One Acre Fund: Solution for Farmers

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BUNGOMA, Kenya — One Acre Fund is a social enterprise with a mission to serve rural, smallholder farmers in the developing world. Its program empowers a smallholder farmer to work out of poverty and end periods of hunger by offering a comprehensive service-bundle that remedies all the barriers to success farmers once faced.

Since its founding in 2006, One Acre has positively impacted the lives of over 578,000 farm families. The organization is on track to reach one million farmers by 2020. The One Acre Fund is proving to be a successful model of smallholder farmer support, one which large agribusinesses will want to follow closely.

The One Acre Fund Program

Smallholder farmers, sometimes labeled as small-scale or peasant farmers, are those who farm on small plots of land to grow food on which they subsist. They tend to rely on family labor and dominate the rural parts of the world. Smallholder farmers produce about 80 percent of the food consumed in Asia and sub-Saharan Africa.

The One Acre Fund provides a long-term service-bundle based on voluntary membership. Farmers are encouraged to form community groups or cooperatives to support each other and to leverage their bargaining power.

The service-bundle also includes the delivery of seeds and fertilizer directly to the farmers, accompanied by training on the best farming methods. The inputs are given to the farmers on credit, with a pay-as-you-can repayment plan. The micro-loans, with over 97 percent repayment rates, defy previous beliefs about a smallholder’s ability to repay.

Along with the training and credit for supplies comes continuous post-harvest support for essentials such as storage and linkages to markets. In 2013, One Acre’s services led to an average 50 percent gain in income for each farmer family and an average 180 percent return on investment.

In the same year, One Acre served 130,400 farm families across Kenya, Rwanda, Burundi and Tanzania. The organization has its eyes set to expand to other countries in the near future. It aims to transition smallholder farmers from merely farming-to-survive to a mode of farming-to-make-a-living and improve their lives for the long run.

The Problems Faced by Smallholder Farmers

Globally, there are 500 million smallholder farmers. In the developing world, more than two-thirds of farmers are women and heads of household. This means that more than 2 billion people depend on these farmers for their livelihoods. The irony is that although these smallholder farmers produce a lot of the food the world eats, they themselves often go hungry. This is especially so for those who live in the rural parts of the world, where 76 percent of the world’s poorest people live and where agriculture is the primary source of livelihood. The rural parts of sub-Saharan Africa are home to about 100 million people, of whom 58 million live on less than $1.25 a day.

The reason for the paradox lies in the lack of access to knowledge about better farming methods and access to the tools and resources needed to maximize farming yields. From the get-go, the poor, remote farmer faces difficulty getting the best seeds and fertilizer for reasons like inflated import prices or supply-and-demand issues. Even if a farmer is able to obtain decent seeds and fertilizer, he or she may unknowingly plant those seeds in a haphazard way, thus relying on luck to yield a good harvest.

Consequentially, these low yields root the farmer in a cycle of poverty that traps them into debt or prevents them from affording farming improvements later on. Their poverty may force them to reuse the same seeds that yielded the small crop the previous year, or they may resort to using little or no fertilizer the next time round.

Furthermore, smallholder farmers normally do not have access to farmers’ insurance in spite of the fact that farming is inherently a risky business vulnerable to climate change and weather. In the U.S., farmer’s insurance is a given.

With all these barriers, the cards are stacked against the poor farmer. A single mistake can guarantee a year with a period of hunger until another harvest comes. If a crop fails or it yields little, the next period of hunger stretches for a longer time. Under these circumstances, smallholder farmers take two steps backwards with every step forward.

One Acre Fund’s service-bundle addresses all these problems and more. By consolidating farmers to give them leverage they would lack independently, One Acre gives them bargaining power to buy seeds and fertilizer at a lower bulk price. This also makes the One Acre credit for each farmer reasonable and affordable. Rather than walk or pedal a bike to a far-off farm supply store that is usually in short supply or selling at inflated prices, One Acre ensures that quality seeds and fertilizers are delivered straight into the hands of farmer cooperatives. Herein lies a key to the success of One Acre’s program: facilitating distribution of farmers’ needs.

Furthermore, One Acre’s service-bundle is backed with micro-insurance to help farmers weather bad times, like the recent crop virus that hit Kenya’s main staple, maize. And the service-bundle includes special loan offers—including school fee loans—to encourage farmers to not forsake selling their harvests too soon in order to pay for their children’s school fees. Selling too soon often means selling when the demand is low and the price is low, hence forgoing optimal profits for the farmer.

To add more insurance against hunger, One Acre advises farmers to diversify their crops so that harvest times are spread out throughout the year. An added benefit to this is a more nutritious diet for the farming family.

Without such advice and support, the problems of the sub-Saharan African region will continue. Kenya, where the One Acre Fund is based, is ranked 80 out of 109 countries in The Economist’s Global Food Security Index. The index ranks countries according to their access to affordable, available and quality food. Kenya’s primary industry is agriculture. Eighty percent of its economy depends on it, and 80 percent of Kenya’s farmers are small-scale. Being ranked near the bottom quartile for food security in the world shows the dire situation in which Kenya sits. There are over 45 million Kenyans to feed, so there is much work to be done.

Smallholder Farming is a Business

For the One Acre Fund, serving smallholder farmers is not only a moral imperative, it also makes economic sense.

Two billion people depend on 500 million smallholder farmers worldwide. Empowering these smallholder farmers has a multiplier effect: increased yields feed more, and the increase in incomes leads to more investment—toward more farm yields and investments toward the improvement of human welfare through health and education. Supporting smallholder farmers is a sure way to eradicate poverty and eliminate hunger for 842 million people in the developing world.

And it is a better way to lift people out of poverty and into the purchasing power of the middle-class. A 1 percent per annum increase in agricultural growth, on average, leads to a 2.7 percent increase in income of the lowest three income deciles in developing countries.

Furthermore, financing for smallholder farmers suggests a market potential as large as $450 billion, the vast majority of which is untapped. Plus, growing global demand for agriculture commodities have interested leading buyers in sourcing from smallholder farmers.

The idea of looking at smallholder farmers as potential business partners and drivers for economic growth is not a new one. Land O’Lakes, Inc., known for its butter sold in major supermarkets across the U.S., is a $10 billion agribusiness. With over 90 years of experience, Land O’Lakes supports the second largest cooperative in the U.S. with approximately 9,000 employees, 3,200 farmer members and 1,000 member cooperatives.

What many do not know about Land O’Lakes is that they manage 33 agricultural development projects in 24 countries through their own international development division (they are the only Fortune 250 company to have such a department). Land O’Lakes’ 2013 impact report stated that almost 94,000 farm members of 282 cooperatives worldwide benefited from their technical advisors.

Cargill is another American agribusiness that is a global food trader and food processor. It collects agricultural commodities and sells them to food and beverage manufacturer-customers.

For its cocoa, Cargill has implemented a “Cocoa Promise” program in six countries. Most of the world’s cocoa is grown by between six and seven million smallholder farmers. In order to meet the ever-growing demand for cocoa, the Cocoa Promise program trains cocoa farmers, supports cocoa farming communities and invests in the long-term sustainable production of cocoa. Since 2012, the Cocoa Promise has trained over 115,000 farmers on agriculture’s best practices through its 2,550 Farmer Field Schools worldwide. To date, the program has improved access to education for over 34,000 children who live in cocoa-growing regions, and $6.25 million in premium payments has been paid out to farmer cooperatives.

The One Acre Fund may not be a giant multinational corporation, but it has a feasible plan and mid-range goal to serve 1 million smallholder farmers and their families by 2020.

One Acre’s advantage over Cargill and Land O’Lakes is its locality and its army of local field agents. One Acre’s HQ is located in rural Kenya instead of some distant city in the developed world. Some 1,800 staff-members—mostly Kenyans—stem from the local HQ as field agents who train, directly deliver necessary inputs, and serve and monitor the farmers all across East Africa (rather than one controlled large plantation).

Because of this, they can react quickly to the needs that arise. One Acre behaves like a fleet of speed boats compared to multinationals which maneuver slowly through the ocean like a large aircraft carrier. One Acre is more capable to adapt and adjust when time is of the essence in the realm of farming where issues like timing your planting just right could mean a good harvest or not.

Distribution and flexibility may be the advantages One Acre has over the bigger corporate giants in agribusiness. But the greatest innovation One Acre has in the business is their mindset about smallholder farmers. For One Acre, smallholder farmers are king. They are the boss. They are not poor helpless peasants who need handouts. One Acre understands that smallholder farmers can make a significant contribution to their society.

Therefore, it is no wonder why 2014 is the Year of Family Farming, according to the International Fund for Agricultural Development. And it is no surprise why the likes of Cargill and Land O’Lakes may be looking to the progress of One Acre’s work as a model of sustainable agribusiness, especially given that sub-Saharan Africa presents a number of high growth markets.

When the One Acre Fund reaches their goal in serving over one million farm families, more than five million other people will benefit. And their neighbors will produce enough surplus food to feed another five million of their neighbors. Everyone, including businesses, will benefit in the end.

Maria Caluag

Sources: One Acre Fund, Roger Thurow, The International Fund for Agricultural Development, International Food Policy Research Institute, Global Food Security, Land O’Lakes, Cargill, World Bank, The Initiative for Smallholder Finance
Photo: One Acre Fund

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