One Acre Fund helps Africa's small farmers keep in their fields

"Because we’re charging them for the good or service it means we can [ensure financial] sustainability as an organization," says Stephanie Hanson, director of policy and research at OAF.

The loan terms are what make the One Acre model work for farmers. Rather than forcing farmers to make regular payments, OAF allows farmers to repay loans at their own convenience. The only stipulation is that farmers must finish repaying their loans at harvest time. In the case of a major crop failure caused by drought, disease, or a natural disaster, OAF offers farmers the opportunity to purchase insurance. In extreme cases, the organization will even forgive the loan in order to allow farmers to feed their families.

Investments in African agriculture have the potential to spur rural development, but a lack of access to credit, inputs, training, and markets means small farmers continue to live in poverty. By designing its services specifically for smallholder agriculture in Africa, OAF hopes to change that.

"You can get a Coca-Cola, often cold, in nearly any rural village in Kenya," offers OAF founder Andrew Youn. "We want to make basic agriculture technologies, finance, and training every bit as ubiquitous."

Microfinance – when targeted to smallholder agriculture – can improve the lives of rural Africans, stem the tide of urbanization, and increase food security across the continent. OAF currently serves 75,000 farm families, and plans to expand to over 200,000 families in the next three years. With a 98 percent repayment rate on its loans in fall 2011 that rivals even the highest-performing MFIs, OAF is proving that microloans for agriculture are possible.

The question now is whether the One Acre Fund will inspire other MFIs to follow suit.

• This article originally appeared at Global Envision, a blog published by Mercy Corps.

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