By Mialy Karen Rasolomanana and Sarobidy Rakotonarivo

Most farmers near protected areas are isolated and lack access to affordable and safe credit. This limits their ability to invest in their farms, often constraining them to rely on low-input methods like slash-and-burn farming (involving burning and rotational farming). These unsustainable practices can lead to deforestation, biodiversity loss, and greater vulnerability to the negative impacts of climate change. Climate-smart agriculture (CSA) can help address these multiple challenges but is rarely adopted. One reason is limited access to knowledge about CSA, and another is the high upfront costs for inputs and labor.

The HOPE research project aims to address these constraints in Madagascar by evaluating the impacts of knowledge and credit transfer on CSA adoption and poverty indicators using a randomized controlled trial (RCT). A RCT is a robust method that randomly assigns the study population to treatment and control groups in order to test the impact of interventions on outcomes like CSA adoption and welfare indicators, such as food security and off-farm income. 

The main CSA techniques that are promoted across our study sites include the use of organic fertilizer (basket compost) and manure fertilizer, cover crops, mulching and contour farming on three main crops; coffee, cassava, and rice.

Injecting credit into village savings groups as part of the trial

As part of the RCT, the Arise project recently implemented the credit injection to 43 associations comprising 900 household members. Village savings and loan associations (VSLAs) are self-managed groups of up to 30 members within a village that save money over time and lend these savings to members. These village savings groups have received training in financial literacy. 

Members of a village savings group in a rural village in southeast Madagascar

While these VSLAs have been functioning for at least two years, members can only amass small pools of capital, and this might limit the usefulness of their lending and investment in farming or other income-generating activities. The injected credit aims to address these constraints and provide additional resources that can provide the much-needed capital to spur investments in more productive and resilient farming practices.

We labelled the credit “Credit for CSA support” (Box 1). We stated that the credit is aimed at addressing the various constraints that farmers are facing in implementing more costly and riskier farming techniques. Additionally, beneficiaries are also being provided an ongoing training in CSA techniques by our field technicians (who were recently empowered at the task).

Box 1. Credit for CSA support

We know you live in severe poverty and most of you are experiencing food insecurity. This might explain why you lack the resources to implement improved farming practices such as climate smart agriculture – So, we heard you! And this is the reason why we provide this credit for CSA support to help alleviate resource constraints and enable you to invest in these improved practices.

You may use the payment to buy improved seeds, invest in basket composting, or manure fertiliser, or buy extra labour to carry out contour farming or mulching. You, as a group, are free to decide on the additional rules for that extra credit: the payback return, how much each member can borrow, the criteria that members need to meet before they can take out loans. The only rule we are imposing is that we want the credit to have sustainable effect on your lives and instead of you sharing it at the final pay-out (i.e., the end of the VSLA cycle), we want you to keep it in the common pot so you can use it again at the next cycle.

You do not have to directly invest it in CSA practices. We understand that in some cases, you’d rather invest the money in some businesses that generate quick returns before re-investing the payoffs in CSA, and that is totally fine.

Disbursing the money to remote groups was not easy

The average credit provided to each association amounts to approximately $670, which is double the average total savings per Village Savings and Loan Association (VSLA) at the end of a typical cycle. 

Disbursing credit to VSLA members in remote rural villages posed significant challenges. The original plan to use mobile money was scrapped due to high fees and security concerns over large cash withdrawals. Instead, the team issued bank checks and organized a 20-day operation involving five field technicians and a logistics officer to assist designated members across eight communes in safely cashing out the funds.

We aim for the credit to encourage beneficiaries to adopt higher-risk, higher-return farming practices, such as climate-smart agriculture (CSA), to boost their profits and incomes, and reduce reliance on clearing forestlands. Additionally, we hope the credit will yield broader positive impacts, including enhanced resilience to climate shocks, improved climate adaptation, and increased income diversification beyond agriculture.

A VSLA President proudly displaying the cheque he received for his association

Feedback from members of VSLAs that have benefitted from the credit

We received several positive feedbacks from beneficiaries and remain optimistic that the credit injection and training will lead to significant improvements in local welfare and contribute to biodiversity conservation efforts. 

This external credit will spare my savings from being used as insurance funds against various shocks such as a decline in my farming yields due to a bad weather or health issues. When we face these shocks, we often have to take out loans from the associations to meet our basic needs. With this credit, I can now invest my loans in more productive activities such as improved farming or other small entrepreneurial activities.”

VSLA secretary

“With the CSA credit, I am planning to purchase good quality seeds and some materials, such as a wheelbarrow, that will help me become more efficient in my farm. This increased efficiency will also hopefully help increase my yields and improve my food security.”

VSLA member

“This credit gives me high hope. I am very keen to ensure we can use it over many cycles and I am confident that it will play a big role in improving our lives. The fact that the credit won’t accrue any interest is so helpful, as I’ve seen people in my community taking out lands from private lenders here at exorbitant interest rates. We will hold each other accountable and agree on clear rules to ensure that this credit will last and all the transactions are traceable and fully transparent.” 

VSLA treasurer