How Nuru Helps Farmers Take Their First Steps Out of Extreme Poverty

Nuru International’s mission is to end extreme poverty in remote, rural areas. Globally, 1.6 billion people live in extreme poverty [Multidimensional Poverty Index 2014]. In a context of overwhelming need, Nuru prioritized impactful and sustainable focus areas in which to work with the most people at the least cost. Thinking big, Nuru started by identifying the lowest common denominators for all people living in extreme poverty; it found that half are smallholder farmers living in remote rural areas (852 MM or 53%). Smallholder farmers have land and labor, but fail to consistently produce sufficient crop yields to both feed their families and have a stable income. Their hunger and financial insecurity are complicated and compounded by an inability to cope with economic shocks; preventable disease and death; and lack of access to quality education. These overlapping challenges make extreme poverty a multidimensional issue and, too often, a matter of life-and-death. Nuru believes that with access to opportunities, smallholder farmers can and will graduate from daily survival to cultivating a future without extreme poverty.

Nuru seeks to end extreme poverty in remote rural areas through establishing local community development organizations and funding them with social enterprises. Nuru begins by identifying local leaders, providing training, co-creating solutions, and implementing these solutions to create sustainable, lasting change throughout the region and beyond. Nuru’s focus on long-term development gives Nuru members time to develop the habits, norms and mentality needed to live free from extreme poverty—permanently. Their path out of poverty begins when Nuru members—smallholder farmer households living in remote, rural areas—learn to overcome hunger and increase income in a sustainable way. Additional programs teach Nuru members to cope with economic shocks; diversify sources of income; avert preventable diseases and death; and access quality education for children. This post focuses on how Nuru is enabling farmers in Kenya and Ethiopia to take their first steps out of extreme poverty through its Agriculture Program, Market Linkage, Revolving Fund and Farmer-Based Organizations.

Smallholder farmers in remote, rural areas have limited agricultural productivity due to lack access to quality farm inputs, low adoption of good agricultural practices and exposure to risks like diseases, pests and environmental fluctuations. Nuru’s Agriculture Program helps farmers increase crop yields, food security and income by providing a comprehensive suite of goods and services, which include farm input loans, technical training, extension services and group support structures. The farm input loan provides high quality seed and fertilizer for the production of grains and pulses. The input loan is punctual, accessible and has flexible loan terms providing for repayment after harvest. Technical training builds knowledge, skills and lasting behaviors, ensuring farmers learn, adopt and continue good agricultural practices. Extension services throughout the season prevent, avoid and mitigate risks to crop production. Group support structures build on existing networks of trust and social capital to reinforce, multiply and efficiently scale programming. The results of the Agriculture Program are: increased crop yield, food security and income (as assessed through Nuru’s Monitoring and Evaluation Program).

Increasing farmers’ crop yields—alone—is not enough. In order to surpass subsistence agriculture, farmers must translate surplus yields to income. To do so, farmers need access to reliable markets where they can sell their produce at a fair price. Nuru’s Market Linkage strategy centers on connecting farmers with reliable buyers further up the value chain. Disaggregated smallholder farmers producing bulky commodities—such as grains and pulses—find themselves in the most disadvantaged position in the value chain. With little market information and high transaction costs, smallholder farmers oftentimes have no other recourse but to sell their produce at marginal prices. Nuru’s Market Linkage solves this problem by aggregating smallholder farmers and their surplus produce. This is conducted through farmer organizations and physical infrastructure including mobile buying stations, village aggregation centers and centralized granaries. This creates efficiencies by reducing transaction costs and off-tarmac miles. Grain is then sold in big lots to large traders. The value captured in the process funds the Market Linkage strategy and stays with the farmer instead of intermediary traders.

The Market Linkage strategy is dependent on farmers producing surplus yields, which they achieve through the Agriculture Program. This assumption begs the question: can Nuru provide farmers with lasting access to finance without an ever-growing, centralized portfolio? Nuru’s Revolving Fund strategy is our response to the monumental challenge of funding smallholder agricultural input loans. With an estimated $450 billion global demand for smallholder agricultural finance—currently less than two percent satisfied—sustainable financing mechanisms are an essential part of lifting hundreds of millions of smallholder farmers out of extreme poverty.[1] Loans are financed through a revolving fund. Farmers take loans, increase their yields, harvest their crops and repay their loans (with interest), thereby replenishing the fund. This pool of funding initially grows through Nuru’s investment and is sustained through good stewardship and farmer-owned entrepreneurship. Units of the Revolving Fund thereby comprise small, incremental and permanent advances towards decreasing the deficit for smallholder agricultural finance.

Farmer-Based Organizations provide the mechanism to deliver the Agriculture Program, Market Linkage and Revolving Fund strategies throughout a community. Community leaders, with close and intensive mentorship of local Nuru Agriculture Program staff, work to establish and strengthen a Farmer-Based Organization founded in their community. These farmer-owned, farmer-run and farmer-profiting businesses engage in partnership with the Agriculture Program to administer input loans, partake in technical training, engage in extension services and strengthen their organization. The Farmer-Based Organization manages the Market Linkage strategy as a business line, offering farmers and the business entity fair and profitable returns. Each organization features a Revolving Fund, which they make productive and profitable by satiating the demand of credit from their farmer-members. Over time, the Farmer-Based Organization has members who have learned and adopted good management and agricultural practices. They then no longer require the facilitation and mentorship of the Agriculture Program. Similarly, the Market Linkage business line and Revolving Fund pool of capital become sufficiently established and profitable. In this way, the Farmer-Based Organization and its farmer-members continue to thrive, and Nuru is able to establish Farmer-Based Organizations elsewhere, where the cycle begins anew.

Here is a snapshot of our current progress: In 2015, Nuru is working in Kenya and Ethiopia. Nuru Kenya’s Agriculture Program is offering farmers loans for the production of maize, sorghum and finger millet. The Market Linkages strategy is launching with a revamped financial model and purpose in 2015. Nuru Kenya’s Agriculture Program is yet to fully implement Revolving Fund and Farmer-Based Organization strategies, although these opportunities are on the horizon. Nuru Ethiopia’s Agriculture Program is targeting 1,700 farmers taking loans for the production of maize, beans, wheat and teff.[2] The Market Linkage, Revolving Fund and Farmer-Based Organization strategies became operational in 2014, Nuru’s first year of programming in Ethiopia.

[1] Dalberg (2012) Catalyzing Smallholder Agricultural Finance http://dalberg.com/documents/Catalyzing_Smallholder_Ag_Finance.pdf

[2] Eragrostis tef is a nutritious cereal that forms a substantial part of the Ethiopian diet in the form of injera, a spongy sourdough-risen flatbread.