Note From Kenya: Improving Value Chains for Smallholder Farmers Through a Complete Service Model

Razoa Wasiki is a smallholder farmer in western Kenya. She is 28 years old, and she has three children: Timothy, Ernest, and David.

I first met Razoa in late 2009, about six months after she had joined One Acre Fund, the organization for which I work. Razoa had taken a loan of bean seed and fertilizer from One Acre Fund, which she repaid in cash over the course of about six months. One month before I met her, Razoa had harvested her beans. She planted a quarter acre of land, and harvested 90 kilograms (about 200 pounds) of beans.

Razoa was very happy with her harvest—in the past, she had never had access to quality bean seed, so she had never cultivated beans during Kenya’s “short” growing season. She sold her beans shortly after harvest and earned enough money to put Ernest and David in a local private primary school. Since she enrolled the boys in private school, their performance has been excellent. “If my children succeed in their education and have enough food, they will have a good life,” Razoa says.

Razoa’s primary goal is to ensure that good life for her children, and the only livelihood she has to do so is farming. In 2010 and 2011, Razoa planted maize with a seed and fertilizer loan from One Acre Fund. She received training from a One Acre Fund field officer on how to cultivate maize, and at the end of each season, she harvested more than 10 bags of maize (900 kilograms, or nearly 2,000 pounds) on half an acre of land. These harvests were more than triple her previous harvest of three bags of maize.

With the income from her 2010 maize harvest, Razoa was able to buy a dairy cow. She named the cow One Acre, and it is now producing milk, which she sells for extra income. She is saving that money to put her oldest son, Timothy, in private school with her other two children.

Razoa is just one of many hardworking farmers in Kenya, Rwanda, and Burundi who have increased their incomes with asset-based financing from One Acre Fund. In the last six years, we have built an organization to serve these farmers that is focused on scaling rapidly, generating high impact, and reaching financial sustainability.

A complete service model

One Acre Fund started in 2006 to serve farmers just like Razoa. From our first 40 farm families in Bungoma, Kenya, we have grown to serve over 73,000 farm families in Kenya, Rwanda, and Burundi. On average, our farmers double their income per planted acre in one year, and our organization is currently operating at over 75 percent financial sustainability. Farmer loan revenue covers over 75 percent of field operations costs, and the shortfall is covered by private donor support (primarily from social entrepreneurship foundations like the Skoll Foundation). We measure success in our ability to make more farmers more prosperous, and we operate with one overriding principle: “Farmers First.”

From the beginning, our field staff spent hours talking to farmers to understand what tools they needed to succeed. Based on these conversations, One Acre Fund developed two primary innovations that allow us to serve farmers successfully. First, we offer a complete service model—farm inputs, finance, education, and market facilitation—that improves every element of the value chain for a smallholder farmer. We offer asset-based financing to our farmers—they receive inputs on credit, and they repay their loans in cash. At the end of the season, we sell farmers the tools they need to store their surplus production without losses. Second, we bring this service model deep into rural areas, direct to where our farmers live and work.

When a farmer enrolls with One Acre Fund, the farmer joins as part of a group of 6 to 12 individuals. The farmer receives an in-kind loan of seed and fertilizer, which is guaranteed by the group members. One Acre Fund delivers this seed and fertilizer to a market point within two kilometers of where the farmer lives and a field officer provides in-field training on land preparation, planting, fertilizer application, and weeding. These trainings are standardized across One Acre Fund’s entire operation, with modifications for particular geographic areas (for example, Rwanda has additional trainings on soil erosion due to its steep hillsides). All trainings include interactive exercises, simple instructions, and group modeling of agriculture techniques. For instance, after a field officer teaches a group of farmers how to position poles in the soil for climbing beans, the field officer asks them to model the technique in the field so they can receive immediate feedback.

Over the course of the season, the field officer monitors the farmer’s fields, and accepts cash repayment from his farmers. Farmers can repay any amount of money at any time during the season—our repayment system is completely flexible. At the end of the season, the field officer provides extensive education on post-harvest storage and handling. One Acre Fund also offers basic storage tools for sale to farmers, so that they can store safely and choose to sell their surplus at the market when prices increase, a few months after harvest.

This service model is producing great results—our farmers are doubling their farm income per planted acre, and 98 percent of farmers repay their loans. We measure this income impact through rigorous harvest monitoring and evaluation; each season, we measure the harvests of over 1,500 test and control farmers. We are now implementing additional monitoring and evaluation tools to understand some of the non-income impacts of our service model. Anecdotal evidence shows that One Acre Fund farmers often invest in secondary school education for their children, but we don’t have accurate data on the percentage of our farmers who are making these investments. Secondary-level education is correlated with lower birth rates, among other positive impacts.

Proving us wrong

Just as our service model was developed through extensive consultation with farmers, we’ve refined that model over time based on farmer feedback. Our country headquarters are in the rural areas where we work, so that everyone in the organization—from the country director to field directors to field officers—has the opportunity to get real-time input from our clients. Like any business, we succeed when our customers succeed. If we are doing something wrong, our farmers feel empowered to criticize us—after all, they are paying for everything they receive from One Acre Fund.

When we started operating in Kenya, we asked farmers to repay us with a portion of their harvest. They were increasing their yields as a result of their seed and fertilizer loan, and we reasoned that it made sense to repay that loan with a portion of the increased yield. Farmers might not have cash on hand to repay, but they would have extra maize or beans. As it turned out, farmers didn’t like this system at all, and they requested to repay in cash. Not only that, but they wanted to start repaying a few months before harvest. 

When our field leadership decided to implement non-cash payment, they thought it was the only reasonable solution for farmers with limited assets and irregular incomes. But our farmers proved us wrong—they did have small amounts of cash, and they wanted to use that cash for loan repayment. After their feedback, we modified our operations to accept cash repayment three months before harvest. The next season, again based on farmer feedback, we started accepting cash repayment before farmers even received their seed and fertilizer. No one could have predicted when One Acre Fund started that farmers would want to pay back their loans so early. Now, it is standard practice across the organization. This shift in our payment system emphasized to our staff that we must continually work to understand our clients, through surveys as well as informal conversations. Our motto is “Farmers First,” but we must put that into practice by always asking farmers what they need before offering a new product or service.

Vision for the Future

In the next three years, we will grow to serve more than 200,000 farmers and add additional country operations. By 2020, we aim to reach one million farmers through our core program model.

However, this is just a drop in the bucket. There are tens of millions of farmers who could benefit from One Acre Fund’s services, and there is growing attention towards these farmers from the global policy community. In a time when food prices continue to rise, unused arable land is limited, and the global population is growing, many policymakers are realizing that we need smallholder farmers to increase their food production in order to feed the world.

We see this spike of interest in agriculture development as a tremendous opportunity. We want to share what we are learning in the field from our clients to help make agriculture development policy smarter. Already, we are actively engaged in the Kenyan government’s agribusiness policy working group. In Rwanda, we partner with the government on its fertilizer distribution initiative, its crop intensification program, and the Global Agriculture and Food Security Program (GAFSP)-funded terracing project. We look forward to deepening our government work in tandem with the growth in our core field operations.

Beyond agriculture policy circles, we see an opportunity to engage with the microfinance community and share our experience with asset-based financing. We are honored to have received recognition such as the 2010 and 2011 Financial Times/IFC Sustainable Finance Award for Achievement in Basic Needs Financing. Traditional microfinance has grown astronomically in the last 20 years, and we believe that traditional microfinance institutions can serve a new market of smallholder farmers by using asset-based financing. Financing assets can reduce risk and create clear, measurable income impact.

One Acre Fund is proud to be part of the burgeoning “Green Revolution in Africa.” Our innovative service model is already helping thousands of farmers feed their families, pay school fees, and invest in new income-generating opportunities. With the majority of people in sub-Saharan Africa engaged in farming, there are millions of farmers who just need the right tools to achieve the same increases in food security and income that our farmers are now achieving.

While most Notes From the Field feature USAID-supported work, occasionally we post Notes reporting on work that does not receive USAID support but that represents interesting innovation, good practice, fodder for discussion, or all three. The work featured here has not received USAID funding.

Acknowledgments
This publication was produced for review by the U.S. Agency for International Development. It was prepared by Stephanie Hanson of One Acre Fund.

Disclaimer
The views expressed in this publication do not necessarily reflect the views of the U.S. Agency for International Development or the U.S. Government.