Reflections from my learning journey to Kenya to meet with staff from two social businesses working in the agricultural sector: One Acre Fund and Njabini, Inc.
After holding interviews with 9 groups, I felt closer to understanding the farmers we are working with and what they want from a lender. The next step was to learn from the experts. I still had so many technical questions unanswered and wanted to get advice on how to structure a successful and lasting program. This meant jumping on a bus to cross the border to Kenya, where I was lucky enough to meet with staff from two organizations: One Acre Fund and Njabini, Inc.
At the One Acre Fund (OAF) headquarters in Bungoma, Kenya, I met with OAF Program Associates Kiette Tucker and Kalie Gold, as well as Kiva fellow Rory Winn (placed at OAF). Each shared their insight into the logistics and principles that make OAF such an efficient, scalable, and impactful organization serving small-scale farmers.
I had seen the numbers and heard success stories – and once I witnessed their tight and fast-growing operations in person I became a firm believer that One Acre Fund (OAF) is an exceptional leader in agricultural financial services in Africa. However, saying “financial” services is misleading. Their unique model does not include any monetary loans. Rather, they offer packages on credit, which they distribute before harvest season, complete with seeds, fertilizer, and key training. OAF has proven their model to consistently double farmers’ income per acre of land planted.
During weekly group meetings, OAF field officers track farmer repayments and provide training on how to utilize the proper farming techniques that will yield the optimum output from the seeds and fertilizers they purchased. A marked difference between traditional microfinance and the OAF model is that OAF provides their packages as a soft loan – meaning there is no set repayment amount due each week, just a suggested schedule. The firm deadline for farmers to repay the amount in full is not until about 2 months after the harvest.
Njabini – a small town in the “breadbasket of Kenya” – is also the name of the social business, Njabini, Inc., co-founded three years ago by Mike Behan, Erin O’Malley, and Kenyan native Tom Mwangi. Njabini, Inc. employs disadvantaged and disabled mothers who design handmade scarves, bags, hats, and jewelry that are exported for sale in the USA. The team has spent over a year researching and implementing a new initiative, Farmers Together (FT), which will help families in the area increase their incomes by offering “service bundles” to farmers. The bundle will include market linkage, high quality farming inputs, training, and will have a flexible repayment structure, much like the OAF model.
Despite the difference in scale, I took away similar insight from both One Acre Fund and Farmers Together.
The Importance of Timing
Both FT and OAF have strictly set monthly schedules for their operations to ensure the success of their farmers. For OAF, this means in January farmers sign Constitutions and prepay for their packages (about $12). In February, seeds and fertilizers are delivered. Harvesting occurs in July and September 15th is the final deadline when their packages must be paid in full. This firm structure keeps OAF efficient and reliable.
Compared to where OAF operates, more constant rainfall in central Kenya where FT works allows farmers to plant at different times throughout the year. However, this is problematic because there are months that are ideal for higher farming yields, coupled with the complexity of lending to farmers at all different times. This means that FT had to create a schedule for farmers to follow so they are able to disburse in-kind loans (seeds, manure, fertilizers) to all of their farmers at the correct and same time. Creating this schedule and convincing farmers to switch to it is what co-founder Mike Behan described as his biggest challenge.
The challenge is similar when lending cash, which FT has done in the past. When doing so, Mike warned that timing the loan disbursement and repayment in accordance with the harvest is difficult when farmers are planting different crops. However, as we have found, receiving the loans before the harvest is the main priority for our farmers in Uganda. He explained that, “ideally farmer families are not holding on to that cash for too long.” He emphasized that when a large sum of money is sitting in the bank, farmers might be tempted to pull from it for food, school fees, or other emergencies. This should be avoided entirely. “You don’t want farmers to miss their planting season and have to wait until the next.” Even when the farmers are able to pay back the loan, it matters what they spent it on. They must use the loan money to make a change in their farming practice. For example, by purchasing a better seed or using the proper amount of fertilizer, they can expect that this year’s harvest will be more profitable. If the loan is not used to improve their farming yield and income, how will they be able to pay back interest and increase their standard of living?
The Importance of Groups and Empowering the Local Community
We continued to recognize that the advantage of our project with URCSF is that there is already trust and solidarity within each group. Farmers who will be enrolling in the lending program we are designing have been receiving training and assistance from URCSF and Ugandan founder Peter Luswata for up to five years. Yet our expert interviews stressed that each groups’ objectives, expectations, and commitments need to be put down in writing.
FT and OAF both require groups to agree to a Group Constitution, where each borrower signs a contract that clearly states repayment policies and deadlines. However, it the Constitution is also where the participants can finalize other decisions together. This includes setting meeting days and times, group savings schemes, and agreeing on fines for not attending a meeting or training session. Furthermore, they agree on penalties for not paying a certain amount of their loan by specific dates. A Group Constitution might read, “If I can’t pay on time, I will sell one of my sheep to pay this amount by this date.” OAF emphasized the advantage of encouraging more people to be involved in decision making and decentralizing as much as possible to the group level. For this reason, Group Constitutions also define the roles of group officials – as some duties of greater responsibility are delegated to elected chairpersons, treasurers, or secretaries.
OAF staff Kalie Gold and Kiette Tucker pointed out that the community-centered staffing structure and weekly group meetings create a constant feedback loop. In addition, this creates a natural check system as an incentive for farmers to remain on target. Constant communication among group members, group leaders, and field officers is critical to ensure that money is being spent properly. In fact, this system functions so well that over 80% of OAF farmers have completely repaid their loans even before the harvest!
The Need to Set Expectations
A staff member told me, “One of the biggest successes of One Acre Fund is when we promise to deliver something, it gets delivered, and the farmers really respond to that.” Besides reliable deliveries, OAF further builds trust by employing local residents in their own village, who speak the local language. Both organizations devote significant effort to make certain their farmers understand the benefits of what they are purchasing and will be able to take full advantage of the program. Mike added that centering an organization’s practices around trust, dependability, and clear communication is key in creating a program on which farmers can rely and find value.
For this stage of the project we were focused on researching best practices and learning from the experts who have experience working in the agricultural services sector of East Africa. The aim was to learn not just from their experiences, but also to get their opinions and advice for going forward with our project. This meant intensive interviews with key staff as well as observing their field operations and sitting in on meetings. The two organizations we met with were picked very specifically due to the nature of the work they do and the stage they are at right now. One Acre Fund was chosen for their known success in providing credit and training to farmers, and Njabini, Inc. because they have just begun a project similar to ours and a comparable size.