For serious development and economic growth it is imperative that the rural population be incorporated into the main economic stream through being plugged into the financial system. KM Financials has embarked on a project that seeks to significantly improve access of rural farmers to credit.

Unlocking and leveraging collateral value of cattle in Zimbabwe

AECF Investment

US$ 250,000 Grant
US$ 500,000 Repayable Grant
US$ 1,041,000 Matching funds

Project Duration: October 2011 – September 2017

Project Sector: Rural Finance - Livestock

Project Summary 

KM Financials will securitise the farmers’ livestock thereby leveraging loans on these securitised assets for the use of other farmers farming needs. This will be achieved through KM Insurance offering guarantees as collateral to financiers who extend credit to the farmers. The farmers will in turn insure their cattle and crop with KMI so that these act as a fallback position for KM Financials. The crop insurance will compensate the farmers for the loss of inputs in the event of loss of crop from field to floor. KM Financials will also provide default insurance cover to the banks that are funding the farmers.

KM Financials plan to insure over 48,000 cattle within this scheme. The project should also be able to reduce the interest cost of rural farmers from over 100% per annum being charged by microfinance institutions to under 15% per annum delivering $1.41 million in finance costs over the initial 6 years. The project has already been actuarially evaluated by FBC Reinsurers who have already provided a letter of undertaking to underwrite the program.

It has the potential to improve acces to finance through micro-finance institutuins using cattle as collateral which wil in turn unlock working capital amongs Zimbabwe’s small-scale cattle producers and ultimately lead to  improved rural livestock.

The project  will promote financial literacy amongst poor people, and allow them to operate commercially, rather than by way of subsistence. It will bring thousands of smallholder farmers into the mainstream agricultural economy.

The farmers in remote corners  will have access to banking, financial  and insurance services. This project will reduce the cost of borrowing to rural farmers to under 15% per annum.

Through the linkages to various stakeholders, farmers will enjoy services such as beef abbatoirs,milkl processing companies, animal husbandry training, and vet services  to ensure that they have healthy herds and as such productivity is guaranteed and hence increase in income.