I just don't get it.
Can a return of more than 20% per annum in USD yield be achieved while lending to smallholder farmers in rural Kenya?
CONTEXT: An impact investor wants to give us debt at 14-18% per annum in USD to lend to farmers. Now, add in foreign currency exchange gains and losses risk, inflation risk, execution risk, etc. Wouldn't it not reach the rural farmer at 50-60% per annum or even more?
Today, rural smallholder farmers can't afford healthcare and education; it's just too expensive. Our intervention is to help them afford these things and diversify to create additional revenue streams away from farming.
To make it viable, I believe debt (if needed) must reach the farmer at less than 15% per annum in KES. That's what I think because gross margins are so slim in rural farms.
If they grow maize in less than 1 acre, they are probably earning less than $300 the whole year (Synnefa Field Data). If we increase income by 30%, how does $390 solve for this? Then come and add 60% interest rates?
I don't know how other agricultural companies have been doing it, but I would love to learn and see what I can borrow and implement at
@synnefa_KE. Especially around lending to rural smallholder farmers deep in the villages because that's where much of our effort is needed to truly get them to unlock true wealth and escape poverty.
#debt #impactinvesting #agriculture #farming