Financial services food security innovation – Kilimo Biashara

Financial services food security innovation – Kilimo Biashara

Kenya, KenyaNairobi, Kenya
Organization type: 
for profit
Project Stage:
Established
Budget: 
$1 million - $5 million
Project Summary
Elevator Pitch

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

Through Innovative solutions such as Kilimo Biashara subsistence farmers are transformed into commercial farming enabling Equity Bank champion transformation

About Project

Problem: What problem is this project trying to address?

The initiative was created due to the emerging food crisis within the region due to the over reliance on subsistence farming to ensure food security. The food crisis, skyrocketing food prices and the high rate of unemployment was causing unrest and insecurity in some parts of the country. Majority of the people largely those at the Base of the financial Pyramid (BOP) could not afford basic foods. Equity Bank being a financial inclusion champion conceived strategic partnership to tackle food insecurity through the proliferation of commercial farming giving rise to the ultimate solution for supporting farmers and communities as a whole.

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

The Kilimo Biashara initiative is credit services adapted to crop production. It is a loan product specifically designed for smallholder farmers in food crop production with a subsidized interest rate (10% p.a vs. 22% p.a for other loan products). It is administered through the Bank’s vast branch network and supported by a team of staff qualified in agricultural practices to support smallholder farmers’ transition towards commercial farming. The initiative provides additional benefit to the farmers through training on financial literacy with specific emphasis on budgeting and use of borrowed funds. The availability of agriculture relationship officers who understand crop production needs. As well as warehouse receipt financing where the farmers can store the crop in a specified and certified warehouse as they wait for prices to improve while maintaining the quality of the harvest.
Impact: How does it Work

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

• The bank has given out loans of KSHS 2.7 billion (USD 31.8 million equivalent) to 53,266 direct clients. The farmers have been able to produce food crops for domestic use and sell the excess to the market thus increasing their household incomes. Some farmers have diversified their sources of incomes by establishing agency banking outlets where fellow community members can access financial services. • Currently the farmers have been contracted to do seed multiplication for seed companies, a move which supports transformation of agriculture from a subsistence focus to commercialisation. This has also addressed the challenge/ shortage of seeds in Kenya and in the region. • Very strong agricultural value chain partnerships have emerged with other players like fertilizer companies and agro chemical companies joining in the partnership to facilitate the farmers’ food production process. Ensuring success end to end. • World Food Program has adopted Kilimo Biashara in the Purchase for Progress project where small holder farmers have the opportunity to sell the surplus produce to WFP thus creating a ready market for farmers. This has enhanced the sustainability of the initiative.
Sustainability

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

The Kilimo Biashara initiative has received competition from other financial services institutions within the region involved in enhancing inclusion as well as local microfinance institutions targeting the agricultural sector. What differentiates Equity Bank is the robust nature of the initiative whereby we have partnered with international development partners so as to influence best practices, used our vast branch network to ensure accessibility and reach of the solution to the neediest and provided support to the entire value chain ensuring a focus over the entire agricultural spectrum. We do not see challenges emanating but rather opportunity for other players to join in the fight against food insecurity and poverty.
Team

Founding Story

Equity Bank began its operations in 1984 and targeted farming communities in the rural areas of Central Kenya. Since inception, the Bank has been focused on eliminating the challenges faced by smallholder farmers in accessing financial services hence its establishment of the first branches in rural communities. The founder’s resilience was tested in the early 1990’s when many foreign banks were converting from retail to corporate banks, leaving a vacuum in the retail sector. In addition these Banks were also closing their rural branches. But true to its commitment to the rural communities in enhancing financial inclusion Equity maintained its rural presence and even increased its presence in the areas that experienced the vacuum created by the departure of the foreign banks. And to date, Equity Bank stands as the largest Bank in East and Central Africa in number of customers due to its resilience and commitment to financial inclusion.
About You
Organization:
Equity Bank Limited
About You
About Your Organization
Organization Name

Equity Bank Limited

Organization Country

, NA, Nairobi

Country where this project is creating social impact

, Kenya

How long has your organization been operating?

More than 5 years

Has the organization received awards or honors? Please tell us about them

2012 Ernst & Young Entrepreneur of the Year Award – Ernst & Young

2012 Most Innovative Bank in Africa – African Banker Awards

2011 Best Initiative in Support of SME’s and Millennium Development Goals - Africa Investor Awards

2011 New Sustainability Champions – World Economic Forum

2011 & 2010 African Banker of the Year – African Banker Awards

2009 Yara Prize for Agriculture – Yara Foundation

2007 Global Vision Award in Microfinance – G8 Vision Summit

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Innovation
How long have you been in operation?

Operating for 1‐5 years

Which of the following best describes the barrier(s) your innovation addresses? Choose up to two

Access, Cost, Quality, Equity.

Social Impact
Please describe the goal of your initiative; outline what you are trying to achieve

Equity Bank’s initiative for food security is Kilimo Biashara, it is a Kiswahili word meaning "farming as a business". It is a financial product specifically designed for smallholder farmers who are in food production and agro dealers who supply farmers with farm inputs required in form of certified seeds and fertilizer aimed at ultimately increasing productivity of food crops and harvests.

Which barrier(s) to financial inclusion does your solution seek to address? (select all applicable)

Physical and other accessibility obstacles that prevent communities from reaching financial services, The lack of affordable financial products tailored to the needs of underserved and excluded communities,, Powerful incentives for financial service providers to move up-market.

If you selected 'other' above, please specify which other barriers to financial inclusion you solution seeks to address:
For which underserved or excluded communities will your solution create access to valuable, affordable, secure and comprehensive financial services?

Agriculture is the backbone of Kenyan economy and means of livelihood for most of the rural population. The sector contributes directly 26% of GDP of Kenya another 25% indirectly. It supplies the manufacturing sector with raw materials. The sector accounts for 65% Kenya’s total exports, employs 40% of total population and over 70% of the rural population depend on agriculture for their livelihoods. However, in Kenya over 10 million people suffer from chronic food insecurity and poor nutrition. It is these segments of the population that the solution targets – the over 70% of the rural population that depends on agriculture and the quarter of the population that experiences chronic food shortages.

Could your solution work in other geographies or regions? If so, where?

Yes the solution could be replicated in other countries around Africa and specifically around the Sub Saharan Africa region. We would like to replicate this model within the regional market in countries such as Uganda, Tanzania, Rwanda and South Sudan within the next one year since all systems and facilities required are in place. The only remaining resource required is funding since the funding we currently have with our partners is only for the Kenyan market.

If your solution is dramatically successful, how will things be different in 10 years?

Ten years of successful implementation of the solution would yield approximately 40% to 50% contribution towards the GDP of the country underpinning the relevance of agriculture to the development of the nation. Additionally, widespread commercial farming would result in the increase of job opportunities thus providing economic benefit to a large section of the population resulting in their transformation both socially and economically. However, the most important benefit would be the reduction in the cases of food insecurity and poverty throughout the region. This would be achieved through increased food production and enhancement of the quality of harvest. This would enable all communities within the region an opportunity have their basic needs met elevating the national outlook and development towards the millennium development goals.

What will have had to have changed to make this happen?

Agricultural transformation – there would have to be a sustained change in the perception of agriculture as a viable economic activity. At the moment, there still exists a large section of the population that practices subsistence farming and as such is yet to realize the potential agriculture can have in transforming lives and livelihood through commercialization of their agricultural practices.
Agricultural value added services – there would have to be an increase in the number and quality of value added services relating to food production. This would entail attracting more investors towards the agricultural industry so as to enhance the overall value chain for the farmer. In doing so, the farmer would be able to increase his/ her profits due to the strengthening of value chain partnerships and cooperation.

What has been the impact of your solution to date?

The bank has given out loans of KSHS 2.7 billion (USD 31.8 million equivalent) to 53,266 direct clients. The farmers have been able to produce food crops for domestic use and sell the excess to the market thus increasing their household incomes. Some farmers have diversified their sources of incomes by establishing agency banking outlets where fellow community members can access financial services.
Currently the farmers have been contracted to do seed multiplication for seed companies, a move which supports transformation of agriculture from a subsistence focus to commercialisation. This has also addressed the challenge/ shortage of seeds in Kenya and in the region.

What is your projected impact over the next five years?

Regional replication – we shall aim to replicate this financing model to the other regional markets where we do operate namely; Uganda, South Sudan, Rwanda and Tanzania.
Enhancing farmer financial inclusion – we shall aim to increase the number of households transforming from subsistence farming to sustainable commercial farming and onwards to building commercial enterprises that will enhance their lives and livelihood.

What barriers might hinder the success of your project? How do you plan to overcome them?

Fluctuations in weather patterns and climatic changes – the bank would mitigate the climate change risks by promoting conservation agriculture and specifically initiatives such as use of drought resistance crops, drip irrigation, livelihood activities that conserve the environment. In addition the bank has developed an insurance product that would help smallholder farmers insure their crops and harvests mitigating weather related risks.
High rate of financial illiteracy – the success of our project hinges on the enhancement of financial literacy training where we are able to educate farmers in financial management practices that would ensure sustainability of their commercial practices.

Winning entries present a strong plan for how they will achieve and track growth. Identify your six-month milestone for growing your impact

Number of farmers trained under the financial literacy program and the number of farmers accessing credit products

Identify three major tasks you will have to complete to reach your six-month milestone
Task 1

Intensify agribusiness awareness campaign to enhance financial inclusion among farmers

Task 2

Coordinate regional financial literacy trainings to increase number of farmers accessing and benefiting from financial service

Task 3

Increase the number of Equity Bank agricultural extension officers and provide adequate staff training.

Now think bigger! Identify your 12-month impact milestone

Source finances to support farmers with entrepreneurial skills enabling access and utilization of value added services

Identify three major tasks you will have to complete to reach your 12-month milestone
Task 1

Ensure regional expansion into neighbouring markets and countries.

Task 2

Enable the effective and efficient use of technology to enhance farmer productivity

Task 3

Establish more strategic partnerships to bring onboard greater collaboration and synergies

Sustainability
Tell us about your partnerships

IFAD through Kenya Government and AGRA’s role is to facilitate a risk sharing fund of 10% to mobilize KSHS. 3 billion (USD 50 million equivalent).
The Ministry of Agriculture is responsible for providing extension services such as training farmers on agricultural best practice. AGRA also provides supports to AGRO dealers.
Other partnerships that have been created include the World Bank, World Food Program, Millennium Village Project fertilizer, companies, seed companies, fresh produce exporting companies and chemical companies.

Are you currently targeting other specific populations, locations, or markets for your innovation? If so, where and why?

At the moment the initiative has been implemented throughout the country in the various agricultural ecosystems.

What type of operating environment and internal organizational factors make your innovation successful?

Equity Bank combines its vision to be the champion of socio-economic prosperity in Africa with its ability to create mutually sustainable value chains to ensure sustainability. Each and every day the Bank and its employees remain focused on providing value, convenience and transformation to its customers through prioritization of product, process and organizational innovation. Being an innovation leader in the industry drives us to a constant pursuit for out of the box solution, leveraging technology and partnership thus enhancing the passion and execution capability of our employees which results in the unification towards scaling up provision of financial services that socially and economically empower its clients. This culture has been the cornerstone of our success in Kilimo Biashara

Please elaborate on any needs or offers you have mentioned above and/or suggest categories of support that aren't specified within the list

Financial literacy training – Through the Equity Group Foundation we shall continue to provide financial management training to men, woment and the youth of the nation. The objective of the venture is to train and empower 1 million youth and women by 2014 with knowledge in financial matters so as to minimize the factors limiting economic transformation

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