2. The Small Farmer Development Program

2.1 Methodology of the Study
2.2 Baseline Survey
2.3 Classification of Farmers
2.4 Group Formation
2.5 Group Structure
2.6 Level of Organization - Rules and Structure
2.7 Participation
2.8 Participatory Monitoring and On-Going Evaluation
2.9 Linkages
2.10 The Role of Women
2.11 Savings Groups
2.12 Credit

The following section will explain the methodology used for this study, the nature of SFDP groups in Thailand, and factors influencing their success or failure.

2.1 Methodology of the Study

Information was collected at meetings which took place in the SFDP villages. Data collected at these meetings included: group activities, group structure and organization, election of leaders, credit/savings, monitoring and evaluation, the role of women, and future group plans.⁷ The number of participants in these meetings averaged 10-11 making for a total of 314 villagers interviewed in 30 villages. Translations from Thai to English were done by Mr. Dirok, a project coordinator for the Small Farmer Participatory Program, a successor to the SFDP. Mr. Dirok has a Masters Degree in plant biology and is himself the son of small farmers. Additional information was collected from project files kept at the FAO's headquarters in Rome, the FAO Regional Office for Asia and the Pacific (RAPA) in Bangkok, and the DOAE officials at the provincial, district, and sub-district levels.

⁷ Group Discussion Points are listed in Appendix I.

Altogether, this researcher visited and collected information on 30 SFDP groups in 31 villages. Forty nine officials from the Department of Agricultural Extension who participated in the SFDP were interviewed for this study: 5 at the national level, 8 at the provincial level, 10 at the district level, and 26 at the sub-district level. In addition, 8 individuals were interviewed who did not take part in the SFDP but who now are involved in the successor programs - the Small Farmer Participation Program (SFPP) and the Planning and Farmer Participation Development Program (PFPDP).

2.2 Baseline Survey

The baseline survey was carried out by sub-district officers of the DOAE who acted as Group Organizers for the Small Farmer Development Project. The purpose of the baseline survey was to collect data used to 1) identify small farmers, 2) identify suitable group activities, and 3) help group organizers understand the circumstances in which the small farmer lives. The baseline survey was designed with the help consultants from Khon Kaen, Chiang Mai, and Songkla Universities. The length of time to complete the survey varied from village to village but averaged three to six months.

The survey was divided into four sections covering: 1) the agricultural and economic conditions of each family, 2) the social organization in the village, 3) the basic economic infrastructure of each village, and 4) the problems faced by farmers. Many sub-district extension workers who were required to carry out the baseline survey complained that it was too detailed or unreliable. Those who felt the survey was too detailed thought that the sub-district extension workers did not need to collect so much information on each household and stated that they did not use most of the information collected from the survey. Those who felt the survey was unreliable mentioned the absence of information about social conditions and the reluctance of farmers to give information that would make them appear poor. Mr. Charoen, a sub-district extension worker in Songkla province, noted that it is often difficult to obtain accurate information from the villagers. “The baseline survey was not really useful since the village is in a national forest. The villagers are reluctant to tell the truth.” Thus, Mr. Charoen believes the incomes for the small farmers are incorrect. Several of the sub-district extension workers stated that from their own observations they could see that much of the information from the surveys was inaccurate. As a result, these agricultural extension workers did not use these surveys when implementing the SFDP.

On the other hand, many extension workers found the baseline survey to be very useful. The baseline survey focused their attention on issues that they had never considered before. The baseline survey also gave them a much better idea of the income levels and social status of individuals in the villages. As a result, they found it much easier to identify economic and social problems that occurred during the implementation of the Small Farmer Development Program. On balance, the baseline survey was very useful although its design may have led to some inaccuracies. A successor program, the Small Farmer Participation Program has adjusted the baseline survey along the lines of Rapid Rural Appraisal. Using this method, agricultural extension workers collect a smaller amount of data more applicable to SFPP implementation. Agricultural extension workers rely less on interviews with small farmers and more on their own observations. As a result, survey results are more applicable to small farmer group formation and survey time is reduced.

2.3 Classification of Farmers

The sub-district extension workers (Kaset Tambons) used the results of the baseline survey to divide farmers into the categories of small farmer, medium farmer, and big farmer according to income. All farmers below the average income of a village are considered small farmers. Using this method of classification and given the distribution of wealth in most villages, more than 50% of the households in any given village were classified as small farmers. Thus, the designation small farmer masks some large differences in individual skill and income levels within a given village. In addition, because the level of income varied from village to village and region to region, the level of income associated with the designation small farmer varied considerably from village to village. For example, the cut off line for a small farmer in the northeast village of Jote was an income of Baht 2,800 whereas the cut off line for a small farmer in the southern village of Lankwai was Baht 20,000.

Many extension workers expressed dissatisfaction with using income as a method of determining who in a village is a small farmer. In village society many factors aside from income can be important. For example, Mr. Luasin, a district officer in Songkla province, noted that some farmers have many relatives in the village who help them. In addition, the farmer many own certain physical assets that do not show up on calculations of income. Similarly, some villages have better infrastructure and access to markets increasing the welfare of households in the village. In short, a farmer's incomes may not reflect the farmer's actual welfare.

2.4 Group Formation

The semi-annual statistical reports give information about group formation that occurred during the Small Farmer Development Program. These are summarized below.

Table 1
Group Formation

February 1986
Activities	No. Groups	Male	Female	Total
Crop	49	-	-	640
Livestock	41	-	-	580
Other activities	50	-	-	50
Total	140	-	-	1720
February 1987
Activities	No. Groups	Male	Female	Total
Crop	50	735	138	873
Livestock	38	590	64	654
Other activities	24	420	177	597
Total	112	1745	379	2124
February 1988
Activities	No. Groups	Male	Female	Total
Crop	35	603	47	650
Livestock	49	836	75	911
Other activities	21	435	91	526
Total	105	1874	213	2087
February 1989
Activities	No. Groups	Male	Female	Total
Crop	35	603	50	653
Livestock	49	840	75	915
Other activities	21	440	110	550
Total	105	1883	235	2118

Similarly, the Terminal Report of the SFDP in Thailand (1990) reports that “during the project implementation, 119 income-generating groups were formed in 68 villages. The number of farmers involved increased from 1,270 small-scale farmers in 31 villages to 2,544 in the same villages two years later, and increase of 70%. In addition, 52 inter-group associations were formed in different disciplines, with the participation of 82 groups.”⁸

⁸ FAO. People's Participation in Rural Development through Promotion of Self-Help Organizations in Thailand: Project Findings and Recommendations. 1990, p. 7.

Two additional points should be made about figures from the semi-annual statistical reports. First, these numbers mask a fairly dynamic situation. During the entire period from the beginning of 1985 to the end of 1987, new SFDP groups were being formed at the same time as other SFDP groups failed. Indeed, in 1987 the SFDP was expanded from the original 30 villages to another group of approximately 30 villages as the result of the decision to continue the Small Farmer Development Program beyond the initial two year period. Second, figures from the semi-annual reports may not accurately reflect the number of self-sustaining small farmer groups. As discussed below, some of the SFDP groups were groups in name only and did not have regular meetings or work together on common problems.

This researcher visited 30 villages in Khon Kaen, Chiang Mai, Nakhon Sawan, and Songkla Provinces which participated in the Small Farmer Development Program. In addition, one village and a training session for the bilateral Thai-Dutch SFPP were visited. Of the 30 villages visited, 15 still had successful SFDP groups engaged in savings or income generating activities. The criteria for a successful small farmer group include:

1) the group was established with the help of the sub-district officer under auspices of the Small Farmer Development Program.

2) the members of the group work together through group activities to solve common problems.

3) the group holds regular meetings and is self-sustaining (although perhaps not involved in their original activity).

4) the group creates, implements, and enforces its own rules and chooses group members for leadership positions.

The 15 active SFDP groups participated in various activities. These activities are illustrated in the table below.

Table 2
Group Activities

Activity of Group	Number of Groups	Percentage
group savings	6	40%
rice bank	3	20
village shop	2	13
pig raising fund	1	7
sericulture	1	7
chicken raising	1	7
joint irrigation	1	7
Total	15	100

A high proportion of successful small farmer groups were engaged in savings activities. The prevalence of savings activities is especially evident when one realizes that rice banks, pig raising funds, and village shops all are methods to mobilize village savings. Savings activities seem appropriate for small farmers for several reasons. First, there is clearly a strong need for funds at the village level. Rates of return to agricultural activities are quite high and small farmers have difficulty gaining access to banks. Second, savings activities require group cooperation. Individual farmers have difficulty accumulating large sums on their own. Group efforts improve discipline and quickly raise funds that can be used for loans. In contrast, most production activities, such as live stock raising are done on a household basis and thus not suitable for group activities. For example, cooperation on raising pigs and chickens generally meant cooperation on loans to buy animals or to buy feed.

Failed Groups

Activities of failed groups and reasons given for failure are as follows:

Table 3
Activities of Failed Groups

Activity of Group	Number of Groups	Percentage
Savings group	4	27%
Chicken raising	3	20
Vegetable growing	3	20
Loan group	2	13
Sheep & rabbit raising	1	7
Fish raising	1	7
Rubber	1	7
Total	15	100

At this point, several observations can be made. First, several groups that presented themselves as SFDP groups did not qualify as sustainable small farmer groups according to the four part definition given above. For example, in Tanew village, Nakhon Sawan Province, group members only agreed to sell their vegetables together in order to get a better market price. This group does not have regular meetings (although members do consult with each other on price) nor do they have any formal rules or organization. Similarly, in Nonchard village and Mandair village, Khon Kaen Province small farmers formed two groups for the purpose of receiving loans from the Bank of Agriculture and Agricultural Cooperatives (BAAC). While these groups were begun as part of the Small Farmer Development Program and held regular meetings, the BAAC imposed all group rules and record keeping on the group.

Second, some of the activities chosen as group activities were not conducive to group formation and showed a high degree of failure. For example, livestock raising itself does not foster group interaction. Each household raises its own animals and provides the animals with food and care. In groups that successfully raised livestock, group members did not cooperate to raise animals but to mobilize funds for agricultural or livestock production. For example, chicken raising proved to be particularly unsuitable as a group activity. First, group members normally confined cooperation to vaccination of animals. Such vaccination prevents diseases from spreading from one household to the next. As each household raised its own chickens, groups did not require formal structures and groups did not meet regularly. Second, despite vaccination, chickens still tended to catch diseases and die. A similar situation occurred in the village raising rabbits and sheep. Thus, chicken raising and other livestock production was not a suitable activity for small farmers' groups.

A related factor in small farmer group failure was environmental problems. For example, several group activities in Khon Kaen, Chiang Mai, and Nakhon Sawan provinces fell apart after droughts. Similarly, in the southern province of Songkla, groups had to abandon group aquacultural activities after salt water from the sea leached into their fresh water ponds and killed the fish. Arguably, environmental problems should not destroy a well organized small farmer group if the group has strong cohesiveness. However, as some of these environmental problems occurred in the first two to three years of the Small Farmer Development Program, they came at a crucial stage in group formation and thus caused some groups to collapse.

Third, lack of adequate record keeping skills and literacy caused problems in several of the poorest groups. The hill tribe village of Janu in Chiang Mai Province and the Thai village of Kudtuaman in Nakhon Sawan Province both reported that the group treasurer absconded with group funds causing the collapse of those groups. In Janu village, the group's treasurer was the only person in the village literate enough to keep the group's records. In Kudtuaman village also, lack of literacy prevented group members from periodically examining the group's records.

Fourth, members who needed to work as wage laborers encountered particular difficulties participating in group activities. In Wang Saithong village of Nakhon Sawan province, five of fifteen small farmers worked together to raise chickens. The other ten small farmers could not participate because they were engaged in wage labor and had no extra free time. After two years, the group collapsed for two reasons: first, a storm destroyed their chicken pen and second, two of the participating small farmers had to migrate in search of work. At the time this researcher visited Wang Saithong, only three small farmers were available for interviews. The rest had gone to Bangkok in search of work. The three small farmers that were available had just returned to harvest their crop and were planning to return to Bangkok to work after the harvesting was completed. Of the 15 SFDP groups still operating, eight or 53 percent stated that they wanted to involve wage laborers in their group activities but could not because the wage laborers needed to work.

Wage laborers encountered two major difficulties participating in SFDP groups. First, in order to participate in group activities such as borrowing funds to plant crops, wage laborers must stop day labor to plant crops, and tend to them during the growing season. During this time, these individuals have no income since they have stopped working in the labor market. Since these individuals are usually the poorest members of the community and need daily wages to survive from day-to-day, participating in group activities is very difficult. Second, wage laborers normally have to migrate in search of work. As a result, they are not present in the village to take part in community or SFDP group activities.

Finally, conflicts within SFDP groups contributed to the failure of SFDP groups. However, given the reluctance of Thai's to admit intra-group conflict to village outsiders, social tensions are probably under reported. In only one village (Klongnong in Songkla province) was intra-group conflict given as the cause of group failure. In this case, villagers organized a savings group and a village shop. However, some group members refused to abide by the rules governing the return of loans from the savings group. Disputes over interest due on overdue loans caused this group to collapse. Similarly, the SFDP shop competed with a private village shop owned by a relative of an SFDP member. This member began to complain of inaccurate accounting when the SFDP shop began to undercut the prices of the private shop. As a consequence the SFDP group running the village shop also collapsed.

2.5 Group Structure

Composition

The structure of SFDP groups is similar to the structure of other traditional Thai community groups. Typically, members of a small farmers group select five to seven members to serve as a governing committee. Committees usually have a chairperson, vice-chairperson, secretary, treasurer, and one or two community relations officers. Community relations officers carry information between the members of the committee and the members of the group. In the case of loans, community relations officers make certain that members use loans for the intended purpose. Small farmer groups often select women as community relations officers because they believe women are better at communicating between members of the group.

Selection of Leaders

Typically, small farmer groups choose leaders by consensus or by vote of the members at group meetings. Small farmer groups hold such elections once each year. It is not unusual for committee members to hold the same position for several years. Most leaders complain that serving on the committee is burdensome but agree to continue to carry out their committee functions out of obligation to the group. Small farmer groups choose leaders on the basis of past leadership, by virtue of hard work on a project, or because of special skills such as being able to communicate with members well or being able to keep accurate records.

2.6 Level of Organization - Rules and Structure

Degree of organization varied greatly from group to group. As noted above, some groups were not actually self-organized or self-sustaining. Thus, some farmers who claimed to be members of a group merely bought or sold products together to get a better price for their goods. Other groups had a highly developed organization that evolved over several years. In general, level of organization was quite high. The committees of SFDP groups usually organized the group's activities, formulated a set of rules to govern relations among members, and kept group records. In some cases, a group created very formal rules that were posted in public areas or at group meetings. In other cases, a group created informal rules. The complexity of rules tended to vary with the type of group activity. Thus, those groups which engaged in savings groups or village shops created very formal rules and maintained careful records. Those groups engaged in sericulture, livestock raising, or joint irrigation created relatively informal rules.

2.7 Participation

The FAO Peoples Participation Program aims to improve the welfare of small farmers by encouraging them to participate in their own development. In this way small farmers gain confidence, take a more active role in development, and feel that development projects really answer their needs. In many ways the SFDP achieved these results. Thus, after taking part in the SFDP, several farmers stated that the SFDP made them feel that they were important and that the government cared about them. Implicit in the PPP approach is the idea that farmers' economic and social progress depends upon their attitudes towards development and that participation in development fosters the attitudes and self-confidence that allow individuals to help themselves.

Participation in SFDP groups occurs at two levels, formal and informal. At the formal level, individuals participate through attendance at group meetings, service as committee members, and work with other members on group activities. The degree of formal participation varies greatly from person to person. Some members, generally those on the decision-making committee, demonstrate a high degree of participation. Other members, particularly the poorest, demonstrate a limited degree of participation. They only attend group meetings (held several times a year) and engage in group activities. Thus, formal participation in group decisions can be quite limited for some members of SFDP groups.

At the informal level, however, participation appears to be quite high. Members of SFDP groups participated in group decision making by talking with other members and group leaders informally. The importance of informal participation should not be underestimated. Most Thai farmers live in small communities where people know each other and individuals can easily talk to their neighbors about issues of common concern. In addition, the importance of informal participation can be seen in the weight attached to the role of community relations officers. All successful SFDP groups have at least one and often several community relations officers. These individuals not only relay information from committees to members but also communicate members views back to the committees. Taken as a whole, the degree of informal participation for all SFDP members is quite high.

It is also important to note the influence of social norms on participation in SFDP groups. First, SFDP groups do not operate differently from other groups in Thai society. Thai farmers adopt conventional Thai organizational structures when forming SFDP groups. This means that group members understand their roles at the beginning of an SFDP project. In addition, conventional Thai groups can be fairly responsive to group participation in decision making thus making success more likely. This may not occur in other countries. Indeed, even in southern Thailand group participation is more problematic due to larger income disparities between group members and religious divisions between Buddhists and Muslims. As a result, SFDP groups have been less successful in southern Thailand.

To summarize:

· formal participation in SFDP groups varies from individual to individual. Other than engaging in group activities, poor farmers often do not show a great deal of formal participation.

· almost all members of SFDP groups show a high degree of informal participation by speaking with other group members.

· community relations officers play a key role in communicating information within SFDP groups and fostering individual participation.

· SFDP groups are organized along the lines of conventional Thai groups. As a result, SFDP success in encouraging participation may not be readily transferable to other countries where social norms are not as conducive to participation by small farmers.

2.8 Participatory Monitoring and On-Going Evaluation

Participatory Monitoring and On-going Evaluation (PMOE) provides a way for participants to become involved in their own development. As explained by Alexandra Stephens, FAO Home Economics and Program Officer, “Participatory monitoring and evaluation serves a dual purpose. It is a management tool which enables people to improve their efficiency and effectiveness. It is also an educational process in which participants increase awareness and understanding of the various factors which affect them, thereby increasing their control over the development process. It is a process within a system which allows the beneficiaries to continuously share in assessing their own progress, and periodically evaluate themselves to learn from past mistakes.”⁹ Thus, PMOE should encourage bottom-up participation and not just serve as a way for government officials to monitor group activities.

⁹ Alexandra Stephens. Participatory Monitoring and On-going Evaluation: Handbook for Training field Workers. Craftsman Press: 1990. p. 10.

Participatory monitoring and on-going evaluation (PMOE) has until now not come fully off the ground. Monitoring is still mainly viewed as a management tool to control the work of the field staff, rather than a help to this field staff to assess jointly with beneficiaries their own accomplishments. A few experiments with 'Participatory and on-going evaluation in rural development' specially designed by Ms. A. Stephens for SFDP use have been tried out in a number of villages. To this useful system, could be added the making of 1 or 2 case-histories (1 page) of the formation of a specific group - success and/or failure - per GO. Altogether this would supply insight into how groups are actually developing, something that has been missing until now.¹⁰

¹⁰ Gerrit Huizer. Report on Backstopping Mission. 1987. p. 10.

At the national level, staff of the DOAE were trained several times in the techniques of PMOE. The DOAE arranged for Ms. Stephens to carry out a training session for DOAE staff in January of 1988. However, DOAE officials at the sub-district level found themselves so busy trying to Organize SFDP groups and implementing other agricultural programs that PMOE never really got off the ground. As with the credit aspect of the SFDP, PMOE seemed to suffer from lack of an individual to push for greater implementation of PMOE.

2.9 Linkages

Although the Terminal Report of SFDP in Thailand (1990) reported 52 inter-group associations, the SFDP groups interviewed for this study reported few linkages with other groups. During interviews, groups were asked if they had contact with small farmer groups in other villages, Thai or foreign NGOs, government development projects, or the government run agricultural cooperatives. Most groups reported few outside linkages with any of these institutions. On the other hand, almost all villages reported some contact with the Bank for Agriculture and Agricultural Cooperatives or government run Agricultural Cooperatives which supply credit. However, many of the small farmers in SFDP groups reported that their members were ineligible for BAAC loans due to lack of suitable collateral. In addition, small farmers often viewed BAAC application procedures as too troublesome and therefore not worth the effort involved.

Table 4
Percentage of SFDP Groups Interviewed that Reported Contact with Other Organizations

Type of Organization	percentage of groups reporting links
BAAC	26%11
Foreign NGOs	17
Thai NGOs	7
Universities	7
Thai Government Projects	3
Groups in Other Villages	3
Agricultural Cooperatives	0

¹¹ 76% of the 30 SFDP villages visited reported households taking BAAC loans. 17% of villages reported households taking loans from government run agricultural cooperatives. The number of group members taking loans was lower.

In addition, groups were asked how often they had contact with government officials. Government departments that work at the sub-district (Tambon) level include the Department of the Interior, Department of Education, Department of Health, and Department of Agricultural Extension. Results indicate relatively infrequent contact with local government officials although farmers have much more contact with the Department of Agricultural Extension than with any other government agency. (In fact, this is one reason why the Thai government chose the DOAE to implement the SFDP). This data can be summarized as follows:

Table 5
Frequency of SFDP Group Contact with Government Officials

Type of Official	Ave. Contacts/Year
Department of Agricultural Extension - Ministry of Agriculture and Cooperatives	20
Community Development - Interior Ministry	6
Health Worker - Ministry of Health	6
Non-formal Education - Ministry of Education	2

2.10 The Role of Women

The Small Farmer Development Program did not explicitly address the problems of women and they are not mentioned in the objectives of the project. As a result, agricultural extension workers made no effort to treat the problems of women separately from the problems of small farmers generally. One can make several observations, however. First, most small farmers groups contain both men and women. For example, of the 15 active SFDP groups at the time of this study, 70% had both male and female members, 23% were composed of only men while 7% were composed of only women. Second, Thais view certain activities as women's activities and women ran groups formed around these activities. Third, small farmer groups often elect women to leadership positions. Most active SFDP groups have at least one woman on the committee that oversees group activities. Women often serve as group relations officers who communicate group committee decisions to group members. Finally, most of the sub-district agricultural extension workers in Thailand are men. According to an official in the Department of Agricultural Extension, women make up only 13 percent of all sub-district agricultural extension workers.

The situation of women in relation to the Small Farmer Development Program can be further elucidated by considering certain aspects of Thailand's history and culture. A consultant for the SFPP, Patchanee Natpracha notes, “women have traditionally been seen in Thai society as home makers, taking care of children, men and the elderly and also of the family purse. Men have been seen as the 'providers', the head of the family, and the protectors of the nation.... [Thus] at the village level, only 0.4 percent of elected village heads are women, while at the national level women have never exceeded 3.5 percent of the members of the House of Representatives.”¹²

¹² Patchanee Natpracha. A Case Study on the Effectiveness of Women Extension Workers for Farm Women. FAO, 1989.

Table 6
Women's Participation in Agriculture, derived from a report of the Department of Agricultural Extension, Ministry of Agriculture and Cooperatives, 1987

Activity	Percent of work Done by Women
Rice Cultivation	65%
Field Crop Cultivation	50
Horticulture	50
Vegetables and Home Gardening	100
Sericulture	100
Soil Improvement	80
Plant Protection	50
Farm Management	70
Harvesting	50
Food Preservation and Processing	100
Animal Raising	50
Inland Fisheries	90

Source: (Dulyapach, 1985)

Average monthly wages both in the farm and non-farm sectors are lower for women. In the private sector, women's average wage is about two-thirds that of men, while in Government, with equal pay policies, women are concentrated in the lower echelons where average salaries are less. Unemployment rates are higher for females in the current labor force in both rural and urban areas. Education is seen as the major determinant of modern sector employment in Thailand, and women's comparative lack of education is a contributing factor to their low wages, poor opportunities for advancement, and lack of skills and knowledge.¹³

¹³ Patchanee Natpracha. A Case Study on the Effectiveness of Women Extension Workers for Farm Women. FAO, 1989.

2.11 Savings Groups

Small Farmers complained that obtaining official loans through the Bank of Agriculture and Agricultural Cooperatives (BAAC) was difficult. Branches of the BAAC were hard to reach and small farmers felt that the application procedure was too difficult. Also, before 1988 the BAAC did not approve loans without physical collateral. Since many small farmers do not own land, they found it impossible to borrow money from the bank. Thus, many small farmers found it easier to obtain loans from the local money lender rather than from the BAAC even though the money lender's interest rates were higher.

Due to the difficulty qualifying for commercial loans, a popular activity of SFDP groups was the formation of savings groups for the purpose of accumulating and securing better access to capital. Of the 15 active SFDP groups 6 (40%) engaged in savings activities. These savings groups loaned accumulated funds to group members for various productive activities. Most savings groups required their members to deposit 10-30 Baht per month on a specified day each month. Savings could then be lent out to members of the group for productive activities. Borrowers needed to obtain the signatures of one or two guarantors who would pay back the loan if the borrower defaulted. Normally borrowers signed a contract with the savings group which clarified the terms of the loan. Savings groups usually lent their funds at rates of between two and four percent per month for a period of 3-6 months. Loans were used for inputs (fertilizer and seed) for agricultural production (rice, mushrooms) or for livestock production (chickens, pigs, and cattle). Many savings groups wanted to raise enough capital for a community project (such as a meeting hall) or to increase the scale of production (for example, many farmers raising pigs wanted to raise cattle which are easier to feed and command higher prices).

However, savings groups were not the only method used to mobilize savings. Small farmers created rice banks, livestock funds, and village shops to raise funds and put members savings to work. In the process even greater sums of money could be raised for loans or increased productive activities. For example, small farmer groups usually used the income from village shops to purchase a wider range of goods or otherwise improve the shop. In this way, village shops provided a new method to increase group savings and mobilize capital for productive activities. If rice banks, livestock funds, and village shops are considered forms of saving then approximately 87 percent of successful SFDP groups engaged in some form of savings activity.

2.12 Credit

The initial SFDP proposal included a plan for a guarantee-cum-risk fund of US$ 40,000 for income generating activities. Due to difficulties finding a Thai financial institution willing to participate in the guarantee-cum-risk fund, this amount was later reduced to US$ 12,000. However, during the course of the SFDP, the credit component of the project was never implemented. Instead, the funds set aside for this purpose were used for additional training of DOAE staff and to cover overexpenditures exceeding the amounts given in the allotment allocation.

Initial attempts to establish credit facilities were unsuccessful. There appear to be several reasons for this failure. First, the FAO was unable to obtain an acceptable letter of agreement from the Bank for Agriculture and Agricultural Cooperatives. On February 10, 1986 FAO headquarters in Rome reported that the draft letter of agreement dated December 1985 was not acceptable. The problems included a letter of agreement that was a) tripartite instead of bilateral, b) not explicit regarding the operation of the fund or group liability mechanisms, c) did not link credit with savings, and d) contained unclear language subject to misinterpretation.

Second, the BAAC proved reluctant to provide a guarantee-cum-risk fund. In April 1986 a senior DOAE official reported to FAO headquarters, “We would like to inform you of an agreement with the bank on guarantee-cum-risk fund that the bank is seemingly unwilling to work on this matter. It prefers granting credit to farmers individually but not in kind of group and favors revolving fund rather than guarantee cum risk fund. If possible we would like to request for extension and modification of guarantee cum risk fund to be applied as revolving fund with another bank from now on. More details are to be specified as soon as we receive official rejection from the bank.”¹⁴ At this point, the credit aspect of the SFDP took a back seat as DOAE and FAO officials concentrated on the major task of implementing the SFDP at the village level.

¹⁴ Note from Dr. Pote to Dr. Reynolds, April 1986.

However, the Revolving Loan Fund was never set up. This occurred for two reasons. First, the SFDP was due to terminate in December 1988. There was no point in setting up a revolving loan fund for a project that was about to terminate. Second, the funds set aside in the original Plan of Action had already been used for training purposes. In addition, given the fact that December 1988 expenditures exceeded the budget, not enough SFDP project funds remained for a US$ 25,000 capitalization.

Thus, there are several explanations for why the credit aspect of the SFDP was not implemented. First, the Bank of Agriculture and Agricultural Cooperatives was reluctant to participate in the original guarantee-cum-risk fund. The bank complained of large overhead costs for individual loans at the sub-district level. In addition, the BAAC was reluctant to loan money to farmers without physical collateral. Since many SFDP groups were composed of small farmers with little or no land, the BAAC was wary of lending to them. This situation only changed in 1988. With the end of the prototype SFDP project, the National Economic and Social Planning Board (NESPB) approved nation-wide replication of the People's Participation approach. At this point in time the BAAC changed its policies and began to lend to groups on the basis of group liability. Thus, while the SFDP did not contain a Revolving Loan Fund based on group liability, after 1988 the BAAC began to loan to non-SFDP farmer groups on the basis of group liability. In this way, many small farmers were able to gain access to credit even though the SFDP did not formally integrate such credit in its Plan of Action.

Second, it appears that the credit component of the SFDP was overlooked by both the DOAE and RAPA staff while they concentrated their efforts on creating small farmer groups at the sub-district level. The presence of a designated individual in the FAO RAPA office to take responsibility for the credit component of the Small Farmer Development Program might have helped to prevent the credit fund from being overlooked.

In conclusion, the FAO should push harder for credit schemes to accompany the PPP projects. Small Farmers clearly need credit as a supplement to income generating activities. In addition, both the small farmer groups and DOAE officers complained that the DOAE did not give them enough monetary support. Thus, small farmers did not have the capital to initiate and sustain many income generating activities.

Finally, the following points should be made regarding provision of credit for small farmer projects:

1) Rates of return to agricultural activities are high. Small farmer groups who mobilized savings and loaned money to members charged interest rates of 24 to 48 percent per year. That farmers are willing to borrow funds at these rates shows the high rates of return from agricultural activities.

2) Small farmers often use savings funds in emergencies to help the poorest or most affected members of the village community. Thus, loans offer some protection to the members of the community who need it most.

3) Small farmers have difficulty gaining access to banks. Many small farmers commented on the troublesome process of obtaining bank loans. Farmers indicated they would rather do with out loans or borrow money from village money lenders despite the high rates of interest rather than borrow from the bank. Many small farmers think it is too difficult to gain access to the BAAC.

4) Some SFDP groups collapsed due to lack of financial support. Small farmers, sub-district officers, RAPA staff, and SFPP consultants all indicated that some groups failed due to lack of promised credit. In these cases small farmers needed the loans to get a project off the ground. Failing to receive promised loans, they quickly became disheartened. Thus, lack of access to credit caused these groups to fail.