How cooperative loans can change lives

There are 35,000 cooperatives in Nepal, and they play a crucial and recognized role in poverty reduction. Find out how loans from cooperatives in Lalitpur help farmers diversify their income.

When Dunka Dewan talks to her farm animals, she seems very fond of them. A particularly important animal is her very large pig, which she pets with affection. It is especially large now, as it is pregnant and about to give birth to some 18 piglets. Each one can be sold for about 3,000-5,000 rupees. The mommy pig itself costs 35,000-40,000. So one can see that the animals are but dear, also valuable to Dunka.

Dunka has profited from cooperative loans. She has been a member of Santaneshwar Naudhara cooperative for eight years and taken several loans from the group, paid back and taken another one again. In addition to pig raising, she is currently raising chicken in her yard and fish in a pond. She also has a couple of cows and buffalos. Diversifying her income is beneficial, because she is also paying 60,000 rupees a year for the lease of her farming land. Dependence on one source of livelihood would make her vulnerable to market shocks, animal epidemics and such.

There are 35,000 cooperatives in Nepal, and they play a crucial and recognized role in poverty reduction. Caritas Nepal is supporting 32 copperatives.

The most popular loan offered by the visited cooperatives is business loan, which is commonly taken for buying land. But as demonstrated by Dunkas’s story also landless people and lease farmers can benefit from cooperative loans. Another cooperative Caritas has been supporting is Godamchaur Dalit Women Agriculture Cooperative. Originally the group was just a 25 member dalit women’s group, which was doing savings together. Now the group has 86 female members, who have 34 children.

The cooperative has been officially registered under the cooperatives act in the District Cooperatives Office. After support, their saving habits have picked up, and the cooperative is now more functional. Each member saves about 100 rupees per months. The loans offered by the cooperative have had a big impact on their lives. The 10 to 12 percent interest loans have been used for establishing vegetable farming and petty shops. Half of the group members are involved in vegetable farming. The ladies tell that they earn about 100 000 rupees each from vegetable farming in a year. Previously they would work in daily labour doing odd jobs on other people’s farms for example. This would bring them 100-200 rupes day, for about 15 days a month. Adding this up makes their previous annual income only 27 000 Ruees, which means that vegetable farming has increased their income to four timest he original.

Cooperatives as “banks for the rural poor”

Some of the more established cooperatives work almost as banks for the rural poor. Running a cooperative is not a simple task. One common challenge is that the members are not able to pay back the loans they have taken. To get all the investments back, the cooperative management has to make a lot of reminder calls and sometimes apply also a 3% punishment interest. However, all the loans have been paid back eventually and legal process has never been necessary. Overall in Caritas supported cooperatives 80% of the loans have been paid back in time and the remaining 20% during an extension time. Up to 75% of all members in the Santaneshwor cooperative have used the opportunity take a loan from the cooperative. In July 2018 Caritas ended its support to the Santaneshwar Naudhara Saving and Credit Cooperative. This is part of Caritas strategy, which directs it to support cooperatives to reach A (+) level on a scale starting from C. Most help is moved to supporting new weaker cooperatives.

Not working for profit, but social improvement

Entering the cooperative branch office in Lalitpur looks similar to visiting a bank. However, the executive manager Gayatri KC of the head office explains that they are not working for profit, but social improvement. They have only nine paid staff to keep the administration costs slim. Committee members work on voluntary basis. The cooperative is audited regularly and report to the municipality. They are a member of bothregional and national cooperatives unions, and these umbrella organizations give the cooperative technical guidance and advocate on their behalf towards relevant national ministries. But even this cooperative at its start was a mere savings groups. 80 women in 4 groups were saving just 20 rupes a month each. Now the cooperative has 540 members in Lalitpur branch and 2400 in total. After various animation training and capacity building and skill training given by Caritas Nepal the cooperative is now economically, socially and financially strong. The current savings in the cooperative are over 70 million rupees.

A very successful farmer who didn’t use to be one

Sarita Khing, 43, is a prime example of the benefits of cooperatives. She is a successful farmer. So successful in fact that she has been interviewed by national TV. She is producing vegetables like zucchini, cabbage, cucumbers, tomatos on her 2.5 ropani of land, which is about one fourth of an acre. Every year she pays 40,000 rupees for the lease of her land. Considering that her profit is about 150,000 rupees, the lease of land is a significant amount. But she has received both a loan and capacity building from the cooperative. In fact it was the cooperative worker Hira Lama, who told her about the possibility of getting a loan. She has used the opportunity to build better shades and other structures for her plants.

Sarita is not originally a farmer, but has used every bit of knowledge and opportunity to become one. She merits the cooperatives leaflets for getting skills and knowledge on how to manage plants and fight pests and insects. It has been her motivation to be able to live off her own farm and she has reached that goal. She no longer has to go to work on other peoples land. “I am very happy” she says and adds that she will not let anyone touch her tomatoes. She works her farm alone and even goes herself to sell the produce to the market in the evening. Though she may not be able to buy land for herself, her dream is to be able to help her children do so. “I would not have been able to do this without the cooperative”, she says. “Please come and visit me again in 75 days, when my tomatoes have grown”, she tells us.