Cooperation between cooperatives for financial resource mobilisation

21-09-2021

It is a pleasure to share with you an experience of collaboration between cooperatives from Burkina Faso. Through an analysis of the value chain, with the ambition to strengthen its position and to offer the best services to its members, UCRB Faso Djigui, one of our rice cooperatives in the Kou plain in Bama, Burkina Faso, has decided to vertically integrate the value chain by processing and selling rice. In order to achieve this, the goal is to set up a rice processing factory.

Agriterra has decided to embrace this ambition and this year’s collaboration has been designed around this business. At the end of June, we organised a business plan workshop to obtain precise figures on future profitability, the return on investment, but also the strategies for resource mobilisation and marketing to better succeed in this project. This workshop lasted 5 days. The benefits to the cooperative and its members were obvious once the project would be well conducted. But it remained faced with challenges not to be neglected.

Challenges

The first challenge was related to the supply of paddy rice: this posed the problem of competition with private and more experienced factories that had already been buying paddy rice from UCRB’s members on the Kou plain. To further engage members, a one-day workshop was dedicated to the procurement strategy of the union factory. The members, through their primary cooperatives, made a commitment to deliver the necessary quantities for the first year. This required the development of a commitment and purchase contract for rice between the cooperative and its members.

The second challenge was related to the mobilisation of financial resources. The investment would be financed by a loan from AFDI/TRIAS, through the FREDIC fund, at a very competitive rate; a partner of the cooperative with which Agriterra has signed an Memorandum of Understanding (MoU) to better support the cooperative, Agriterra being specialised in the business aspect. This MoU between Agriterra and TRIAS, in the field, has been a precious help in the professionalisation of this cooperative.

For internal working capital, members committed themselves and raised 10% of the working capital after a workshop (this will be a subject of another post as it was a very interesting process).

In order for the rest of the funds to be mobilised, we decided to see local financial institutions. The micro-finance structure, the Caisse Populaire, one of the biggest and powerful SACCOs established throughout Burkina Faso, agreed to accompany the project in the framework of a beautiful collaboration between cooperatives. An agreement was signed for a line of credit of EUR 152, 439 to finance the working capital. It is a beautiful collaboration or business relationship between cooperatives. In this collaboration, an interest rate of 10% was retained against a normal rate varying between 12% and 14%. The person in charge of the SACCO who followed this business plan activity, says he is confident and urges UCRB to really use this line of credit to succeed in this project.

Activities

Agriterra Burkina Faso has already undertaken many activities to ensure the success of this project. Thus, the board and staff have already been trained, by Agriterra, on basic marketing and are currently developing a marketing plan. Similarly, they have benefited from training in basic financial management and, through the Jobs, jobs, jobs programme, they have recruited a young accounting manager to ensure solid and professional financial management.

Issouf Ouedraogo, business advisor Burkina Faso