info
Farm finance

The Case for Farm Finance

Access to financing helped Wilbroda change her future. Millions of other farmers also deserve that opportunity.

How Access to Financing Helped Wilbroda

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.

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.

A Tool to Reduce Poverty for Millions

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.

We're Looking for Leaders

Explore One Acre Fund's career opportunities. Positions open across 10 countries in Africa. 

Browse our Job Openings