Kulemela Investments - Missing middle finance for African agribusiness

Kulemela Investments - Missing middle finance for African agribusiness

Tamale, GhanaGhana
Year Founded:
2012
Organization type: 
for profit
Project Stage:
Growth
Budget: 
$50,000 - $100,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Kulemela Investments integrates philanthropy and profit by channeling foreign investor capital toward small and medium sized African agribusinesses. These businesses support small-scale farmers directly, or are leading a beneficial market systems change, returning both financial and social impact.

WHAT IF - Inspiration: Write one sentence that describes a way that your project dares to ask, "WHAT IF?"

What if small-scale African farmers had too many market options, as opposed to too few?
About Project

Problem: What problem is this project trying to address?

In Ghana small-scale farmers lack access to markets, and markets lack access to capital. This is due in large part to a history of loan non-repayment, lack of collateral assets, and risks associated with rain-fed agriculture. 92% of registered businesses are SME’s and agriculture accounts for 39% of the country’s GDP, thus increased SME agribusiness finance is greatly needed. As a whole there’s an SME finance gap of $140-$170 billion in Africa.

Solution: What is the proposed solution? Please be specific!

Kulemela raises foreign capital and invests in Ghanaian agribusinesses that need growth financing of $10,000 - $200,000. Our innovative loan agreements are tailored to meet each business’ unique agricultural timelines with customized interest rates, moratoriums, and repayment schedules. We are able to provide this "missing-middle" financing because we operate with a low-cost due diligence process that harnesses local talent. In addition to financing, we also connect investees with technical assistance providers to maximize returns. We’ve already injected $141,000 into the Ghanaian agro-economy – 50% directly into the pockets of small-scale farmers – through 8 investments across the maize, rice, poultry, and vegetable value chains.
Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

Kulemela works with high potential agribusiness entrepreneurs who have struggled to access growth financing from traditional sources. Take for example, Basideen Issifu and his business Anibirds Farm. Anibirds is a commercial guinea fowl farm, and an incubator manufacturer. Guinea fowl is an indigenous poultry to Ghana, is more nutritious than chicken, and is loved by locals, but its demand far outweighs its supply. Kulemela’s $33000 loan to Anibirds helped expand bird production to a 5-acre commercial farm with an adjacent farmer training facility. Basideen envisions a Ghanaian poultry market free from foreign imports and he’s already trained 80 fellow farmers in guinea fowl rearing to get there. Kulemela shares this vision.

Impact: What is the impact of the work to date? Also describe the projected future impact for the coming years.

In our first 20 months of operation, Kulemela has distributed $141000 of investment to 7 agribusinesses across the maize, rice, poultry, and vegetable sectors and made our first 7% return payment to our pilot investors. Our $30000 loan to Effah Farms has been used to grow their poultry farm from 6000 to 10000 birds, resulting in an additional $40000 of revenue, and approximately 6-8 tons of Ghanaian grown poultry competing with foreign imports. With a $30000 loan, Rainbow Ventures has purchased an additional 262 tons of maize from 2400 small-scale farmers, injecting $72000 into their pockets while providing a fair and consistent marketplace. Kulemela believes in investing in value chains that are threatened by foreign imports, have high potential to increase incomes, and create meaningful employment opportunities that maximize the potential of individuals and economies for good.
Sustainability

Financial Sustainability Plan: What is this solution’s plan to ensure financial sustainability?

Kulemela is a for-profit business that charges our investees market interest rates. The revenue earned from these interest charges goes to covering our operational expenses, paying investor returns, and our retained earnings. We will need a portfolio size of $500000 to break even, and to get there we aim to raise an additional $370000 in direct portfolio investment as well as $120000 for operations from various sources in 2014.

Marketplace: Who else is addressing the problem outlined here? How does the proposed project differ from these approaches?

Currently the impact investing market is worth $36 billion. However, with minimum investment amounts of $500000, the big players overshoot the need of the majority of African agribusiness entrepreneurs who require far less than this. Kulemela is excited about our low-cost due diligence process and we’ve already spoken to larger impact investors such as the Lundin Foundation, A-Spark, and AgDevCo about future co-investments. Recognizing the great need for financing for SMEs, we also seek to influence the commercial banking sector in Ghana to open up financial services for agribusinesses.
Team

Founding Story

Mark, Mina, Andrew, and Ben all worked in African agriculture market development for several years. We founded Kulemela after consulting on large donor funded market facilitation projects across Ghana, Zambia, and Uganda, and meeting countless entrepreneurs with great visions but who were under-served or unserved by the finance sector. We wanted to invest in entrepreneurs like Agnes Yankey – a rice processor whose end-market demand was greater than what she could supply simply because she lacked the working capital to buy more rice from small-scale farmers. Businesses like Agnes’ are paramount to economic growth, poverty reduction, and food security in developing communities and we look forward to being their finance partner of choice.
About You
Organization:
Kulemela Investments - Missing middle finance for African agribusiness
About You
First Name

Andrew

Last Name

Aforo

About Your Project
Organization Name

Kulemela Investments - Missing middle finance for African agribusiness

Organization Country

, NO

Country where this project is creating social impact

, NO, Tamale

How long has your organization been operating?

1‐5 years

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Your Solution
Founding Story: Share a story about the “Aha!” moment that led you to get started and/or to see the potential for this to succeed.

Mark, Mina, Andrew, and Ben all worked in African agriculture market development for several years. We founded Kulemela after consulting on large donor funded market facilitation projects across Ghana, Zambia, and Uganda, and meeting countless entrepreneurs with great visions but who were under-served or unserved by the finance sector. We wanted to invest in entrepreneurs like Agnes Yankey – a rice processor whose end-market demand was greater than what she could supply simply because she lacked the working capital to buy more rice from small-scale farmers. Businesses like Agnes’ are paramount to economic growth, poverty reduction, and food security in developing communities and we look forward to being their finance partner of choice.

Select Sector(s): To which of Unilever's categories of sustainability does your solution apply?

Sustainable Agriculture, Smallholder Farmers.

Measurable Impact
Audience: Who have you identified as your customers/recipients and why? How will you get your solution to them or engage them in your initiative?

Kulemela’s primary customers are small and medium-sized agribusiness entrepreneurs who require $10000 - $200000 of growth financing – producers, aggregators, and processors. We have specifically chosen to work in this range of financing as it is the most under-served finance market in Ghana. These entrepreneurs require more than what microfinance can offer, and less than what most commercial banks or impact investors are willing to invest. We spend significant time on site with our clients.

Impact: What is the impact of the work to date and expected impact in the future?

In our first 20 months of operation, Kulemela has distributed $141000 of investment to 7 agribusinesses across the maize, rice, poultry, and vegetable sectors and made our first 7% return payment to our pilot investors. Our $30000 loan to Effah Farms has been used to grow their poultry farm from 6000 to 10000 birds, resulting in an additional $40000 of revenue, and approximately 6-8 tons of Ghanaian grown poultry competing with foreign imports. With a $30000 loan, Rainbow Ventures has purchased an additional 262 tons of maize from 2400 small-scale farmers, injecting $72000 into their pockets while providing a fair and consistent marketplace. Kulemela believes in investing in value chains that are threatened by foreign imports, have high potential to increase incomes, and create meaningful employment opportunities that maximize the potential of individuals and economies for good.

Growth, Finance & Leadership
Scaling the Solution: How do you intend to scale your activities over the next two years (e.g., reach new markets, diversify solutions, etc.)? What will make this possible?

There is currently more demand for our product than we can fill and we are continuously developing innovative finance models. For example, our production loan is distributed according to triggers associated with a specific farm activity. This reduces the interest charges to the entrepreneur, and risk to our investors. In order to increase our portfolio to a profitable size and reach scale in 2014, we’ll need to expand our field team from 4 to 10, and raise another $370000 from investors. We’ll be diversifying our investor base by reaching the accredited investor market through partnerships with Toniic, the SVX, and Impact Base. We’ll also be seeking co-investment partnerships with larger impact investors as mentioned earlier.

Financial Sustainability: What is your business model to ensure financial sustainability?

Kulemela is a for-profit business that charges our investees market interest rates. The revenue earned from these interest charges goes to covering our operational expenses, paying investor returns, and our retained earnings. We will need a portfolio size of $500000 to break even, and to get there we aim to raise an additional $370000 in direct portfolio investment as well as $120000 for operations from various sources in 2014.

Experience: Please provide examples of any previous entrepreneurial initiatives you have pioneered.

Kulemela General Manager Andrew Aforo ran a successful rice aggregation venture before consulting in the agriculture market development space. Director of Business Development Mina Shahid worked as the marketing strategist for an organic fertilizer business in Ghana prior to starting the Uganda office for EWB Canada, and Executive Director Mark Brown prototyped innovative outgrower schemes for Blue Skies – one of Ghana’s largest fruit exporters.