Financial sustainability is crucial to the Nuru Kenya Agriculture program’s ability to serve increasing numbers of farmers each year. The Agriculture team strives for this sustainability by making strategic staffing decisions, working efficiently and minimizing operational costs whenever possible. Another huge contributor to the Nuru Kenya Agriculture program’s sustainability is the collection of loan repayment from farmers. Loan collection is one of Nuru Kenya Agriculture’s most challenging tasks and the team is constantly looking for ways to streamline collection efforts and improve the repayment rate each year.

Farmers repay their loans using a method called continuous loan repayment. This method was implemented by Nuru Kenya Agriculture during the 2012 long rains season. Continuous repayment means farmers are encouraged to make small payments on their agricultural loan as they have capital available. There is no structured monthly payment, but the farmers must pay 100% of their loan by the loan repayment deadline. This flexible payment system helps ensure the Agriculture program doesn’t exclude the poorest farmers who might only be able to pay after the harvest. Yet, at the same time it enables farmers who are able to decrease their loan little by little so that at harvest time they need only to pay off a small remaining balance. Then, after saving enough maize for food, they can use their harvest surplus for school fees, household improvements or small business investments.

The Nuru Kenya Agriculture program bolsters the continuous loan repayment system by pairing it with several other tactics to facilitate reliable loan collection:

1. Pre-payment (down payment)

One of the challenges with continuous loan repayment is getting farmers to start making payments early in the season. This year, to eliminate the psychological barrier of making the first payment the Agriculture team required that all farmers make a small payment on the day they received inputs. This new initiative also meant the Agriculture team had collected about 4% of the repayment by the time loans were issued!

2. Group Guarantors

Nuru Agriculture issues loans to groups of 8-12 farmers. The groups self-select their members and agree to be guarantors of each other’s loan. This system introduces a new level of accountability to the loans as farmers understand that if they do not repay their friends and neighbors in their group will be held responsible for the loan. Tying the sometimes unfamiliar concept of credit to the commonly held value of caring for your friends and neighbors helps farmers understand the loan terms and means they work together to repay their loans.

3. Bonuses

Incentives for Field Officers (who do the collecting) are used to encourage and reward the hard work of loan collection. This year, the Agriculture program offered a mid-term and season-end cash bonus for field officers who hit specific repayment milestones. A farmer bonus of a discount off of next year’s loan was also introduced for groups who repaid early. These incentives are refined based on research, outcomes and feedback each year and the team hopes to improve upon these systems even more in 2014.

Loan collection will always be difficult work that is paramount to the success and financial sustainability of the Nuru Kenya Agriculture program. When working with thousands of rural farmers who have not had prior access to credit is important to define clear loan terms and incorporate community norms into repayment strategies. By refining the collection strategy as needed and striking a balance between incentives and consequences the Nuru Kenya Agriculture team seeks loan repayment success year after year.