In order to make our projects truly sustainable, Nuru works with the community to create innovative revenue generation models that will eventually be able to meet all the expenses of the project – making the community truly financially self-sufficient. Many times, these ideas come from our Kenyan team. Philip and his team are incredibly resourceful and are very good at identifying gaps in the market – essentially identifying opportunities for arbitrage. This has been perhaps most apparent in the agriculture program.
For those of you not familiar with Nuru’s initial agriculture project here in Kuria, we loan farmers high quality seed and fertilizer and then train them on how to use it properly to dramatically increase their maize yields. That loan gets repaid at harvest. There are a lot of ways to recover the loan. We have learned from other organizations like our partner, One Acre Fund, lessons learned from various repayment schemes. Farmers can repay in cash or they can repay in maize. Last season, we had our farmers repay in maize. At harvest, we went out into the markets and got the going price for maize to establish what we call the “strike price” for that week. We used the strike price to calculate the number of kg’s it would take for a given farmer to repay her loan, and then the farmer would bring that amount of maize to a Nuru buying station to repay the loan.
Last season as I was working at one of the stations with Philip, I noticed him staring off into the distance with a sort of excited look; an expression I have become accustomed to at this point. I knew he had something brewing. “What brilliant idea are you coming up with this time, Chairman?” I asked. He looked at me thoughtfully and said, “You know…many of these farmers are asking us to buy their maize for them – ALL their maize, not just the maize for the loan repayment.” “Yeah I know,” I said. “But as you know, we don’t have any way to store that much maize, and besides, we need to focus on loan repayment. We are not a maize buyer. There are plenty of them out there.” “That’s just my point,” Philip said. “There are tons of buyers out there – scalping our farmers by buying their maize at a ridiculously low price and then making a lot of money by selling it in the urban markets that are too far away for farmers to transport their maize to.” I knew he was right. Middle men would buy a farmer’s maize near their farm for 5 Ksh/kg and then sell it to buyers from Nairobi for 17-18 Ksh/kg. Why in the world would a farmer put up with this?? Well, for a farmer to get her maize to the market, she has to carry it one bag at a time (each bag weighs approximately 200lbs) for 1-2 hours to the nearest market where she could get a fair price because she cannot afford the transportation that the middle man can afford.
“Well Chairman,” I said. “What do you suggest?” “We need to build a granary,” he said. “A very big one – right in the center of our villages out here. Farmers can come and sell their maize to us at a fair price. They can sell all their maize to us – not just what is required for the loan repayment, and we could store it all in the granary. We could then use it to make money for Nuru.” His eyes brightened as he got rolling with his idea. “We could buy at a price slightly lower than market price in Tanzania and other local markets and then sell to those markets – still serving our farmers while making a profit, essentially acting as a maize trader, but providing fair prices for the farmers. In addition, we could keep some of the maize they sell to us – maybe 50%-75% – in the granary and wait to sell it in May or June. After the harvest is finished and the farmers have sold all of their maize, the market price of maize will begin rising until it meets peak levels in May and June just before the next harvest when maize supplies are low in urban markets. We then sell the remainder of our maize at a price 20%-30% higher than we could get during harvest season to those markets. We could capture all that value and dump it back into the project to help subsidize the other programs that are not making as much money.”
I stood there dumbfounded. “But why hasn’t anyone else done this?” I asked. “These maize traders around here are too small,” he said. “Until now, no one has come into the deep interior with the ability to mobilize enough resources to construct a granary of that size to capitalize on these inefficiencies in the market.” I was blown away. It was so simple, but it was genius. We performed some more market research. I consulted with a few outside experts, and then we began the work of planning and constructing the Nyametaburo granary. Philip and his team pitched the idea to the farmers, and they were totally on board. More and more, the farmers have demonstrated a desire to really own the Nuru project. They believe that they can do this… they can end extreme poverty in their villages. Each family contributed 100 Ksh toward the project.
Seven months later, I found myself reflecting thoughtfully on that conversation I had with the Chairman as I looked at the 200 tons of maize now sitting in our granary ready for sale. There have certainly been many challenges along the way in the maize trading business (drying the maize to prevent bacteria growth, ensuring pests don’t destroy it, price fluctuations in the market, transportation and other logistics issues of buying stations, miscommunications with farmers, etc.) But this June, Philip’s idea that he thought of that day as he struggled to serve his people more effectively could, in just one season fraught with all the challenges of our inexperience, turn into $10,000-$15,000 profit that will push the Kuria project forward as we strive for financial self-sufficiency. Philip and his team continue to simply amaze me as I learn from them. They are teaching me every day that this dream and this vision is simply about an awakening… it is about awaking the power of the poor.