Financial technology of small farmer cooperatives ltd. (SFCLs)

Recent studies of the Small Farmer Cooperatives Ltd. (SFCLs) in Nepal have produced a very positive picture of these small, member-based institutions both in terms of impact and viability. This particular paper concentrates on the organisational structure of SFCLs and how they admit new members, how they design their savings, loan and insurance products and and the details of their savings mobilisation and credit delivery processes.

The case study is based on a small sample of the active cooperatives which number more than 100 but the author believes it is extensive enough to give a good idea of the innovative procedures and products they use. Key elements in their success are:

  • SFCLs genuinely live the idea of local ownership
  • a clustered structure is employed through joint liability groups of small farmers at village level, inter-groups at ward level and a main committee at Village Development Committee level.
  • SFCLs use the advantage of being multi-service cooperatives without getting caught in the associated traps.
  • Monthly interest collection, incentives for early repaymnet and penalty rates for late repayment enforce loan discipline.
  • SFCLs receive strong support from the Agricultural Development Bank of Nepal and GTZ.

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