An innovative twist on microfinance

Agriculture is a risky business by nature. Weather conditions impact harvests and market conditions determine food prices, leaving farmers with unsteady income.

Microloans play an important role in helping farmers around the globe subsist during lean seasons and prepare for the next planting. Many traditional microloans, though, have rigid repayment schedules that are better suited for other business models, and don’t address some of growers’ key needs, like access to technology.

To better serve small-holder farmers in developing countries, microfinance leaders including Kiva and its network of field partners have introduced new types of agriculture loans designed to multiply the impact and sustainability of lending.

One feature of these innovative agriculture loans is flexible repayment terms. This means borrowers enjoy longer repayment periods or repay the loans when they have an influx of cash, rather than being locked into a monthly timetable.

Some organizations offer loans that come in the form of products or services instead of money. In-kind loans might include seeds and fertilizers that are purchased in bulk and off-season to maximize savings. They can also be for larger productive assets, such as cows or processing equipment, or even for technology like cellphones which can be used as information hubs for communities of farmers.

Here are some examples:

• Kiva’s partner Honey Care Africa offers an in-kind loan in the form of beehives to subsistence farmers who want to earn extra income. It found that hives grow farmers’ income by $60 per hive yearly, with an additional benefit of up to 30 percent higher crop yields from cross-pollination.

• In Uganda, Grameen Foundation AppLab supplies mobile phones as in-kind loans to help borrowers get access to crucial information such as weather, crop disease warnings and market prices.

• One Acre Fund, another Kiva field partner, offers a blend of flexible repayment where farmers can settle their loans after harvest, and in-kind loans for seeds and training. Compared to those not covered by the One Acre Fund program, recipients of the blended financing saw their incomes increase by 100 percent.

Across the industry, experimentation continues to come up with new types of financial products designed to help farmers, small business owners and others support their families and lift their communities out of poverty. And whether it’s through Kiva or one of its many valuable field partners, anyone can help encourage the industry to continue to innovate by backing a loan that truly serves borrowers’ needs.

Kiva is a partner organization of the Live Below the Line campaign, a five-day challenge to eat and drink using only $1.50 per day to raise awareness and funds toward the fight against extreme poverty. Click here to sign up for the challenge.