The Case for Farm Finance

Abstract

innovations / volume 10, number 1-2 © 2015 Stephanie Hanson 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,1 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.2 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.3 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