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Life-Changing Loans in Africa

Over 70 percent of Kenyans are smallholder farmers, many of whom struggle to earn a living and have little access to loans and financial services. In recent years the Soros Economic Development Fund, along with the Acumen Fund and Grameen Foundation, injected capital into Juhudi Kilimo, a micro-finance company that empowers farmers to increase their incomes and create sustainable businesses. I spoke with the company's CEO, Nat Robinson.

What differentiates Juhudi Kilimo from other microfinance institutions in Kenya?

Juhudi Kilimo serves poor smallholder farmers in Kenya. This is a severely marginalized group with little access to financial services. By extending credit to the farmers, Juhudi helps them acquire assets like dairy cows, poultry, irrigation equipment, and greenhouses.

We call these items assets and treat them as such because they earn money for the farmer, and can be insured against loss. The asset is also a form of collateral for the loan.

Juhudi loans increase the income of the farmers so they can move from subsistence to more commercial farming, enhancing their own food security and that of their community. Conventional microfinance lends money to informal businesses for working capital (like buying food or goods to sell in informal markets). We provide a growth path for individuals to a more secure future.

How does a loan improve the lives of borrowers? How much is the average loan?

In addition to helping smallholder farmers earn money, Juhudi Kilimo links them to markets, to agricultural extension workers, and to other service providers. In providing this pathway to commercial farming, we believe that we are helping to empower individual smallholder farmers and improve food security in families and communities.

Juhudi has approximately 16,000 clients earning between the equivalent of $2.50 and $4 per day. The size of the first loan is about $450. About half the clients buy dairy cows and use the money they get from the milk to earn additional income and to pay the loan. 

Is there a specific client who sticks in your mind?

Yes. One client, a 41-year-old father of two, is a very poor farmer growing maize on his family’s land. He was struggling to meet his family’s financial obligations and needed a steady source of income. He took one of the first loans for $580 to buy a high-yield dairy cow and build a shed to keep the animal. The daily 8 to 14 liters of milk from the cow generated enough cash each day to meet his family’s needs and to pay off the loan in 14 months.

He realized that his neighbors spent a significant amount of time and money travelling to town to grind their maize into flour. So he took another loan of $1160 which he used to buy the first mill in his community, earning him extra income, and saving other farmers time and money. He is currently paying off a $4,300 loan that he used to buy a high-power commercial grain mill and to plant trees on a plot of land he purchased from his income. He employs four people in his grain milling business and now makes an average monthly income of $790.

This success story speaks to what is possible when the rural poor are given access to financial services. We are proud to have played a role in this entrepreneurial journey that has had a positive effect on an entire community.

Do most clients pay back their loans?

We have an overall repayment rate of 95 percent. Only about four percent of the outstanding loan portfolio is at risk of non-repayment after a period of 30 days. 

Our borrowers are organized into groups that guarantee each other’s loans. Therefore, the process becomes a community effort. This creates a very strong incentive for borrowers to repay their loans, especially in rural areas.

Of course our loan officers also assess potential customers and we can repossess the asset if the client defaults on the loan. However, our staff works very hard with our clients during the assessment process to prevent default and ward off over-indebtedness. Our transparent process makes Juhudi a safe lender that attracts customers who will repay their loans.

How do you measure Juhudi’s social impact?

Our repayment rate is a very good indicator of our positive social impact and business success. It means that 95 percent of our clients, more than 15,200 people, are successfully feeding their families, improving their incomes, and in some cases entering the commercial farming market. By 2018, I hope that Juhudi Kilimo will be the leading agriculture finance institution in East Africa providing life-changing loans to 300,000 small holder farmers.

We track and report the number of clients who have taken out loans in addition to the rate of repayment. We also use the GIIRS rating system, the Cerise Social Performance Indicators Evaluation, and the Progress Out of Poverty Index which measures things like family income and the number of children in school over time.

How has Juhudi been received in the investing community?

In 2013, Juhudi Kilimo was recognized by CIO Magazine as one of the top 100 innovative companies leveraging technology to deliver business value. Juhudi Kilimo was the only African company on this list which included Boeing, AT&T, IBM, and Intel.

Additionally Juhudi received recognition at the Citi Foundation micro-entrepreneur awards in Nairobi for its rural entrepreneurs. In 2011, Juhudi was honored with the Schwab Social Entrepreneur of the Year award at the World Economic Forum.

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