Tackling Chronic Hunger: Nuru’s Agriculture Model

I thought in this post that I would take some time to describe Nuru’s agriculture model and talk about some of the ideas behind why we have taken this approach.  There are two main problems we are tackling through Nuru’s agriculture model: chronic hunger with a lack of an economic byields and access to fair markets for smallholder bases in remote rural communities.  We attempt to address these challenges via the main goals of the agriculture program:

Increase Crop Yields

Most farmers in remote rural areas lack two main things that prevent them from creating higher crop yields: knowledge and tools.  Nuru first provides access to knowledge and tools to help farmers increase their crop yields to fight chronic hunger; and, then we provide reliable access to fair markets to enable a community economic base.  The model we use to increase crop yields is the One Acre Fund model – created by Andrew Youn.  Andrew noticed that farmers in remote areas could not afford high quality farm inputs, and that even if they could, they did not have access to information on best practices in utilizing those inputs.  Andrew’s model is to loan high quality inputs to farmers and then teach them proven, best practices in using them to maximize crop yields.  This simple methodology produces yields so high that farmers can pay the loan off, feed their families (defeating chronic hunger), and realize potential disposable income for the first time if they can gain reliable access to fair markets.

Reliable Access to Fair Markets

Once the farmer experiences a dramatic increase in their yield, the chronic hunger problem is defeated, but now they face a different problem – transforming surplus crops into money.  A farmer who enjoys a tremendous harvest of eighteen 90kg bags of maize now has the daunting/costly problem of transporting those 90kg sacks 2 hours by foot to the nearest market.  Lack of infrastructure in remote rural areas creates market inefficiencies that put the farmer at a great disadvantage which cannot necessarily be corrected by traditional market forces.  These inefficiencies make farmers vulnerable to predatory arbitrage and unfair prices.  Nuru acts as a locally-owned intermediary that helps correct some of these inefficiencies by acting as an aggregator of crops and giving buying and selling power indirectly to the farmers.  Through a series of village buying stations and a central main granary, Nuru is able to offer fair market prices to farmers where they already are – in their villages.  Because of the large scale of bulking smallholder yields, Nuru can attract larger buyers and true market prices that enable us to capture profit in the sale of the crop to larger buyers while still offering the farmer fair prices.  On a macro-level, these profits get driven right back into the project to pay for salaries, facilities, and scaling of the project, thereby enabling self-sustainability.  On a micro-level, the farmer is able to realize the revenue potential in their dramatic yield increase.  With proper training, that revenue can form a solid foundation to a promising future for their family – paying for school fees; paying for medical expenses; starting a business; buying livestock and other farm equipment to grow their agribusiness; etc.

Revenue Model and True Sustainability

Interest earned from agriculture loans and profits gained from crop sales to larger markets are designed to enable complete financial sustainability of the project – including fueling the scaling of the project to neighboring districts.  Nuru tracks a metric called the sustainability ratio (SR = revenues generated by the project / expenses incurred by the project) in each of our five areas of development.  100% is break-even, so we seek to eventually achieve 110%-120% in our programs in order to fuel district scaling independent of Western funding.  We still have a long way to go, but we are closing on our goal.  In the long rains season of 2010, we achieved an SR of 66%.  Due to an east African collapse of maize markets and an abnormally high rainfall which caused flooding, repayment rates dipped to 69% last season (historical repayment rates for our farmers have been 98%).  Had we achieved our normal 98%, the SR for the long rains season 2010 would have been 93% – bringing us much closer to our goal.  Currently, we are piloting new techniques in repayment, risk management, and training to bring repayment rates back up in a manner that will be as independent of external factors as possible.

There are many, many challenges to implementing this “simple” agriculture model (some which provide fodder for both hilarious and tragic stories), but I will save a discussion of those challenges for next time.  Stay tuned for the next episode where I will talk more about how “simple” can turn impossibly complicated in a few minutes in this ever-changing, chaotic environment.

 

Jake Harriman

About Jake Harriman

Founder & CEO — Jake graduated with distinction from the US Naval Academy and served seven and a half years as an Infantry and Special Operations Platoon Commander in the Marine Corps. Jake left the military and enrolled at Stanford Graduate School of Business to found Nuru International. Upon graduation, Jake led a team to launch Nuru’s first project in Kenya.

One Comment

  • teresa says:

    Many thanks for the frequent detailed, easy to understand updates.

    All the clarifications on program specifics, inputs vs outputs, make it easy for the donor community to provide ongoing support both financial and with their donated time. Great job! May all your efforts be productive! Blessings!

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