Grape growth brings prosperity

 

Beyond microfinance: supporting rural communities by financing small and medium sized enterprises

In Armenia, ECLOF focuses not only on assisting poor farmers to increase their income but also on financing small and medium sized enterprises that specialise in processing and marketing what farmers grow, because these businesses can help farmers to increase production and the price of their products. One winemaking co-operative supported by Armenian ECLOF (ARM ECLOF) works in this way. The result has been a substantial improvement in the lives of many farming families.

Getnatoun Ltd operates its winemaking factory in the south of Armenia, in the province of Vayots Dzor. The region has three small towns including Yeghegnadzor, which is the region's administrative centre and is on the Yerevan to Goris highway, 122 km from Yerevan, the capital of Armenia.

Otherwise, the Vayots Dzor province is predominantly rural; out of a population of 55,800, there are 35,000 villagers, who work in wineries, jewellery workshops, precious stone mining, carpet making and mineral water production plants; these businesses together represent around 80% of the region’s agro-industrial production.

Agriculturally, the region is best known for its wine and fruit, which are of excellent quality. The abundance of sun, high mountainous climate and clean water give the grapes used for winemaking a special taste and aroma Other agricultural activities include animal husbandry for meat, milk and cheese production, especially goat's cheese, and arable cultivation.

After land privatisation in 1991, many processing factories inherited from the former Soviet Union collapsed. This posed serious marketing problems for small-scale grape growers and high unemployment in the local economy. Many vineyards were destroyed, and agro-based production, including for milk, meat and wool, which was the backbone of the economy, suffered incredible losses. Although the market economy has since picked up with a number of new small and larger businesses opening, sources of finance are a major constraint, particularly for micro and small enterprises.

Five people, all related to each other, founded the Getnatoun co-operative in 1988 for buying, processing, packaging and canning fruits and vegetables. Initially, it specialised in the production of dried fruits. In 1996, the co-operative began a bakery but as more and more bakeries opened in the area competition became fierce and the co-operative's income plummeted. It's bakery needed to expand if it were to survive. However, funds for doing this were not available and so the group decided to do a trial run in wine making because friends had commented favourably on the wine the family already made for itself at home.

The trial worked and then Getnatoun needed finance to go into commercial production. No Armenian banks were interested and the group became dispirited. Members decided to go to Etchmiadzin, "Holy Etchmiadzin" as it is called because it is the mother see of the Armenian Orthodox Church, to pray about their situation. Whilst in the town, they met the director of ECLOF, Tigran Hovhannissian, to whom they told their story and explained their plans. After hearing how ECLOF works, and going through all the necessary application procedures, Getnatoun received its first loan for US$5,000 in November 2000.

From then on, Getnatoun's production has risen steadily. In one year, production doubled. In 2003, the co-operative bought 90 tons of grapes from 30 farms spread across the region. The following year the figures increased to 200 tons of grapes from around 60 farms. This year, Getnatoun has agreements to buy from 91 grape growers and its workforce has risen from the original five members to 17 workers.

Nearly 90% of the farming community in the region live from grape growing, and farming families generally have a low standard of living. This is due to the fact that wine producers in the area buy grapes at a very low price. Grape growers therefore receive insufficient income to cover all their production and living costs. Getnatoun Ltd operates differently. It pays a fair price for grapes, and provides farmers with fuel, pesticides and fertilisers in advance as a prepayment against the harvested grapes. During the growing season, members of Getnatoun visit the vineyards in order to see how things are going. If disease is found on any vines, Getnatoun arranges for specialists to visit the growers to advise them on how to deal with the problem. At harvest time, the co-operative transports all the grapes grown to the processing plant at Getnatoun's expense, in order to keep farmers' costs to a minimum. Once the grapes are weighed, farmers immediately receive their payments. Not surprisingly, increasing numbers of grape growers now wish to sell their crops to Getnatoun Ltd, and the enterprise itself continues to grow.

New wine making vats at Getnatoun Ltd for the co-operative's increased production..

 

Hovhannes Hovhannissian's story

I was born in 1966. I live in Yeghegnadzor in Armenia and I am married. My family consists of six people: my parents, my wife and our children. We have a daughter aged 15 and a son of 13.

I own a 6,800 sq. metre plot of land, which I use to grow a type of grape known as Areni. All my family works in the vineyard. Last year, we harvested 2.6 tons of grapes and delivered 2.3 tons to Getnatoun Ltd, who paid for them immediately. I used the money to pay for various family expenses, including buying two calves to add to our two milking cows. I also bought medicines for my parents and winter clothes for the children. With what I hope to receive this year for my grapes, I plan to repair my house; I have already bought new doors, windows and paint. The only income my family has comes from our grapes and the milk from our cows. I have been involved with Getnatoun for the last five years. The co-operative has never been late in paying me, and I do not have any transport expenses as Getnatoun collects my harvest from the vineyard. In addition, Getnatoun helps us with pesticides and diesel.

Garnik Matevosyan and his wife Sveta tend their wines during spring. Later, they will sell their grapes to Getnatoun Ltd. Mr Matevosyan says of the Armenian co-operative, "This organization is honest and works for the mutual benefit of itself and growers like me. The result is that farmers and their families can work and live more pleasantly."