BLOG Tags: Microfinance

UN study: Digitization of Kenyan farmer payments helps tackle poverty

May 31, 2017 Category: Microfinance Tags: kenya microfinance

Everline Wakhungu and Mathew Khahmba

Everline Wakhungu and Matthew Khahmba, Kenyan smallholder farmers

May 31st, 2017, Nairobi / New York – A new case study by the United Nations-based Better Than Cash Alliance shows how agriculture nonprofit organization One Acre Fund, in partnership with Citi Inclusive Finance, successfully digitized loan repayments for farmers in Kenya. This move significantly boosted transparency and efficiency, driving economic opportunity and financial inclusion for thousands of smallholder farmers and their families.

One Acre Fund, supported by Citi, enabled farmers to easily make loan repayments via mobile money instead of cash, reducing the uncertainty, inefficiency, insecurity and high costs previously caused by cash transactions.

One Acre Fund can now reach more farmers with greater reliability, and staff can spend almost half as much time collecting payments in cash, using that extra time to help farmers increase their incomes through training and educational programs. With One Acre Fund’s package of services, including training and inputs like seed and fertilizer, the average farmer participating in the program earned nearly 50 percent more than peer farmers who do not participate.

Study findings include:

  • Increased participant satisfaction due to transparency and convenience.
  • Eighty-five percent decreased instances of repayment fraud.
  • Reduced processing time for each repayment from 12-16 days to 2-4 days; farmers now know immediately when their payment is received, eliminating the worry about whether it arrived.
  • Eighty percent decrease in repayment processing costs.
  • Forty-six percent of time reduced for staff working on collections, allowing for more time helping farmers improve agricultural practices.
  • Women farmers benefited especially, feeling safer about payment deliveries.

“Mobile repayments have allowed us to increase our efficiency and provide better service to farmers,” said Mike Warmington, the Director of Microfinance Partnerships at One Acre Fund. “We’re excited to be working at the forefront of this technology in the smallholder agriculture lending sector. In our experience, farmers were empowered to thrive in these communities. Clients receive immediate confirmation of payments as they happen, enabling them to better manage their businesses and family finances.”

“Citi’s footprint, track record in inclusive finance and transaction banking capabilities enable us to provide global support to leading social enterprises like One Acre Fund,” said Bob Annibale, Global Director, Citi Inclusive Finance. “Among other benefits, digitization enables efficiency and security, and drives innovative and inclusive business models. Citi is proud to play a part in enabling One Acre Fund and other organizations like them to improve the livelihoods of farming communities.”

One Acre Fund is an example of the significant benefits and impact that digital payments and inclusive digital financial infrastructure, as developed in Kenya, can bring to agricultural value chains, contributing to a more sustainable and productive agriculture sector, a cornerstone of the UN’s Sustainable Development Goals (SDG). These learnings can easily translate to poor farming communities in other countries and One Acre Fund is working on plans to expand in Rwanda, Tanzania, and Zambia in the future.

“For companies and nonprofit organizations who want to work in rural Africa, this success story is a must-read,” said Oswell Kahonde, Africa Regional Lead at the Better Than Cash Alliance. “Digital payments are essential to building sustainable business models and creating long-term impact. By enabling smallholder farmers to make and receive payments digitally, we are creating transparency and accountability which translates to numerous benefits and empowers people to take control of their finances.”

Please click here to download the study

For information & media interviews, please contact:

  • Better Than Cash Alliance: Angela Corbalan, Head of Communications,, (+1) 917 224 9109
  • One Acre Fund: Whitney McFerron, Global Media Relations Lead,
  • Citi: Patricia Tuma, Corporate Communications,

The Case for Farm Finance

Feb 04, 2016 Category: Microfinance Tags: microfinance smallholder sustainability

Maximize your potential and help farmers just like Wilbroda access the tools they need to grow their way out of hunger and poverty. Apply today to join our family of leaders!

When you enter Wilbroda Nafula’s living room in rural western Kenya, you might be surprised to see three solar lamps, all charging cell phones. Wilbroda, a Kenyan farmer and mother of three, doesn’t advertise her business with a sign outside her home. She doesn’t even live close to other shops or at the village center. But word has spread among her neighbors that she has a cell phone charging business, and there is plenty of demand for her services.

“I tell you, in this mobile phone business, I eat well!” says Wilbroda, laughing aloud.

Just four years ago, Wilbroda wasn’t eating well, and neither was her family. Her only source of income was the maize she harvested from a half acre of land, and she was never able to harvest enough maize to feed the family through to the next harvest.

In 2011, she decided to take a seed-and-fertilizer loan to try to improve the production on her land. Along with the loan, she received training on correct agriculture practices, including food storage and market price fluctuations. That year, she produced an excellent harvest, stored enough food to feed her family, and started saving money to replace the roof on her house. By 2013, she had replaced her roof, invested in chickens, and purchased her first solar light. By 2014, she had a calf, a second solar light, and enough money to put her children in private primary school. This year she purchased her third solar light, and she’s planning to expand her poultry business.

With access to microfinance, Wilbroda can support her family through agriculture and her solar lamp business.

Wilbroda is like hundreds of millions of smallholder farmers all over the world, with one critical difference: the agriculture loan she received in 2011 changed the trajectory of her life. She is now part of the tiny percentage of smallholder farmers who have access to finance.

Smallholder farmers are the largest group of people living in poverty, and they are also the most financially excluded. Roughly 70 percent of the world’s poor are farmers, and the majority of them are unbanked. These 500 million farmers are in turn supporting as many as 2.5 billion people. Although most smallholder farmers are struggling to produce enough food, they have the potential to produce dramatically more. The Global Yield Gap and Productivity Atlas, developed by the Daugherty Water for Food Institute at the University of Nebraska and Wageningen University in the Netherlands, estimates that crop yields in Sub-Saharan Africa are 70–90 percent below their potential, the largest yield gap in the world.

Reducing the yield gap in Africa will boost global food production, but it will also have a dramatic effect on the continent’s poverty levels. Agriculture growth has been demonstrated to be as much as 3.2 times more effective than non agriculture growth at reducing extreme poverty in low-income countries.When farmers increase their incomes, they spend it locally. Agrodealers, seamstresses, furniture makers, motorbike drivers, and health workers all benefit. These individuals then spend their increased incomes, perpetuating a cycle of consumption that benefits all actors in the rural economy.

If we seek to end hunger by 2030, as articulated in the Sustainable Development Goals, if we seek to reach global financial inclusion by 2020, or if we seek to make significant gains in economic growth in developing countries, we must target smallholder farmers. They sit at the intersection of our ambitious global food security, financial inclusion, and economic growth targets. If smallholder farmers are able to unlock their potential, they will be a “triple threat,” collectively driving progress on global food security, financial inclusion, and economic growth. If they remain neglected, progress will stall. Given the strategic importance of smallholder farmers, the world should be laser-focused on how to provide them with the tools they need to move from subsistence farming to sustainable livelihoods. Therefore, the single most important tool we can offer them is farm finance.

This blog is an excerpt from The Case for Farm Finance, an article written by Stephanie Hanson for the MIT Innovations Journal's issue on financial inclusion. Click here to read the full piece.

The Best Reads from the Month of Microfinance

Apr 22, 2015 Category: Microfinance Roundup Tags: microfinance momf 2015 smallholder

With the recent publication of six randomized microcredit evaluations from around the world in the January edition of the American Economic Journal:  Applied Economics, diverse actors in the microfinance sector have been weighing in on whether or not microcredit is as impactful as we’ve all thought. While the results of these evaluations seem to show that microcredit alone does not have a transformative impact on poverty, they do illustrate that microcredit can boost financial inclusion for low-income households.

At One Acre Fund, we’ve seen first-hand how access to credit helps smallholder farming households increase their yields and multiply their incomes. Yet we also recognize that when serving rural clients, credit alone is insufficient. It is the combination of several key elements — delivery of loans in the forms of seed and fertilizer directly to farmer villages, along with the provision of agriculture trainings, post-harvest storage support and market facilitation, — that allows farmers to invest in their farms and their futures and grow themselves out of hunger and poverty, permanently.

The microfinance field continues to grow and expand. April has even been designated the official “Month of Microfinance.” Whether you’re a microfinance novice, or have a nuanced understanding of the sector, below is a list of articles and reports (breaking news and existing resources) we think add value to this important, ongoing conversation:

  1. In this new focus note, entitled Early Insights from Financial Diaries of Smallholder Households, Jamie Anderson and Wajiha Ahmed share initial data and information gleaned from CGAP’s Financial Diaries of Smallholder Farmers project. Key takeaway? Smallholder households have financial needs that are unique, complex, and varied across geographies.
  2. Financial inclusion for the young and old! 4 Myths of Ageless Microfinance, by Sonja E. Kelly of Center for Financial Inclusion at Accion, for Month of Microfinance Blog, and this blog by the Center for Financial Inclusion at Accion on MasterCard’s project targeting financial inclusion of youth, discuss financial inclusion challenges and priorities for opposite ends of the age spectrum.
  3. Mobile technologies continue to feature prominently in financial inclusion conversation. In How mobile phones are revolutionizing personal finance in sub-Saharan Africa, Andrew Flowers, digital editor of FiveThirtyEight, discusses the mobile revolution and the democratization of finance across the globe.
  4. In their newly released Global Findex Database 2014, the World Bank reports on the state of financial inclusion around the world. The good news? The number of "unbanked" individuals dropped 20 percent between 2011 and 2014 to 2 billion adults.
  5. In February 2015, One Acre Fund published several original white papers on our online resource library. The papers in the farm finance section offer key learnings on our unique agriculture microfinance model, specifically on our approach to asset financing and flexible repayment.

Did you come across a fantastic microfinance article recently that you think is worth sharing? Let us know via the comments below, or by contacting One Acre Fund on social media.

Responding to the Risks of Farm Finance

This blog was co-authored by Mark Adams, One Acre Fund microfinance partnerships analyst, and Hilda Poulson, One Acre Fund policy analyst, and was originally published by the Seep Network. To read the original piece, click here.

Farmer repayment at One Acre Fund KenyaLike most entrepreneurs, smallholder farmers in rural Africa need financing to invest in and grow their businesses. However, unlike most entrepreneurs, these farmers lack access to the financing they need to make the business of farming productive.

While the agriculture sector in Africa employs 65 percent of the labor force, farmers have surprisingly limited access to credit. Microfinance institutions, many of which focus on serving urban poor, perceive farmers as high risk.  In their assessments, farmer income is irregular and highly susceptible to environmental shocks, and many smallholder farmers have low incomes and low productivity.

After crunching the numbers, most traditional MFIs balk at assuming the increased risks associated with financing farmers. These MFIs should reconsider financing farmers, and deploy strategies to manage those risks. If they do, it will unlock significant market potential.

The Case for Financing Farmers

There is a huge demand for financial services among farmers that is still unaddressed. For example, the total amount of debt financing available to smallholder farmers in the developing world is approximately $9 billion. This amount meets less than 3% of the estimated $450 billion global demand. Additionally, the uniform profession of farmers means that effective solutions are highly replicable and scalable, which is attractive to donors and investors.

Since farmers comprise the largest and poorest group at the bottom of the pyramid, financial tools for farmers also have very high impact potential for MFIs guided by a social mission. Sustained growth in the agriculture sector has proven 2-4 times more effective at reducing poverty and improving livelihoods than growth in other sectors.

If MFIs can mitigate and overcome perceived risks associated with serving farmers, the opportunity—for nonprofits, private sector actors, and governments looking to boost economic growth through agricultural development—is tremendous.

Financing farmers poses risks, but these risks can be mitigated

The unique financial needs of smallholder farmers can mean taking on an increased risk burden for MFIs. Smallholder farmers are highly susceptible to shocks, either from markets or natural disasters. They also tend to be risk-averse and refrain from investing in costly improved inputs, perceiving the risk of crop failure and livelihood loss as too great. Smallholder farmers frequently do not have physical collateral or other sources of income that would help insure the loan.

Yet an increasing number of MFIs, recognizing the market opportunity, are mitigating these risks and finding ways to bring financial services to this market. Some strategies they deploy:

  1. Traditional group lending. Muhammad Yunus’s Grameen Bank pioneered this model, involving the use of social rather than material collateral to hold clients of limited materials means accountable. When loans are made to small groups or cooperatives, peer pressure amongst members ensures payments are made. When an individual is at risk for default, group members agree to voluntarily cover their payments.
  2. Weather index-based insurance. Simpler and less costly than traditional insurance, weather index-based insurance relies on a weather index, most commonly rainfall, to determine payouts. This strategy, deployed by organizations such as MicroEnsure, is best suited for widespread areas affected by similar weather hazards, and where weather is closely correlated to crop yields. Payouts can be made automatically, and a faster payout is mutually beneficial— farmers are more willing to take on risk, and banks are more willing to lend.
  3. Farm yield increases. At One Acre Fund, increasing farm yields is a key component of our microfinance model. As part of their loan package, farmers receive trainings on planting and harvest storage techniques that help them to maximize their post-harvest profits. As a result, farmers who enroll typically experience yield increases of between 50 and 100%. These substantial increases are integrally linked to our 99% loan repayment rate. By dramatically increasing crop yield, farmers have both more food and more profit at the end of the harvest season.

Providing smallholder farmers with credit to invest in their farms isn’t just a good deed, it can also be a good business opportunity. There are risks involved, but there are strategies that can be implemented to reduce risk and to make farm finance a successful product for microfinance institutions.

You're reading this just in time for April's Month of Microfinance! Visit our online library for detailed information on One Acre Fund's agriculture microfinance operations.

Bridging the Microfinance Gap for Smallholder Farmers

This blog was written by Stephanie Hanson, senior vice president of policy and partnerships at One Acre Fund. A version of this blog was originally published by This is Africa, a publication of Financial Times Ltd. Click here to view the original post. 

One Acre Fund farmers repay their loans in Burundi Month of MicrofinanceMicrofinance is widely known for the incredible speed with which it has scaled to reach hundreds of millions of people, and the positive effect it has had in reducing poverty.

However, what many people do not know is that most of these microfinance institutions are located in urban and suburban areas, and they largely target the urban and suburban poor. As a result, the largest group of poor people in the world - smallholder farmers - are largely financially excluded.

While 55 percent of Africa’s population is engaged in agricultural livelihoods, only approximately 1 percent of bank lending across the continent goes to the agricultural sector. In sub-Saharan Africa, 38 percent of adults living in cities report having a formal bank account, compared with only 21 percent of adults living in rural areas.

Smallholder farmers represent two tremendous opportunities: a market opportunity for any financial institution looking to grow their client base, and an impact opportunity for all financial institutions that have a social mission. The total amount of debt financing available to smallholder farmers in the developing world is approximately $9bn. This amount meets less than 3 percent of the estimated total smallholder financing demand, which is calculated to be $450bn globally.

Farmers comprise the largest and poorest group at the bottom of the pyramid, so financial tools for farmers have very high impact potential. Sustained growth in the agriculture sector has proven 2 to 4 times more effective at reducing poverty and improving livelihoods than growth in other sectors. Recent research shows this can be as high as 11 times in sub-Saharan Africa. The uniform profession of farmers also means that providing financial services to farmers is a highly replicable business.

Perceived risk and lack of expertise are the most significant reasons that more banks and microfinance institutions have not yet started offering agriculture finance products. Compared to urban lending, which microfinance institutions are familiar with and have developed expertise in, rural lending feels quite risky. Most banks and microfinance institutions do not have internal expertise on agriculture, and are unsure how to structure loan products that would both meet the needs of farmers and mitigate the risk they take on by lending to them.

Further, operating in rural areas poses infrastructural and logistical challenges. Margins will be lower than when serving urban clients, and financial institutions will have to build out either physical or human infrastructure to reach remote rural areas. Currently, significant distances between bank branches represent a major barrier to rural financial inclusion. For example, in Tanzania, where there are less than 0.5 bank branches per thousand square kilometers, 47 percent of all unbanked persons cite distance from a bank as a primary reason for not having an account.

There is a small but growing movement of financial institutions that have figured out how to overcome these challenges and lend to smallholder farmers. Institutions like Opportunity International, Vision Fund, Microensure, as well as One Acre Fund, all offer products to smallholder farmers that successfully address their financial needs.

The Initiative for Smallholder Finance recently published a briefing on direct-to-smallholder finance in which they note that over 150 finance providers currently offer direct-to-farmer finance. To help facilitate the entry of more financial institutions into the sector, the Consultative Group to Assist the Poor (CGAP) is conducting research to better understand the financial needs of smallholder farm families.

Through our work at One Acre Fund, we have discovered some basic principles that reduce the risk of lending to smallholder farmers, while increasing the income impact that those farmers realise from their loans. We currently serve 200,000 smallholder farmers in East Africa, and have a repayment rate of 98 percent.

We have found that lending to farmers is most effective when we lend seed and fertiliser instead of cash. Providing assets to farmers ensures that the loan is utilised for the intended purpose, and overcomes the challenge of limited access to seed and fertiliser close to the homes of our clients. We also offer a completely flexible repayment schedule to accommodate the irregular cash flow of most smallholder farmers.

Finally, we pair our loans with agriculture trainings, so that farmers can maximise the income impact of the seed and fertiliser that they use. These principles allow our clients to see at least a 50 percent increase in farm income per acre, as well as ensuring that One Acre Fund is repaid.

One Acre Fund is just one of a small number of organisations that has figured out how to successfully lend to smallholder farmers. With a global financing gap of $441bn, we need thousands of financial institutions to step in and start serving this market. Farmers are 70 percent of the world’s poor. Agriculture microfinance is our best tool to significantly reduce global poverty - and it is also a promising business opportunity.

Did you know that April is the Month of Microfinance? Click here to learn more about how microfinance is creating opportunities for the world's poorest.

What to Read on Agriculture Microfinance

This article was originally published on the Financial Access Initiative blog. Click here to view the original post. By Stephanie Hanson and Mike Warmington.

The majority of the world’s poor share one profession: farming. Most of these farmers cultivate less than 10 acres of land, far away from paved roads and with limited access to the improved seed and fertilizer they need to produce good harvests. Most of these farmers also lack access to financial services that could help them buy that seed and fertilizer. If the global microfinance industry seeks to have a long-term impact on global poverty, it must address the needs of smallholder farmers. Most microfinance institutions are focused in urban and peri-urban areas, but a few are starting to offer products specifically targeted at farmers.

We’ve seen fast-growing interest in the farm microfinance sector in the last few years. The books, videos, and papers discussed below helped us understand the market opportunity in farm microfinance, and what needs to happen for the market to take off.

Financing farmers is important

The World Bank estimates that agricultural development is “two to four times more effective in raising incomes among the very poor than growth in other sectors.” Not only is this a high-impact sector, it’s also a large one. Farmers account for more than 30% of the global working-age population, and most of them live in poor countries.

For a vivid portrayal of what happens when smallholder farmers can’t access the resources they need, read The Boy Who Harnessed the Wind. This memoir, written by William Kamkwamba and journalist Bryan Mealer, paints an honest picture of Kamkwamba’s family and their collective anxiety as they struggle to get through a terrible farming season in Malawi. Their “hunger season” that year was not unique. The majority of the country faced the same problem, as did millions of farmers across the region.

What is striking in Kamkwamba’s book is the ripple effect of this problem. Kwamkamba is hungry, so he can’t work a full day in the field and is less productive. At the local market, there are rapid price increases. Through the country, there are rising social tensions, public unrest, and violence.

Fortunately, it’s completely possible for farmers like the Kamkwamba family to significantly increase their agriculture productivity in just one season, creating a ripple effect of income generation throughout rural communities. We’ve experienced firsthand the impact of agriculture development through our work at One Acre Fund. Reading Roger Thurow’s book The Last Hunger Season is the closest thing to spending days out in the field learning from farmers. It follows four Kenyan farmers over the course of a year as they work to increase their incomes and provide for their children (he also speaks passionately on the subject in this TEDx talk). All four farmers are customers of One Acre Fund, which provides them (and 180,000 other smallholder farmers in East Africa) with seed-and-fertilizer loans and training.

Both books illustrate that the challenges faced by smallholder farmers in sub-Saharan Africa are surmountable, and that farm microfinance is essential to catalyzing agriculture development. Perhaps the biggest barrier holding MFIs back from meeting that demand is perceived risk.

Financing farmers poses risk, but it can be mitigated

Agriculture is often perceived as much riskier than other sectors, particularly by financial institutions that lack in-house expertise on agriculture. This lack of understanding leads many MFIs to inflate the risk of farm microfinance. Financing farmers presents risks that vary in both likelihood and severity, but they are identifiable and possible to mitigate effectively.

In a 2005 CGAP paper, Robert Peck Christen and Douglas Pearce outline ten practical strategies that can help reduce the risk of an agricultural finance product. In our experience, the most salient risk-related features they discuss are covariate risk, credit risk, and production risk.

Risk in agricultural lending is often covariate. Weather and crop disease problems can devastate yields, and they generally affect many clients, not just one. The paper proposes diversifying a loan portfolio across geographical areas, crops, and types of livestock. It also suggests pairing loans with index-based insurance to protect against the most extreme cases of weather- or disease-related crop loss.

Loan terms tailored to growing seasons and flexible repayment schedules help manage credit risk. Lenders need to accommodate the “cyclical cash flows and bulky investments” of farmers. Successful models build repayment requirements around the cash needs of farmers without compromising “the essential principle that repayment is expected, regardless of the success or failure” of the farm. For instance, farm microfinance products often have terms that are tailored to the agriculture season and offer flexible repayment schedules instead of strict weekly or monthly payments.

Production risk can be mitigated by bundling lending with access to inputs and training. If a farmer is given a cash loan and uses it to buy low-quality seed or fertilizer, her production will suffer. Lenders can eliminate this risk by bundling loans with access to inputs and training. They can use contractual arrangements with agrodealers and extension workers to guarantee input quality and access to training, or they can provide these services using their own resources and staff.
If financial institutions utilize the strategies above, agriculture risk is manageable.

Farm financing must be bundled with or linked to other services

Examples of successful farm microfinance invariably do more than just provide finance. If a farmer doesn’t know the proper planting technique for a crop, a cash loan is useless. If a farmer produces a great harvest, but can’t store it correctly or sell it for a good price at the market, she can’t generate increased income. Smallholder farmers need access to all parts of the value chain—farm inputs, financing, training, and markets. Successful farm microfinance products address the entire value chain for a smallholder farmer. 

This principle is best articulated by Ugandan grain trader (turned agriculture financier) John Magnay in this Opportunity International white paper. He argues that MFIs must have a “clear understanding that microfinance is just one of the stakeholders within the rural model.” He acknowledges the interdependence of the agriculture model and recommends a two-pronged strategy: monitor household cash flow, and manage the value chain. 

If an MFI takes more control of the value chain, it puts more at stake for the organization, and acts as a strong incentive to “get the approach right.” Magnay recommends linking into agribusiness and providing agriculture trainings to maximize yield. One Acre Fund has found that it’s especially important to provide farmers with high-quality seed and fertilizer.

The channels for delivering this strong control over a value chain vary significantly, and the extent to which a specific MFI controls or partners with others in the value chain will differ. This is a very different way of doing business for most MFIs, and for the farm microfinance sector to grow, MFIs will need to adapt. Are there structures in place to facilitate this?

Farm finance needs to crowd-in key players

There is an enormous market of customers for farm microfinance products, and only a handful of institutions serving them. This Dalberg report sizes the market demand for smallholder agriculture finance at $450 billion, most of which is unmet. To meet even a fraction of this demand, we need lots of MFIs to develop new products and deliver them to their customer bases at scale.

In this presentation, Willy Foote, founder and CEO of Root Capital, speaks about their inspiring approach of “Finance, Advise, Catalyze.” Root Capital is an agriculture finance lender, but they also provide financial training to their clients so that they can grow their businesses. Finally, they seek to grow the entire market for agriculture finance by collaborating with peer organizations. They recently helped launch the Council on Smallholder Agriculture Finance, an alliance of social lending businesses that targets “the missing middle,” businesses that require financing of $25,000-$2 million.

Key players in farm microfinance need to share more knowledge with other practitioners to establish best practices that others can follow. Much like Root Capital is actively trying to crowd-in more competition to the “missing middle,” One Acre Fund seeks to attract more players to farm microfinance, the sector that serves the poorest smallholder farmers in the world. Collaborating with other practitioners, we aim to help MFIs develop farm microfinance products that can address some of the enormous unmet demand in the sector. This is our best bet to spur global agriculture development, and to have a long-term impact on global poverty.

Stephanie Hanson is senior vice president of policy and partnerships at One Acre Fund, and Mike Warmington is microfinance partnerships manager at One Acre Fund.

Fin4Ag Conference Highlights

On July 17th, One Acre Fund participated in the Fin4Ag conference in Nairobi, Kenya. The conference, organized by the Technical Centre for Agricultural and Rural Cooperation, brought together over 500 people from the public, private and civic sectors to discuss ways to improve agricultural finance.

George Osure, Program Director at the Syngenta Foundation, and George Waigi, National Projects Officer at the International Labor Organization, joined One Acre Fund in presenting at a session that explored the role of technical assistance in lending products for smallholder agriculture.

Waigi described the importance of business trainings in giving unemployed youth the confidence to take loans for new commercial ventures, and emphasised the importance of a favourable-lending environment that fairly balances the relationship between borrower and lender.

Osure discussed the Syngenta Foundation’s approach to technical assistance by outlining the work he’s been involved with in areas such as rural extension, seed systems, agricultural insurance, and policy development. He stressed the need to take a holistic approach that listened to the needs of smallholder farmers and communicated with them in a language they understood. In particular, Osure commended One Acre Fund’s service bundle as an example of an appropriate vehicle to reach farmers in some of the remotest parts of rural Africa.

One Acre Fund also had the opportunity to present. Nick Daniels, One Acre Fund’s east Africa government relations manager, drew attention to the importance of packaged services for smallholder farmers, exploring how One Acre Fund has managed to grow to serve over 180,000 smallholder farmers in just eight years.

One Acre Fund is committed to disseminating information on its model to enable other financial service providers to better serve Africa’s smallholder farmers. This Fin4Ag conference was a not only a chance to support this goal, but also to learn from our peers, many of whom are doing phenomenal work in the space.

Using Mobile Money to Extend Financial Services To Smallholder Farmers

Jul 03, 2014 Category: Tags: kenya m-pesa microfinance mobile phones repayment

This blog post was originally published by The Consultative Group to Assist the Poor (CGAP). You can view the original post here. The post was written by Stephanie Hanson, Senior Vice President of Policy and Partnerships at One Acre Fund. 

Kenya is widely acknowledged to be a global leader in mobile money. Over two-thirds of its adult population uses M-PESA, the mobile money system launched in 2007 by Safaricom.

But even in Kenya, many are not using M-PESA. I know many smallholder farmers who are part of this group. They receive seed-and-fertilizer loans from the agriculture organization that I work for, One Acre Fund, and they repay their loans in cash.

One Acre Fund’s field operations team in western Kenya spends much of the year focused on farmer repayment, and a significant percentage of staff time is devoted to the labor-intensive work of collecting money from individual farmers. They are incredibly motivated to improve the efficiency of One Acre Fund’s repayment systems—because less time spent on repayment means more time available for farmer training and education. If they could have deployed M-PESA to streamline farmer repayment years ago, they would have. But the operational barriers were too high.

On paper, digital financial services can sound like a silver bullet to reach millions of rural, underserved smallholder farmers. In reality, the challenges can be greater than the deployment of a low-tech solution. When One Acre Fund staff investigated, they found:

Many smallholder farmers did not have mobile phones. When One Acre Fund began operations in 2006, the majority of clients did not have mobile phones.
If they had phones, they weren’t charged. Many farmers purchased used phones with terrible battery life. They didn’t have electricity at home, so they had to travel to a local shop and pay to charge the phone. This could be a 5-hour round-trip endeavor, and was a serious barrier to phone use.
The mobile money agent network was lacking. Some areas were well served by mobile money agents, but others didn’t have a single agent. The spotty coverage meant that One Acre Fund couldn’t roll out a mobile repayment solution to its entire Kenya operation, a major deterrent to moving forward.
Transaction fees were high. Some One Acre Fund farmers were making loan repayments as small as $3.00, and M-PESA transaction fees were about $0.30 per transaction. Farmers were not willing to pay the transaction fee, and it was not financially sustainable for One Acre Fund to pay those fees for all its clients in Kenya.

In the last five years, the situation has gradually changed. In 2012, the Kenya finance team changed the repayment process so that field officers were required to use M-PESA to submit farmer repayment to headquarters instead of submitting cash. By 2013:

Many smallholder farmers had access to a mobile phone, even if they didn’t have one themselves. Some farmers had their own phones, and some farmers had SIM cards that they used in the phone of a relative or neighbor.
It had become somewhat easier to charge a mobile phone. One Acre Fund offered solar lights on credit to its clients that were capable of charging mobile phones. Clients were able to charge their phones more easily, and also charge the phones of their neighbors (for a small fee).
The agent network had improved dramatically. Across One Acre Fund’s 18 districts of operation in Kenya, an organizational survey found that 72 percent of sites (a village within a district) had three or more M-PESA agents. Only 6 percent of sites had no M-PESA agents.
One Acre Fund had found a way to collect small payments with reduced transaction fees. In mid-2013, Safaricom introduced a new feature called “Buy Goods” that allowed customers to pay for goods and services without a transaction fee. One Acre Fund paid a fee of 1 percent to receive the payments.

In response to these changes, One Acre Fund began piloting mobile repayment with about 1,000 farmers in one district in mid-2013 (roughly 1.5 percent of Kenya clients at the time). In the initial trial, group leaders collected loan repayment from individual farmers, and then submitted an aggregate payment through M-PESA. This trial allowed the finance and operations teams to troubleshoot the repayment procedure and compare repayment to other Kenyan districts. The trial went well, and One Acre Fund decided to expand it in 2014.

The expanded trial included two configurations: group leader repayment (like the 2013 trial), and farmer repayment (new). The group leader repayment trial included 3,500 farmers (roughly 4 percent of Kenya clients), and the farmer repayment trial included 400 farmers (roughly 0.5 percent of Kenya clients). By mid-season, neither configuration showed a difference in repayment trajectory as compared to their respective control groups (One Acre Fund has a flexible repayment structure, so farmers have the flexibility to repay any amount at any time during the loan term. In practice, repayment tends to follow a specific trajectory over the course of the season, and both mobile repayment trials have a repayment trajectory that mirrors their respective control groups). As a result, the farmer repayment trial is currently being expanded to about 5,000 additional farmers in three different districts.

It’s too early to say exactly when One Acre Fund’s Kenya operation will be able to roll out mobile repayment to all its customers. And in Rwanda, Burundi, and Tanzania, the other countries where One Acre Fund operates, mobile repayment is still impossible due to less robust mobile money platforms as well as the challenges described above. Mobile money might be a powerful tool in the future to improve the efficiency of delivering financial services to smallholder farmers, but for now, reaching the last mile of farmers still requires good old-fashioned legwork.

Helping Rwandan Smallholder Farmers Mitigate Risk

Jun 08, 2014 Category: Microfinance Tags: insurance microfinance rwanda smallholder

Imagine you’re an entrepreneur, making important decisions in a risky and unstable environment. Now imagine that there is a risk that threatens not only to sink your business, but also to leave you, your family and your entire community starving.

Smallholder farmers are these entrepreneurs, and their business is extremely risky. If business is good, it means that their families and villages have enough to eat. But if the weather turns against them, it means financial ruin, starvation, illness and possibly even death.

Like other small business owners, financial instruments can help smallholders mitigate risk. Credit insurance is a safety net that protects and empowers farmers, and One Acre Fund is working hard to make it available to more farmers.

In early 2012, we introduced insurance to our farmers in the Rwandan district of Huye. In 2013, we expanded to offer insurance to five districts in southern Rwanda. As of 2014, we offer insurance across the entire country.

One Acre Fund was Rwanda’s first successful, large-scale agricultural insurance program. Today, we’re the biggest provider in the country. We partner with Syngenta Foundation and with SORAS, a local insurance company that issues the policies on our behalf.

How exactly does agriculture insurance work? If you’re a farmer, you can expect a payout when both rainfall and yields are low. In Rwanda, the Ministry of Agriculture coordinates with the insurance companies to collect measurements in each district. If the rainfall or yields are much lower than average at the end of the season, the insurance company will pay.

Without insurance, One Acre Fund would be at risk as well. Currently, all of our clients in Rwanda receive insurance as part of our service package. Rwanda is a small country, so if there is a really bad season, a big proportion of our farmers could be affected. With no insurance, a bad season means farmers may not be able to pay back their One Acre Fund loans. We rely on repayments from farmers for our operations, so big default rates due to bad weather could leave us low on funds for the next season. Additionally, if they’ve lost everything the season before, farmers will be extremely hesitant to invest money in their farms (by taking a One Acre Fund loan) the next season.

Insurance allows clients to avoid this loop. It protects them in bad seasons, and allows them to re-invest the next season without worry.

Bernadine (pictured at right) is a One Acre Fund client in Huye, Rwanda. Bernadine is really proud of her insurance. “I was not expecting the insurance to help so much in repaying my loan,” she says, “Farmers in my group are happy too. We are so thankful for this.”

Insurance protects farm families in hard times. It allows them to repay their loans while also meeting basic needs, and encourages them to re-invest in their farms. This means that even after a tough year, farmers are ready to maximize their harvests in the next season.

Asset-Based Financing and Flexible Repayment Schedules to Better Serve Africa’s Smallholder Farmers

Expanding access to finance isn’t enough. Clients need access to financial products that they will actually adopt. That’s why addressing customer needs, one of the pillars of the Financial Inclusion 2020 Roadmap to Inclusion, is so critical for making finance more inclusive. For smallholder farmers in rural Africa, where inclusion rates are 19 percent compared to the urban rate of 34 percent, the financial services provided don’t come close to meeting the demand. Asset-based financing and loan products with flexible repayment schedules can help close this gap.

Among other financial services, smallholders desperately need access to financing for basic inputs—improved seed and fertilizer—that could dramatically increase their agriculture productivity. Properly designed, this financing could make an important contribution to growth and poverty reduction in Africa.

Unfortunately, microfinance products created for Africa’s poor do not necessarily meet such needs. Most microfinance institutions are concentrated in urban and peri-urban areas and primarily offer cash loan products on strict repayment schedules. These products meet the needs of the urban and suburban poor, most of whom receive small but frequent income from businesses or jobs. Smallholder farmers have different challenges.

Unlike urban clients, smallholder farmers receive the majority of their income all at once after harvesting. As small jobs come in, such as day labor on a neighbor’s farm or a local construction project, farmers can earn some extra income, but this is incremental and unpredictable. A cash loan product on a strict repayment schedule does not meet these financing needs.

How should a loan product be structured to meet the needs of smallholder farmers? At One Acre Fund, we designed a product pairing asset-based financing and a flexible repayment schedule that is working for 180,000 smallholder farmers in Kenya, Rwanda, Burundi, and Tanzania.

Instead of cash, One Acre Fund lends the assets that farmers need for success. By buying through us, farmers are able to avoid the potential pitfalls associated with local sellers, such as poor quality or fraudulent inputs and high prices. Our organization sources materials from large suppliers, negotiates bulk fates, and imposes rigorous quality control standards.

There are other advantages to lending assets rather than cash, as well. Farmers are less intimidated by taking a loan when they are receiving a comprehensive package of inputs that is proven to be profitable. Because it shares features with Islamic finance models such as murabaha, asset-based lending can provide a workable alternative for Muslim clients.

For the lender, the asset-based lending model lowers risk and reduces the need to assess credit worthiness. The lender knows what investment the client has made and knows that the investment can be used in a profitable business model. It also allows for specifically tailored training. With all of their clients using the same inputs, microfinance institutions can provide precise information on how to use them to maximize profits. Our field officers provide highly-specific training at weekly meetings to ensure that clients get the most out of their investments. Field officers also use these meetings to encourage continuous repayment and offer modest incentives for meeting targets early.

Instead of enforcing a strict weekly repayment structure, our flexible repayment structure has just two deadlines for clients. First, farmers must meet a “prepayment” requirement before they receive any of our services (roughly 10 percent of their total loan size). The second repayment deadline is the final one, due after the harvest. After paying that first 10 percent, farmers are free to make repayment on their own schedule, at any time throughout the season.

This type of flexible repayment schedule works because it meets the needs of smallholder farmers, boosts demand for credit and increases the amount invested in farm inputs. And it has been shown that offering a flexible repayment schedule generally does not increase delinquency or default among microfinance clients.

At One Acre Fund, the flexible repayment schedule has been very successful, supporting a growing number of clients as well as excellent repayment statistics over the past three years. Our overall repayment rate is over 98 percent.

This post originally appeared on the Center for Financial Inclusion blog.

Using a Bundled Approach to Increase Productivity in the AU’s Year of Agriculture

Feb 03, 2014 Category: Policy Tags: african union brookings government microfinance

The post below is courtesy of the Brookings Africa in Focus blog. The original post is available here.

The majority of people in Africa are engaged in the same profession: farming. Most of these individuals are small-holder farmers with fewer than 5 acres of land and little access to seed, fertilizer, financing, training or markets. Increasing the yields of these small holders has the potential to lift millions out of poverty in the coming decades.

More than any other sector, agriculture has the potential to spur inclusive economic growth in Africa. Growth in agriculture in the developing world has a multiplier effect on expenditures in poor households. Research shows that a 1 percent increase in GDP driven by agriculture leads to a massive 6 percent increase in expenditure growth for the poorest 10 percent. The Chinese growth story corroborates this research. China’s poverty reduction miracle was disproportionately achieved through growth in rural areas, with agriculture having a greater impact than any other sector.

African governments have already begun to prioritize agricultural growth. 2014 is the African Union’s (AU) Year of Agriculture, but agriculture is not a new area of focus for AU countries. Just over 10 years ago, in the 2003 Maputo Declaration, AU countries pledged to devote 10 percent of national expenditure to agriculture. A handful of countries have consistently exceeded this target, but most have fallen short. This year offers an opportunity to recommit to the 10 percent target and to draw attention to the importance of building an enabling environment for increased farm productivity.

Lack of finance is one of the largest barriers to increasing small-holder farmer productivity in sub-Saharan Africa, but many other factors compound the problem, such as weak property rights, lack of market access, insufficient technical knowledge, poor storage capacity, constrained water and energy supplies, and limited infrastructure. “Without access to credit, most small holders are confined to sub-optimal inputs and methods, and therefore to low productivity,” states the Dalberg report Catalyzing Smallholder Agriculture Finance. In farming, maximizing yields at harvest time requires investments in inputs during planting such as hybrid seeds and fertilizer.  But most farmers do not have enough cash on hand before planting to purchase these high-quality inputs. Without access to finance, farmers cannot increase their yields and their incomes. In addition to credit, farmers need support throughout the value chain to improve productivity. For example, farmers using new inputs require training to utilize them effectively and good infrastructure to bring the final product to market.

Given the demand for agricultural finance, it seems like banks should be jumping at the opportunity to offer credit to farmers. The Dalberg report estimates the global market demand for small-holder credit at $450 billion and the total supply at $9 billion—just 2 percent of the need. If the market opportunity is so great, what’s holding banks back? In short, risk and fear of lower profit margins. Banks evaluate agriculture as a high-risk sector and are concerned about default caused by weather- or pest-related crop failure. Banks are also concerned about the high cost of operating in rural areas. Most banks and microfinance institutions work in urban and peri-urban areas, and would have to invest in a costly expansion of operations to serve rural customers.

Some microfinance institutions have designed innovative products that mitigate risk and lower the cost of delivering financial services to rural areas. These farm microfinance products provide support to the farmer along the entire agricultural value chain to surmount the barriers to agricultural productivity. BASIX, a microfinance institution in India, offers agriculture extension and training services in combination with credit. The business reached 500,000 clients by 2010 and was modestly profitable. Opportunity International offers farm microfinance to clients in several countries in sub-Saharan Africa, including Kenya, Malawi and Uganda. Their lending model also links their clients to input suppliers, extension providers and crop buyers. Our organization, One Acre Fund, pairs finance with the distribution of seed and fertilizer, agriculture trainings and market facilitation. All three institutions have developed farm microfinance products that “bundle” additional services that reduce the barriers to agricultural productivity that small-holder farmers face.

As we move further into the AU’s Year of Agriculture, what can be done by African governments, donor countries, nongovernmental organizations and the private sector to further increase access to farm microfinance and further reduce the barriers to agricultural productivity?

  • Donors and African governments should work together to establish a multi-donor trust fund that provides seed funding for commercial banks and microfinance organizations to develop farm microfinance products. The Initiative for Smallholder Finance offers excellent guidance on the importance of donor funding that addresses supply-side constraints in an October 2013 briefing paper.
  • African Union countries should use the occasion of the Year of Agriculture to recommit themselves to allocating 10 percent of expenditure to agriculture, as set out in the 2003 Maputo Declaration. AU countries should recognize the importance of creating an enabling policy and infrastructure environment for farmers to improve yields and bring their products to market.  The AU should not ignore the agricultural finance sector, and should pledge to make its development a budgetary priority.
  • Commercial banks and microfinance organizations should use innovative design to develop new products that meet the vast demand from small-holder farmers. They should partner with other institutions that are versed in the challenges farmers face to offer services such as farm input delivery, technical training and market facilitation that will help their clients maximize their profit potential.

Combining increased access to farm microfinance with a value chain approach to farmer support has the potential to spur economic growth and reduce poverty in Africa.  During the Year of Agriculture, AU countries, donor governments, nongovernmental organizations and the private sector all have the opportunity to take a bundled approach to make Africa’s agriculture potential a reality.

The MasterCard Foundation and One Acre Fund Launch $10 Million Partnership

The MasterCard Foundation and One Acre Fund today announced a $10 million partnership that will expand access to financial services and training for smallholder farmers in Kenya, Rwanda, and Burundi. The project will enable 181,000 additional poor farm households to improve their farming techniques, and ultimately double their farm profits on every planted acre.  The partnership will result in increased capacity and strengthened systems to serve a greater number of rural smallholder farmers, and employ over 770 additional people as One Acre Fund field staff.  The partnership will also help pioneer a new sector of microfinance, increasing the interest and commitment among microfinance institutions to expand successfully into rural areas.

Founded in 2006, One Acre Fund has designed and proven an innovation that enables Africa’s poorest farm families to grow more food for consumption and sale in local markets. The organization’s model provides farmers with a comprehensive “market bundle” of services delivered to their doorsteps, including high yielding seed and improved fertilizer for staple crop production, financing through in-kind loans, on-farm weekly trainings, and post-harvest assistance through improved storage and market facilitation. One Acre Fund also continuously pilots and tests adaptations to their current model to provide, on credit, additional life-improving products and services to their clients, such as solar lights and tree seedlings.

Since 2006, One Acre Fund has achieved increasing success across its three core metrics. The organization has steadily increased its scale, and now serves 135,000 farm families across Kenya, Rwanda, and Burundi. It has improved its financial sustainability annually; in 2012, farmer loan repayments covered 84% of field expenses. Importantly, One Acre Fund has achieved high impact with every farm family served: on average, doubling farm profits on every planted acre.

According to One Acre Fund’s founder and CEO Andrew Youn, the need for farm microfinance is vast. “We believe there are as many as 50 million extremely poor African households in high-density, agricultural areas across Sub-Saharan Africa that could benefit from finance,” Youn explains, “yet less than 10% of these farmers have ready access to this powerful development tool. One Acre Fund is honored to be partnering with the MasterCard Foundation, a world leader in financial inclusion for the extreme poor, to help shape the emerging rural, agricultural finance movement on a global scale.”

“Agriculture and agri-business hold tremendous potential to help more people in Africa improve their quality of life,” said Reeta Roy, President and CEO of The MasterCard Foundation.  “Our partnership with One Acre Fund will help us understand the complex realities and opportunities for providing productive financial services to smallholder farmers.”

Through its partnership with the MasterCard Foundation, by 2016 One Acre Fund will grow to directly serve 450,000 farm families across its current countries of operation – Kenya, Rwanda, and Burundi. The organization will also strengthen its core MIS and M&E systems, to enable continued improvement to its program design and greater cost efficiency in its operations, and to capture the most accurate and compelling evidence of impact. Finally, One Acre Fund will actively share its knowledge across the sector – through targeted knowledge dissemination and the establishment and publication of core principles for rural, agricultural lending. To this end, the project seeks to build a definitive “proof of concept” for farm microfinance: demonstrating that it can be accomplished at high impact, sustainably, and at scale, and thus increasing commitment among microfinance institutions to expansion in rural areas.

One Acre Fund and Kiva present: How to Secure a Fellowship in the Field with Kiva!

Jul 15, 2013 Category: News Tags: careers kiva microfinance webinar


Join Jacob Schultz, Director, Kiva Fellows and Internship Programs, One Acre Fund Founder Andrew Youn and several former Kiva Fellows/current 1AF staffers for a webinar including:

- Detailed information on how to become a Kiva Fellow
- A brief overview of 1AF's model and the impact it is having in Africa
- General information on how your Kiva experience can position you for a career in development
- General career advice

When: Wednesday, July 17th at 12 p.m./noon EDT (9 a.m. Pacific)

How: Attendees can join the webinar in two ways:

1. If you have internet access, register at and follow the link sent in the confirmation email.

2. If you're in the field with limited internet access, you can call +1 (415) 655-0051 and enter access code 535-880-068. If you would like a copy of the slide deck to accompany the presentation, please email, and we will send you the slides prior to the call. Note that you will not be able to ask questions if you call in.


One Acre Fund Wins Financial Times Sustainable Banking Award

FTLogoOne Acre Fund is the recipient of the Financial Times Sustainable Banking Award for Achievement in Basic Needs Financing! The Award for Achievement in Basic Needs Financing recognizes groundbreaking transactions, programs, and initiatives that use the power of finance to address the scarcity of essential goods—including food, water, and energy—across society.

One Acre Fund is honored to receive the basic needs financing award, which is a tremendous validation from some of the preeminent thought leaders in the banking world. The FT and IFC awards attracted 156 entries from 110 institutions across 44 countries.

One Acre Fund's work was also recently featured in a Financial Times article on food and microfinance. The article examines the importance not only of basic financial services for smalllholders, but of risk management tools such as crop insurance. “Linking financial services to access to weather insurance could help, as this will reduce farmers’ risks and at the same time reduce the probability of defaulting on a loan,” says Maximo Torero, the director of the markets, trade, and institutions division at the International Food Policy Research Institute. One Acre Fund bundles crop insurance with all the loans it disburses to farmers. To read more about the innovative weather-indexed crop insurance product we use in Kenya, see this post on the One Acre Fund blog.