested and collect the loan and the interest owed. When there is a surplus, we deposit it to the accounts of the said small farmers.”