In the Field Update from Kenya

by Sarah Hodsdon

The past two months have flown by here. I orig­i­nally planned to come here to inde­pen­dently research Kenya’s micro­fi­nance landscape—seeking to under­stand how Kenyans, both in rural areas and in the slums of Nairobi, use rotat­ing sav­ings and cred­its asso­ci­a­tions (ROSCAs) and accu­mu­lat­ing sav­ings and credit asso­ci­a­tions (ASCAs) to man­age their finances— rather than the MFIs in the country.

But then while co-oping in China and think­ing about my expe­ri­ences at Grameen Bank in Bangladesh, I decided I wanted to learn more about approaches to income devel­op­ment beyond increas­ing access to finan­cial resources.

Alas, I have spent the past two months vis­it­ing the offices of com­pa­nies in the pri­vate sec­tor, NGOs and non­prof­its, gov­ern­ment min­istries, and attend­ing con­fer­ences on agri­cul­tural devel­op­ment, mobile health, and IT and inno­va­tion. I was wel­comed to join DEMO Africa’s team to help throw their first con­fer­ence last week, where 40 start ups from across Africa (includ­ing Sene­gal, Cameroon, South Africa, Ghana and Kenya) pitched new prod­ucts for web or mobile platforms—nearly half of which were social enter­prises. DEMO Africa is an ini­tia­tive between Microsoft, Nokia, USAID, and the US Depart­ment of State to cre­ate a launch pad and sup­port­ive envi­ron­ment for African start-ups.

In terms of meet­ings, I’ve met fre­quently with Acu­men Fund, and am hold­ing early stage meet­ings with orga­ni­za­tions to deter­mine if they fit their invest­ment cri­te­ria, and in the process am learn­ing more about the fund’s invest­ment strat­egy. I’ve real­ized it’s actu­ally extremely dif­fi­cult to find orga­ni­za­tions that have proof of con­cept, poten­tial to impact at least 50,000 peo­ple, sound man­age­ment, and finan­cial fea­si­bil­ity to under­take roughly half a mil­lion dol­lars in invest­ment. There are incred­i­ble ideas and peo­ple in every cor­ner of the coun­try; and yet many are still the seed of any idea.

Kenya, also does not seem to be lack­ing for financ­ing, but coor­di­na­tion. There seems to be funds for every indi­vid­ual cause or focus, from health­care to agri­cul­ture, to micro­fi­nance, but also vari­a­tion in terms of tar­get amounts. Bridge funds are pop­ping up to acknowl­edge the fund­ing gap between a company’s start-up phase and SMEs tar­geted by larger funds such as Acu­men. The Savan­nah Fund is a new excit­ing player on the scene, and has been founded by an incred­i­ble team of Kenyans and part­ner­ships with Sil­i­con Valley.

I’ve met with Savan­nah Fund, Open­Cap­i­tal, DEMO Africa, Tech­noServe, Grameen Foun­da­tion, mSur­vey, iHub and Nailab (two of the nearly 20 dif­fer­ent accelerators/spaces for young IT devel­op­ers in Nairobi), Trop­i­cal Fresh (a fair trade veg­etable exporter who recently received an invest­ment from Root Cap­i­tal), PAWA254 (a cre­ative space for media, devel­op­ers and activists to col­lab­o­rate), the Min­istry of Agri­cul­ture and the Min­istry of Cooperatives—to name a few. I was also able to attend the government’s Agri­cul­tural Sec­tor Devel­op­ment Forum where 1,000 gov­ern­ment offi­cials met to estab­lish the country’s new agribusi­ness strategy.

Tech­noServe has been one of the most engag­ing com­pa­nies, and has wel­comed my role as a stu­dent and desire to learn more about enhanc­ing mar­ket access for small­holder farm­ers, and mobi­liz­ing farm­ers into groups whereby they can earn sub­stan­tially more when they bring their crops to the mar­ket. I have met with one of their pre­vi­ous suc­cess­ful projects, the Sabasaba Agribusi­ness Soci­ety, that bulks bananas from farm­ers in the cen­tral province, and con­nects them with mar­kets in Nairobi. Their Chair­men has incred­i­ble ambi­tion and ded­i­ca­tion to the coop­er­a­tive, and has plans to estab­lish value-addition at the coop­er­a­tive and begin pro­cess­ing jams, flours, wines and other banana byprod­ucts. Tech­noServe has also shared their busi­ness train­ing cur­ricu­lum, and invited me to go with them to the Tana River (an area cur­rently bat­tling local con­flicts) to observe their early stage farmer mobi­liza­tion for a new pro­gram to con­nect mango farm­ers to larger urban markets.

Trop­i­cal Fresh is founded by the son of a farmer, whose ded­i­ca­tion to help­ing small­holder farm­ers, I believe, has become one of the cen­tral pil­lars of the company’s poten­tial. I’ve just recently joined their team in order to help them locate the nec­es­sary part­ner­ships within Kenya to increase the num­ber of coop­er­a­tives they work with in the coun­try­side, and con­nect them to the myr­iad of finan­cial insti­tu­tions in the city that cor­re­late with the com­pany’ s vision and cap­i­tal needs. Founded in 2009, they are work­ing to cer­tify small-scale farm­ers under Fair­Trade and Global Gap—which can cost up to 400,000 shillings a year, per cooperative.

Engag­ing with Trop­i­cal Fresh and Tech­noServe has shown me that suc­cess for small­holder farm­ers depends on largely two things: 1. farmer ini­tia­tive and 2. patient cap­i­tal. There are a lot of upfront costs in estab­lish­ing a new agri­cul­tural pro­gram, rang­ing from machin­ery for value-addition facil­i­ties, to inputs such as fer­til­iz­ers and seeds, tech­ni­cal assis­tance to guide new farm­ing prac­tices, irri­ga­tion to tran­si­tion from rain-fed agri­cul­ture, cer­ti­fi­ca­tion to main­tain the stan­dards nec­es­sary for many urban and inter­na­tional mar­kets, infra­struc­ture devel­op­ment, trans­porta­tion, refrig­er­a­tion and stor­age facil­i­ties, and THEN throw in the need for agri­cul­tural finan­cial prod­ucts for the indi­vid­ual farmer. It’s expen­sive, and seem­ingly not an appeal­ing area of devel­op­ment right now, despite farm­ers com­pris­ing the major­ity of the world’s poor, and ris­ing demand for food.

How­ever, even if these costs are cov­ered, a strong pro­gram thor­oughly researched and imple­mented, Tech­noServe has explained that it will ulti­mately fail unless it has buy-in from the farmers—something that after decades of dis­heart­en­ment, failed invest­ments and desire to move away from farm­ing, is dif­fi­cult to cultivate.

Ulti­mately, the biggest les­son I have learned so far is that micro­fi­nance needs to bet­ter reach small­holder farm­ers. There’s an invest­ment bub­ble build­ing in Nairobi, espe­cially in ICT and start-ups, and the youth are more excited about try­ing to become the next M-Pesa rather than start an agribusiness. 

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