Local Lenders is a non-profit microfinance organization founded for the purpose of providing small, affordable loans to agricultural entrepreneurs with poor or limited credit history, in order to promote sustainable agriculture. These loans range from $500.00 to $5,000.00 and are set to be paid back within a 12 months with a fixed interest rate of 4 percent. The organization was founded in spring of 2009 and is completely staffed by students from Kenyon College and Mount Vernon Nazarene University.

Problem

According to the U.S. Census Bureau, 13.1 percent of the population lived below the poverty line between 2006 and 2010 in Knox County. On the other hand, agriculture accounts for a large portion of Knox County's economy with a total of $110 million coming from crops and livestock. The agriculture and food sector accounts for 13 percent of the county’s total GDP and 20 percent of the county’s employment. Low income farmers are not able to tap into the tremendous benefits of the agricultural sector because they do not have access to financial services. Most traditional banks do not provide loans less than $5,000. Nor do they consider giving loans to people without credit scores. Moreover, low income farmers in Knox County often have to resort to expensive credit avenues such as predatory lenders who charge high interest rates. The community in Knox County is thus in dire need of a small, short-term and low interest loan system, and this is precisely what we seek to provide.

Solution

Our solution is to provide small, affordable loans to agricultural entrepreneurs with poor or limited credit history, in order to help them pull themselves out of the vicious cycle of poverty. These loans range from $500.00 to $5,000.00 and are set to be paid back within 12 months with a fixed interest rate of 4 percent. Receiving a loan requires that the farmer/entrepreneur go through business counseling, workshops and training programs, all provided free of cost by Small Business Development Center of Ohio, CES Credit Union, and Mount Vernon Nazarene Enactus Organization. This allows the farmer to “customize” their aid package according to their unique circumstances. Local lenders stands out among other such organizations as it is the only one to provide this kind of leverage for the farmers in the decision making process. In doing so, Local Lenders brings together students and administrators from two different colleges as well as various members of the surrounding community in Knox County. In all these many ways, Local Lenders takes a creative new take on providing loan-based systems for farmers in need.

Example

Fred is a low income farmer from Danville Ohio. Fred wants to extend the growing season for his vegetables and fruits by using a hoop house, but he does not have the financial means to do so. Fred cannot be able to take out a loan from the local bank as he has a poor credit score and he does not meet the required minimum loan amount from the bank. Fred is a member of the Knox County Food Council, which is one of Local Lenders’ peer organizations. He then pitched his idea of building a hoop house to the director of the Food Council who then refers him to Local Lenders. Fred meets with Local Lenders members to further discuss his project ideas. Local Lenders then works with Fred to create a business plan for his project proposal, which is submitted to the board of directors for approval. If the board of directors approve Fred’s proposal, Local Lenders will then provide him with a loan of X dollars. Student officers will then be assigned to track Fred’s progress and also assist him with any paperwork that needs to be done for the loan repayment. In this way, Fred will be able to grow more fruits and vegetables that he can sell in the farmers market. This will help create a secure income for Fred that he can use to support his family and invest in his farm.

Marketplace

While Local Lenders does not have any immediate competitors, there are a number of organizations that act as peers in providing support to local farmers in Knox County. These are; the Knox County Local Food Council, Rural Life Center at Kenyon College, Ohio Ecological Food and Farm Association, and Ohio Farm Bureau Federation. These organizations are also working to promote local food systems and sustainable agriculture in Knox County. They differ from Local Lenders in that they do not provide business education/ counseling and they do not collaborate with local banks to give farmers the opportunity to advance to a program that offers a substantial amount of loans. Instead, these organizations create markets for local food and use education, scholarships, and public projects to promote sustainable food systems. By partnering with these organizations, Local Lenders will gain insight into expressed needs within the farming community, have a base from which it can connect with potential borrowers, and have a channel through which it can disseminate information about LL to the community in Knox County.