One of the key interventions of the Kesem Union-2SCALE partnership is to strengthen Kesem’s customer proposition to smallholder farmers as well as to enhance its credit relationship with financing institutions. To achieve this, facilitating capital mobilization and access to affordable financial products and services is key.
Located at Arerti town, 110 kilometers from Addis Ababa Ethiopia, Kesem union is the business champion in this partnership. The union was established in 2005 with 10 founding primary cooperatives, with an initial start-up capital of ETB 820,000($ 16,820). The union operates in two districts, Minjar Shenkra, and Berhet in the North Shewa Zone of the Amhara regional state.
In partnership with 2SCALE, Kesem is supporting quality teff production by smallholder farmers and improving easy access by consumers, particularly those at the Base of pyramid (BoP). Additionally, the partnership is working to improve the aggregation capacity of Kesem to make it a sustainable market for teff produce. Teff is a highly sought-after grain in Ethiopia, owing to its nutritional benefits and unique taste. Besides off taking and aggregating teff, the union also aggregates wheat and chickpeas and facilitates access to inputs for smallholder farmers. Currently, Kesem union is made up of 29 primary cooperatives, with a total membership of 37,037 members, mainly teff smallholder farmers in Central Ethiopia.
Enhancing internal capitalization to improve the union's operations
As part of the bigger role of cooperatives set up in Ethiopia, cooperative unions continue to play a significant role in enhancing livelihoods. To achieve this objective, Kesem union needs enough capital to aggregate produce from farmers during harvesting season. It should also have the capacity to borrow from financing institutions and to provide financial services and products such as loans to its members. However, limited cash flow, low access to capitalization by members, and limited borrowing opportunities from other financial institutions leads to a struggle to pay farmers in cash, thereby constraining operations.
16 years since its inception, Kesem Union continues to work on overcoming the challenge of access to financing. Thanks to the partnership with 2SCALE, the union is slowly addressing this hurdle through mobilizing finance from its members. Amakele Zwadu, the union's General Manager explains:
In the last five years, we had no internal mobilization of funds from our members. This led to low internal capitalization and cash liquidity to efficiently run the union’s activities. Since 2020, 2SCALE has built our capacity to mobilize finances from our primary cooperatives. This was mainly achieved through trainings and sensitization sessions to community elders, religious leaders, and heads of the primary cooperatives on the advantage of mobilizing funds from internal sources. The involvement of such influential people hugely contributed to building trust and convincing the smallholder farmers to acquire more shares. So far, 3,700,154 ETB ($75,595.27,) has been collected from members in form of shares, doubling our capital base over a period of just one year!