How Mobile Money Is Closing the Agricultural Finance Gap for Women in Kenya

> Posted by Brigitta Nyawira, Program Manager, Grameen Foundation

Alice is a smallholder farmer in Machakos, a semi-arid town east of Nairobi, where subsistence farming is prevalent. Most farmers in Machakos grow maize and other drought-resistant crops for domestic consumption and sell whatever little surplus they have at the gates of their farms and in local markets. Until recently, Alice struggled to make a decent living from her small plot of land and small grocery. She did not have the inputs required to increase her productivity, and her farming skills were basic at best, learned through season after season of trial and error. Farming was frustrating because it barely gave her enough money to feed her three children, take them to school, and pay hospital bills. But without capital and the requisite skills to expand her income sources, it was the only thing she could do.

Alice’s story is not uncommon. Smallholder farmers across Africa still face obstacles accessing suitable, affordable financial services. This is especially acute for women.

According to the Food and Agriculture Organization (FAO) of the United Nations, 80 percent of the arable land in Sub-Saharan Africa is managed by smallholder farmers, with women accounting for 50 percent of the agricultural labor force. In Kenya, where 75 percent of the population makes a living from agriculture (directly and indirectly) and the sector accounts for 24 percent of GDP, only 4 percent of the country’s total credit is channeled to agriculture. A fraction of that goes to women smallholder farmers.

Where credit is available, traditional lenders, who typically view smallholder farmers as being high risk, require a series of hard-to-meet pre-requisites in order to access credit. Smallholder farmers are commonly asked to produce a title deed to their land, or demonstrate financial stability that can only be verified through bank statements. Most will not meet these minimum requirements. This keeps smallholder famers in Kenya locked in a vicious cycle of poor inputs, low productivity and low income. It is particularly hard for women, who traditionally have not been allowed to own property, require their husbands’ consent to open a bank account, and have primarily worked at home or on the farm, making little or no money at all. Any money they would make would either be given to the husband, or channeled back to the home to cater for the needs of the household. Without collateral, savings or financial records, it has been nearly impossible for women in Kenya to access formal financial services.

To address these challenges and provide access to a suitable, affordable and accessible agricultural loan, Grameen Foundation and Musoni Kenya, a local microfinance institution that operates mainly in rural Kenya, collaborated to design Kilimo Booster. The loan product is tailored to the needs of smallholder farmers.

Unlike other loans, its flexible repayment terms correspond to farmers’ harvest cycles and cash flows. Equally important, funds are disbursed directly into farmers’ mobile money accounts no more than 72 hours after a loan is approved. Additional features also make Kilimo Booster especially convenient to women.

Groups Are Still Important

The Kilimo Booster loan utilizes the group methodology in which members co-guarantee each other for loans. This type of social collateral typically works well for women as they are already accustomed to the workings of informal savings and credit groups, and because it eliminates the need to prove financial stability through bank statements and traditional collateral.

Technology Extends Reach

Musoni Kenya’s operations are powered exclusively by mobile technology. Applications for Kilimo Booster are made via a digital field app and loan disbursements and repayments are made via mobile money technology. This is typically a welcomed feature among the women, who do not have to leave tending of the home and farm to travel to a Musoni branch in town for their loans to be processed. According to Alice, “Using the mobile phone is easy for us and it saves time. No one knows what you are doing, or if you have money, so it is also safe for us.”

Using digital technology, the loan application process has been simplified enough to accommodate everyone, regardless of their education levels. The loan officer visits the farmers in their homes, collects all the necessary information digitally, and once the loan is processed, the women can cash out at a mobile money agent, typically found within a 5 kilometer radius. Kenya’s mobile phone penetration, which stands at 90 percent (more than 75 percent of them are registered mobile money users), has provided an enabling environment for the uptake of digitally-enabled products such as Kilimo Booster.

Targeted Outreach

Since its roll-out in 2013, more than 17,000 Kilimo Booster loans have been disbursed, with women receiving 55 percent of the loans. To continually reach more women, Kilimo’s marketing activities are focused in rural areas, specifically in rural marketplaces, where the population of women is higher. In addition to financing, Grameen Foundation and Musoni offer farmers training on an ongoing basis, thus building their skill set and enabling them to take on and profitably utilize higher loan amounts.

Alice’s experience demonstrates how the right product can overcome the barriers to financing smallholder farmers. She has graduated from her first loan of US$200 to a loan of US$2,000, which she has used to expand her farming activities. She now grows vegetables and green grams, in addition to maize, and has also expanded into poultry, dairy goats, rabbits and guinea fowl. This has helped to smooth her income and create a stable agribusiness.

As she says in the video, “If I compare myself to people who are not with Musoni, they cannot do business the same way I do.”

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