The Nuru Agriculture Model Sees Some Changes
Recently we made a decision that will have a big impact on the agriculture program and the model itself. Starting in 2011, we decided to issue input loans to farm maize only during the long rains season – not during both the long rains and short rains. This seems like a small statement and a decision that wouldn’t have much of a significant effect on the program, but the ripple effects from this decision will change many parts of the model – including the pace of scale, how we source and train leaders, our ability to experiment with new cash crops, and dramatic shifts in cash flow in and out of the Kenyan project. This decision was a very difficult one to make because in addition to having a big impact on the Nuru model, it will also could have a potentially negative impact on the community itself with regards to hunger.
So why do it? Why move from farming maize during two seasons each year to farming only one? In recent seasons (the last two), we have been having trouble with loan repayment and dropping participation in the program – two very alarming indicators that something seems to have gone awry. After an initial two seasons of back to back bumper crop yields, growing participation, and 98% repayments rates, we saw a dramatic drop in repayment and in participation over the following two seasons. Both macro and micro factors were at play to produce this degradation. First, the maize market in east Africa collapsed during that first season driving the price at which our farmers could sell down. This may seem odd to you with food prices now rising globally. In fact, famine conditions existed in Kenya following the post-election violence of 2008 which actually caused a spike in maize prices. This spike in prices caused a reaction at the grassroots and government level, though, that produced downward pressure on maize prices the following season. First, farmers saw that maize prices were insanely high, and they saw an opportunity to make a lot of money, so…all of them planted the next season – and I mean all of them. As I took the bus from Nairobi back to the project that season, I was amazed – acre after acre of nothing but maize. My heart sank knowing that this flood of maize onto the market was going to cause a heavy downward pressure on the price. Sure enough, at harvest, prices were down 60% below the previous season. To make things worse, in reaction to famine conditions the previous season, the government began importing subsidized maize from Uganda which served to further collapse the price.
So what was the impact on the Nuru farmer? Originally, our loan repayment scheme involved farmers repaying their loans by selling us their maize at harvest. During our first two seasons, prices were good enough to enable one acre farmers to repay their loan with only three bags of maize (they were producing 12-15 bags). When the market collapsed, though, it took around six bags instead – doubling their required payment. This took away from both surplus maize for disposable income and in some cases, maize for consumption. This effect made it very difficult for our farmers to repay their loans. In fact, by the repayment deadline, we had recovered only around 50% of our outstanding loans. This led to the second problem.
There are two rainy seasons in Kenya – long rains (February – August) and short rains (September – January). These two growing seasons for maize are butted right up against each other. As a farmer harvests, he needs to clear his land, prepare it again, and plant before the rains come approximately one month after harvest. This is a pretty tight turn around for farmers to make. If they plant on time and follow our agriculture practices to a tee, this turnaround is possible, but if anything at all goes wrong, it can throw the farmer off cycle and their maize could be late in harvesting. Let me give you an example:
Let’s say Mwita plants one acre of maize. He plants on time and uses the good practices that we taught him. He harvests on time, but when he harvests, he finds that the market price that Nuru is buying at is much lower than the previous season. In fact, it requires that he sell twice as much maize to Nuru than last season. Mwita harvests 12 bags of maize, and to pay off Nuru’s loan this season, he must sell 6 of those bags – leaving only 6 for his family’s consumption for the next 6 months (the exact amount they need to live on). Mwita decides to hold his maize and not sell right away hoping that the price will go back up. Instead, the price goes down. Now it takes 7 bags to pay off the loan, and his family’s food store for the next 6 months becomes threatened. Mwita decides to go ahead and sell to pay off the loan because he fears the price will go even lower. Now, because he is late in paying, he is late in getting inputs (Nuru will not issue another agriculture loan until the previous one is paid off). Mwita gets his inputs late, and instead of planting at the end of February to make the rains on time, he plants at the end of March. Because he planted late, his crops don’t do as well the next season, and he harvests only 10 bags of maize. Not only does he harvest fewer bags the next season, but he also harvests late – meaning that he will be late again in repaying and even later in getting his inputs. Exasperated, Mwita decides to hunker down and just not pay Nuru’s loan this season. Because he doesn’t pay, he can’t take out another loan for inputs, and his problems further spiral back into the poverty he just came out of.
This is obviously presents a sustainability problem for our farmers. To address this problem, we made some big changes in the program. Many of these changes we have taken directly out of our partner One Acre Fund’s playbook. The first is that we have instituted a continuous repayment scheme instead of a one-time lump sum payment at harvest. This allows the farmers to pay small amounts throughout the growing season and reduces the risk of fluctuating maize prices at harvest. The second change was to go to one season instead of two. This was a more difficult decision to make because it could cause our farmers trouble during the short rains season as their consumption maize stores are depleted. To mitigate this risk, we have begun experimenting with a cash crop to grow during the short rains season that has a much shorter growing cycle than maize (3 months instead of 6). Farmers will be able to grow a cash crop to make additional income during Nuru’s off season that will allow them to buy food to feed their families. By only issuing loans during one maize growing season, the farmer gets an extended period of time to repay their loan to allow more flexibility in timing for planting a, harvesting, and processing the maize prior to sale. This also has the indirect effect of increasing the quality of maize sold because the farmer has more time to process it (sort, clean, dry, shell, and bag it).
These changes have already begun to take effect in our communities. Repayment rates are going up as well as enrollment in the current long rains season. We will be closely monitoring these changes over the coming season and continue iterating the prototype as necessary.
About Jake Harriman
Founder — Jake Harriman is a United States Naval Academy graduate and former Force Recon Marine combat veteran who became convinced that the “War on Terror” can’t be won on the battlefield alone; the contributing causes of violent extremism–specifically extreme poverty–must also be eradicated. After transitioning out of the Marine Corps, Jake enrolled in the Stanford Graduate School of Business to found Nuru International in 2007 with a mission to eradicate extreme poverty in some of the most fragile regions of the world in order to help stop the spread of groups like Al Qaeda and ISIS. Over the next twelve years, Jake and his team grew Nuru to become one of the premier organizations at the nexus of security and development - empowering over 130,000 people with lasting meaningful choices to permanently climb out of extreme poverty in some of the toughest places in the world.Read More Stories of Hope