UVAN Ltd works with groups of smallholders organized into local producer associations, for the export of vanilla. One such association is the Kojja Vanilla and Fruit Association. There are no written agreements between the company and producer associations on sales. The company provides the smallholders with loans through the association. UVAN benefits from the association through being able to provide group training exercises to improve the quality of the vanilla, and also the bulking of vanilla at the association level. Loan applicants are screened by the association. Loans can be in cash (for household expenditures such as school fees) or in kind (for production inputs). The loan may not exceed half the expected value of vanilla production. Repayment is made after harvest through a 'check-off' system. Recovery levels are high, due to the screening and monitoring of borrowers by other association members, and due to the incentive of retaining membership in the association, and therefore being able to benefit from the relationship with UVAN.

The basis for the success of this scheme is the close relationship and trust between the company and the association. With respect to the credit system, the transaction costs of screening and monitoring are lowered by their transfer to the association, which has the incentive to ensure that loans are repaid so as not to jeopardize the relationship with UVAN.

Analysis:

• Credit applicants are screened by the smallholder group.
• Repayment is encouraged by individual and group incentives.
• Shows positive effect of providing training and extension, physical inputs, and post-harvest services through the same channel as credit provision.