Juhudi Kilimo Rural Agriculture Micro-Asset Financing
This entry has been selected as a finalist in the
Leveraging Business for Social Change: Building the Field of Social Business competition.
Juhudi Kilimo Company Limited is a newly established for-profit enterprise that addresses this market gap by providing an innovative, agriculture-based, micro-asset financing loan product to assist the smallholder farmers in acquiring productive assets such as dairy cows, chickens and irrigation equipment. Juhudi is a wholly owned subsidiary of the K-Rep Group based in Nairobi Kenya.
About You
Section 1: About You
First Name
Nat
Last Name
Robinson
Website
Country
Kenya
Section 2: About Your Organization
Is your initiative connected to an established organization?
Yes
Organization Name
Juhudi Kilimo
Organization Website
Organization Phone
254 0203906000
Organization Address
7th Floor K-Rep Centre, Wood Ave
Organization Country
Kenya, NA
Is your organization a
For‐profit
How long has this organization been operating?
1‐5 years
Your idea
Name Your Project
Juhudi Kilimo Rural Agriculture Micro-Asset Financing
Describe your Social Enterprise
Juhudi Kilimo Company Limited is a newly established for-profit enterprise that addresses this market gap by providing an innovative, agriculture-based, micro-asset financing loan product to assist the smallholder farmers in acquiring productive assets such as dairy cows, chickens and irrigation equipment. Juhudi is a wholly owned subsidiary of the K-Rep Group based in Nairobi Kenya.
Country your work focuses on
Kenya
Innovation
What makes your innovation unique?
While similar in structure to the traditional microfinance and microcredit services, there are key differences. For example, micro-asset financing produces a greater positive social impact. This is because assets financed through Juhudi produce a cash flow (such as selling milk or eggs) and there is a reduced risk since the asset financed can also act as collateral in the event of default. The Juhudi Kilimo theory of economic change posits that economic development can be brought to rural Kenya by providing a growth path for rural smallholder farmers, by leading from an initial wealth-creating asset to next-stage agribusinesses and then to larger rural enterprises.
Do you have a patent for this idea?
Impact
This Entry is about (Issues)
Tell us about the social impact of your innovation. Please include both numbers and stories as evidence of this impact
Over the last five years the project disbursed a total of KShs 175 million ($2.2 million). Over 7,000 smallholder farmers, 46% of whom are women, have benefited from this pilot project. By financing income-generating assets and linking farmers to development services, Juhudi helps to build and sustain wealth-creating rural activities. By becoming a sustainable, profitable institution, Juhudi will continue generating social and economic value beyond 2014. The most popular asset financed under Juhudi Kilimo is the diary cow which range in price from Kshs 40,000 to Kshs 80,000. Local breeds only produce 2-4 liters per day while the breeds financed through Juhudi can produce anywhere from 12 to 20 liters per day. Production is also dependent on how well the animal is maintained by the farmer. A liter of raw milk in Kenya will sell for on average of Kshs 20 per liter which will leave the farmer with roughly Kshs 14 per liter after deducting costs and extra milk used for any calf and family consumption. When factoring in the normal 305 day lactation period for cows, a dairy farmer can usually generate enough income to service a Kshs 40,000 loan during the period. Juhudi has recently deployed the CERISE social performance impact tool to support the social mission and ensure that the marginalized rural smallholder farmers continue to benefit from the financial services provided by Juhudi.
Problem: Describe the primary problem(s) that your innovation is addressing
Agriculture and agro-related activities employ about 75% of Kenya’s workforce many of whom are smallholder farmers. Yet per capita food productivity from Kenya is 30% lower than the rest of Sub-Saharan Africa resulting in 21% of total food consumption being imported or received as food aid. Many of these these rural poor smallholder farmers are unable to access to financial services required to acquire more productive farming assets to increase yields on the farms. An estimated 51% of the rural Kenyan population is excluded from financial services or only access informal sources. Many of these rural farmers lack the collateral or business assets required for financing by the country’s many Microfinance Institutions, because they have limited rural reach and serve only 17.9% of the target Kenyan population. Juhudi Kilimo is addressing this problem by providing innovative asset financing to the rural smallholder farmer.
Actions: Describe the steps that you are taking to make your innovation a success. Include a description of the business model. What might prevent that success?
Between 2009 and 2014, Juhudi expects to increase the size of its portfolio by KShs 200-300 million (USD $2.5 million – 3.8 million) per year. The funds are critical to the future sucess of the innovation and faster these funds are raised and deployed, the faster Juhudi will reach sustainability. Juhudi’s projected FY 2009 – 2014 income increases its total income year over year by 150%, with the largest increase from 2009 to 2010, as that is the first year that Juhudi will have access to large amounts of debt. During this same five year period, Juhudi anticipates increasing the number of active clients from 7,179 to 40,321. The rapid expansion is achievable based on the existing 25,678 clients who are already registered or saving with Juhudi and currently awaiting a loan. To meet these levels of growth in the rural areas, Juhudi has engaged innovative cost saving technologies such as Safaricom’s MPESA mobile money transfer system. A recently updated loan tracking system will also provide Juhudi with the capacity to manage the growth in clients while remaining flexible enough to interface with new processes like MPESA. To manage risk, all dairy cows financed by Juhudi (approximately 71% of the outstanding portfolio) are insured through the Kenyan Cooperative Insurance Company (CIC) for death and disease at a cost of 4% of the asset. This insurance also extends to cover death of the client at the cost of 1% and supports funeral costs. CIC has been working with K-Rep for several years to develop these insurance products for the smallholder clients. Juhudi is currently exploring additional insurance products such as weather indexed crop insurance and political violence insurance to reduce the risks related to all assets financed.
Results: Describe the expected results of these actions over the next three years. Please address each year separately, if possible
Juhudi plans to achieve profitability in 2011, while maintaining operation size and scale. Growth will continue to be a priority as well, though the primary focus is reaching and maintaining profitability, and status as a leading Kenyan institution for rural asset based finance. In three years Juhudi seeks to grow the outstanding portfolio from USD $ 893K to $9.2M, increase number of clients from 7,377 to 47,364 and maintain a minimum repayment rate of 95% (current rate in 2010).
How many people will your project serve annually?
1001‐10,000
What is the average monthly household income in your target community, in US Dollars?
$100 ‐ 1000
Does your innovation seek to have an impact on public policy?
No
If your innovation seeks to impact public policy, how?
Approximately 150 words left (1200 characters).
Sustainability
What stage is your Social Enterprise in?
Operating for 1‐5 years
Does your organization have a board of directors or an advisory board?
Yes
Does your organization have a non monetary partnerships with NGOs?
Yes
Does your organization have a non monetary partnerships with businesses?
Yes
Does your organization have a non monetary partnerships with government?
No
Please tell us more about how partnerships could be critical to the success of your Social Enterprise
Juhudi Kilimo will maintain its existing strong partnerships with the K-Rep Group, Kiva.org, the Grassroots Business Fund but seek additional financial supporters in the social investment field. Other critical will partnerships include groups such as the ministry of agriculture's extension service providers and NGOs like TechnoServe and SwissContact to build the future capacity of the Juhudi Kilimo farmers.
We would like to learn more about how your initiative is financially supported. Please explain your business plan/revenue model
Juhudi Kilimo deploys a hybrid microfinance business model that was adapted from the Grameen Bank in Bangladesh to fit the needs of Kenya. Juhudi provides loans and charges an 18% flat interest rate on the outstanding balances along with a 1% application fee to generate income. The lending interest rate is comparable to other microfinance institutions in Kenya but Juhudi will continue to strive to balance profitability with providing the best social impact for its clients. Under the current cost structure and sources of financing, Juhudi will reach profitability once the outstanding portfolio reaches $4.3 million.
The Story
What was the defining moment that led you to this innovation?
Juhudi Kilimo is the product of a five-year pilot program under the K-Rep Development Agency, an antipoverty NGO, that performs research and product development for the microfinance sector. K-Rep noticed that many microfinance institutions in Kenya favored lending to urban clients engaged in trade or small businesses. The rural smallholder farmer was excluded from the system. K-Rep then began piloting a credit scheme for smallholder farmers and later identified a demand to acquire larger loans to acquire productive assets. After successful completion of the pilot, K-Rep transferred all of the pilot program’s assets to Juhudi Kilimo in April of 2009.
Tell us about the person—the social innovator—behind this idea.
Aleke Dondo is the social innovator who brings 21 years of experience in microfinance with the K-Rep Development Agency, a non-profit microfinance institution which services the needs of rural small-scale farmers and micro-entrepreneurs through innovative microfinance projects. Aleke has in-depth background with the start-up and management of rural microfinance organizations and a background in small (informal) enterprise development. He holds a Master's Degree in economics from York University in Toronto and has carried out more than 30 major studies in the fields of small enterprise and microfinance development, and has published 10 research papers on these subjects. Aleke serves on the boards of organizations involved in development work including Kenya Gatsby Trust (Chairman), Kenya Community Development Foundation (Vice-Chairman) and Saga Thrift and Enterprise Promotion.
How did you first hear about Changemakers?
Newsletter from Changemakers
If through another source, please provide the information
 | 95 weeks agoJosh Harder said: I heard a report saying Juhidi is the most effective source of micro-business / SME financing in Kenya because they allow borrowers to ... about this Competition Entry. - read more > |
| 98 weeks agoNat Robinson said: Dear Violeta, Thank you for the comment. I believe the largest challenge we face at the moment is sourcing affordable and long-term ... about this Competition Entry. - read more > |
| 98 weeks agoVioleta Bendersky said: Dear Nat Robinson, According to your experience what are the main barriers or challenges so that social business model can ... about this Competition Entry. - read more > |
| 102 weeks agoNat Robinson updated this Competition Entry. |
| 102 weeks agoNat Robinson submitted this idea. |
