MVIWAMBI is a local network of farmers’ groups in Tanzania working as a second-level farmers’ company. It provides training and farm-inputs to its members and collects and markets their coffee. Mviwambi is highly motivated and wants to grow. But high interest cost from the farm-inputs provider and delays and price dictation from the local bank hampered Mviwambi to provide competitive and well-timed services to its members. Last year the coffee collection dropped by 50%: many members sold their coffee to private buyers because the local bank delayed in providing the working capital and forced MVIWAMBI to pay a very little first payment for the coffee compared to the market price. Mviwambi dreamed of having an initial own capital for being able to start coffee collection on time and provide competitive prices to its members.But where to start? How to convince members that investing capital in their own company is for their own benefit? Especially after a season in which many members where quite disappointed?
Since 2014, Agriterra advises Mviwambi in business planning, financial management, marketing, member commitment, internal capitalization, access to capital, and many more topics. From each topic Mviwambi carefully selects several ideas which will fit ultimately in their own development path.Mviwambi’s strategy was to invest in loyal members by providing good and cheap farm-inputs, before asking them to raise internal capital. Via Agriterra, Mviwambi accessed a farm-input loan from SIDI** at reasonable interest rate. After careful members’ screening and contract signing, qualitative farm-inputs were provided on time, with the condition to deliver a minimum amount of coffee. Many non-members were attracted by this service and applied for membership. Mviwambi puts them on a waiting list: “deliver your coffee first before being eligible for farm-inputs on credit”.
Thanks to a better liquidity position, Mviwambi was able to accommodate the early harvesters and pay a reasonable first price on time. Several months before season closure now, the coffee collection approaches 500 tons again. The loan to SIDI has been repaid on time. And many new members enroll in Mviwambi. During the last Annual general meeting the board remembered the members about last year’s difficulties due to dependency on external capital and it proposed a resolution for internal capitalization; it was adopted: 30Tsh/kg of coffee will be deducted by Mviwambi before paying the coffee. By the end of the season, Mviwambi expects to count approximately 15 million Tanzania Shillings as members capital.
A great step in reversing the spiral of dependency on external capital towards a first slice of autonomy. Mviwambi also shows that free-riders can easily be brought back if played on their calculative commitment. Even free-riders are human beings who all have the need to belong to a group. Most free-ride out of necessity. Enforcing fiercely the free-riding preventing by-laws will scare them away for good; providing services when and how they need, will bring them back as sheep. When they will reverse their own dependency spiral on external capital, most of them will become loyal members, full of affective commitment, thankful to have been helped by their cooperative, and ultimately ready to invest in their cooperative.