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CATALYZE CASE STUDY

GOALS

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Expand access to financing for
CATALYZE FINANCE businesses and producers in targeted
sectors and groups. The groups
FOR RESILIENCE targeted by F4R are actors in the
agricultural value chain and young
Benefits of financial incentives in
entrepreneurs. F4R focuses on three
Burkina Faso value chains: cowpea, small
ruminants and poultry.
CONTEXT
USAID CATALYZE Finance for Resilience (F4R) seeks to mobilize
financing for investments in the agricultural sector and youth-led
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businesses in areas of Burkina Faso and Niger threatened by Develop a network and strengthen
violent extremism and food insecurity. The F4R approach involves the capacities of local financial
providing incentives to financial institutions (FIs) and financial facilitators. Financial facilitators (FF)
facilitators (FFs), strengthening their capacities and creating are people or companies who work
market linkages and networks between these important actors and with parties
between them and stakeholders in target sectors and
communities at risk. who help obtain financing from
financial institutions. The FFs have
CHALLENGES
no financial interest in the business
In most countries around the world, women and young people or investment.
are disadvantaged in seeking financing for their businesses.
These groups are underserved for a variety of reasons,
including local culture, the size and type of their Income-
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Generating Activity, lack of assets that banks require as Provide financial institutions (FIs) with
collateral, and market bias. makes it more risky to finance these incentives and facilitate their
groups. To give more chances, decision-makers connection to the market to increase
access to financing. Weak planning
and coordination capacities in
Burkina Faso and Niger hamper the
effectiveness of increasing access to
finance, largely due to
Policies and donors often require that these clients be targeted with specific support to help
them increase their chances of accessing financing. F4R uses the principle of pay for results
(P4R), providing performance incentives to increase the mobilization of private capital in
target geographic regions and economic sectors. The activity also gives special attention
and additional financial incentives to FFs for loans to young people and women.

LEARNING QUESTION

How can “pay for results” (P4R) incentives help effectively mobilize
financing for actors in the agricultural value chain, women and
young entrepreneurs in Burkina Faso and Niger? What are the
obstacles and accelerators?

In Burkina Faso, the F4R team is establishing partnerships with strong financial institutions (FIs)
that operate in the geographic areas targeted by the program and that have the potential to
increase investments in women. One of these partners, Caisse Baïtoul Maal, exceeded initial
expectations and objectives.

PROCESS
F4R is currently recruiting partner financial institutions using a combination of one-on-one
meetings, information sessions and word of mouth. Partners are selected through annual
calls for applications (RFA) – the selection process will be transformed into a rolling
application process very soon. Selected FIs sign grant agreements with F4R for a fixed
amount (FAA), with payments made as capital mobilization milestones are reached. The
milestones depend on the amount of loans granted by partner FIs to target groups and in
target regions in Burkina Faso.

Baïtoul Maal (CBM) is a cooperative operating according to the principles of Islamic finance
and is present in two of F4R's target regions in Burkina Faso. CBM provides various financial
services - mainly to solidarity groups - for investments in commercial and agricultural
activities lasting between 6 and 15 months, savings accounts, and money transfers.

CBM's partnership with F4R began in September 2021, with a grant intended to mobilize
250 million FCFA (approximately USD 400,000) in financing for target value chains and
geographies.
In implementing its work with F4R, CBM has benefited from the support of local FFs trained
by F4R who are also incentivized to identify producers and SMEs in target value chains and
help these clients develop financing applications quality. This support from local FFs allows
CBM to increase the number of its new clients and make more investments than usual; it
also reduces the workload of CBM loan officers and the processing time of applications
thanks to the quality of the files. Once CBM has disbursed the funds, the FFs provide follow-
up services until full reimbursement.

OBSTACLES TO INCREASING
FINANCING IN THE SAHEL
The performance incentive and support of F4R's FFs,
who are incentivized to identify and bring on quality
clients, has been essential for CBM to achieve well-
QUOTE
above-average results. As of June 30, 2022, two months " HeIt must be said that we had
before the end of its contract, CBM reached 309 million the support of financial facilitators
FCFA in mobilized credits, or 124% of its initial to have access to numerous
objective. The institution is groups of women... also, the
currently in negotiations with F4R for a new incentives offered by the project
contract whose amount of credit granted to target allowed us to surpass ourselves. "
groups would be twice as large as the first.
- Ms. Saré, CBM
As exciting as this result is, it also comes with
significant unanticipated spinoffs that are
important to document.

✓ 93% of the funding mobilized went to women.CBM is not specifically interested in women, but
has established a partnership with the “Support Fund for Women's Income-generating
Activities” (FAARF), which provides MFIs with a loan fund aimed at women. The share of credit to
female customers was around 37%, with a rate of around 60% female customers in F4R's target
geographic areas. Thanks to their performance within the framework of F4R, they are now 80%
female customers in these same areas.

✓ Extension of CBM's service offering to producers and SMEs in the F4R target zone of
the "Central North" region.CBM only had small service points in this region; however,
with their business increasing in the area through F4R, they are now planning to set up a
full-service branch. This will be very beneficial for access to financing for the populations
of the Center North, including for the financing of agricultural activities.

✓ Improved reimbursement performance.CBM (and the FFs) have developed real

expertise in assessing financing needs and requests for target value chains and are able
to provide better quality loans. This, combined with the monitoring of loans disbursed
by the FF, led to repayment rates of 100% for the
 F4R portfolio, compared to the rest of its portfolio, with a repayment rate of around 65%.

✓ Increasing the performance and visibility of CBM in the fieldthanks to the partnership
with F4R has attracted new financial partnerships or with old partners who have renewed
their commitments, including development projects/organizations for approximately 1.2
billion FCFA (nearly 2 million dollars). They work in particular with these different partners
who allow them to have access to lines of credit/loans at low interest rates for their
activities. They also have contracts for the transfer of money to populations at risk with
different humanitarian partners.

✓ Improved overall financial performance of CBM.Thanks to the increase in activity

resulting from their contract with F4R and some of the points listed above, CBM is also
experiencing an improvement in its performance ratios, particularly those related to their
equity and profitability (operational self-sufficiency ), which increased by 325% and 24%
respectively, from 2020 to 2021.

LESSONS LEARNED
✓ The two-tier P4R system is effective. F4R's approach of incentivizing both IF and FF to
raise more capital, with an additional incentive for women's funding, made this
performance in women's awareness and funding possible.

✓ Targeting specific value chains and intervention areas allows FIs to concentrate their
activities and offering and therefore greater visibility in the target region. The resulting
return in terms of marketing and advertising can be very significant.

✓ In these early stages of the project, the technical assistance/coaching provided by the local F4R
team to FIs is critical, as the team's review helps ensure that submitted credit applications meet
all criteria of eligibility of the IF. Currently, none of the applications submitted to CBM have been
rejected.

NEXT STEPS

❖ Renewal of the fixed amount of the financial incentive to CBM for

62 million FCFA (94,000 USD) for a credit mobilization objective of
500 million FCFA (a little over 760,000 USD).
❖ Even more funding for women. We have seen that there is both
potential and opportunity for lending to women when there is a more
attractive incentive amount provided to FIs for this purpose.
❖ Creation of a new CBM agency in the North Center - one of the
most difficult regions for F4R to serve.
❖ Expansion of the Central North FF network and continuation of their activities.