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Juhudi Kilimo

Investing in trust to unlock smallholder potential

  • Case Study
  • Agriculture
  • East Africa
  • 2011
of company revenue from agricultural loans
of customers are women

Access to affordable credit is crucial for wealth creation, especially for smallholder farmers. Juhudi Kilimo’s innovative trust-based underwriting model has empowered rural farmers in Kenya, enabling them to access loans and improve their livelihoods.

The problem

Small-scale agriculture is a vital engine for growth in East African rural economies and is instrumental to reach the 40% of Kenyans who live in poverty. Boosting rural incomes in Kenya requires, in part, a transformation from semi-subsistence, low-input, low-productivity farming systems to more productive and organized farming. This transformation requires capital.

Formal credit is a key enabler for formalized farming yet remains elusive in Kenya, where only 32% of smallholder farmers have access to formal credit. Furthermore, gender inequality makes it far more likely for men to access credit than women. This financial drought has led to exploitative practices by loan sharks, with exorbitant interest rates and stringent repayment terms creating an impenetrable cycle of bad debt.

This credit gap, coupled with exploitative and discriminatory practices, paints a grim picture for smallholder farmers striving for financial stability and improved livelihoods for their families.

The solution

Juhudi Kilimo has emerged as an innovative solution in this difficult climate. Its model not only bridges the credit gap but does so with dignity, offering a viable alternative to smallholder farmers who are eager to break free from the exploitative practices of loan sharks. 

Eighty percent of Juhudi’s lending is carried out through the group lending model, wherein rural communities of 10 or more members co-guarantee each other. Relationships with these community savings groups, known as “Chamas”, has been critical to Juhudi Kilimo’s success in developing long-lasting trust in its product. More than a decade after launching and with the increased adoption of mobile devices in Kenya, Juhudi Kilimo has been able to scale its impact through a foundation of trust and a proven and scalable underwriting mechanism.

Juhudi Kilimo’s journey from social collateral to mobile loans is a testament to its adaptability and commitment to community empowerment. By combining technological innovation with on-the-ground support, Juhudi Kilimo is providing financial solutions and building a holistic ecosystem that equips smallholder farmers for a future of sustainable prosperity.

The origin

Juhudi Kilimo’s roots trace back to the Swahili words “juhudi,” meaning effort, and “kilimo,” signifying agriculture. It originated as an initiative within the K-Rep Development Agency, a pioneering microfinance company in Kenya. K-Rep’s “juhudi” loan pilot, initiated in 2004, demonstrated the demand for financing productive assets like livestock and irrigation equipment that enabled farmers to generate income and repay loans. While successful, the need for substantial capital, approximately $5 million USD, prompted the shift to a for-profit structure. 

In 2009, Juhudi Kilimo spun off from K-Rep as a for-profit entity while K-Rep remained its majority shareholder. This transformation opened avenues to access different forms of capital and allowed Juhudi Kilimo to scale its operations and reach profitability.

The impact

Juhudi Kilimo utilizes innovative social collateral mechanisms, which enable farmers to leverage productive assets as collateral. These instruments both mitigate vulnerabilities and enhance overall resilience.

For farmers, access to credit is a gateway to invest in agricultural activities or assets, such as fertilizers, livestock, or machinery. These unique loan products go beyond traditional financial mechanisms, fostering a tailored approach that bolsters agricultural productivity and lays the groundwork for wealth building and sustainable livelihoods.

About 50% of Juhudi Kilimo customers report immediate and significant income improvements. Its loans facilitate longer-term investments in critical areas such as improved housing, better education for children, enhanced healthcare, and heightened food security, all of which contribute to improved livelihoods.

“My first loan from Juhudi Kilimo I used it to buy quality farm inputs from Kenya Seeds and I must say that my harvest was great and I got a lot of money from my harvest. Another loan I used to buy a motorbike which is giving me daily income. And my last loan I used it to start a shop which is giving me income up to date.”

Customer of Juhudi Kilimo

The investment

Acumen’s investment in Juhudi Kilimo in 2011 aimed to support innovative agricultural microfinance solutions for smallholder farmers. This financial support enabled Juhudi Kilimo to scale operations and refine its model despite the inherent risks in agricultural microfinance. 

Acumen’s ongoing strategic support and board guidance have helped the company pivot efficiently,  optimize operations, and leverage technology. This has ensured that Juhudi Kilimo maintains financial sustainability, offering credit at or below market rates. The investment, although extremely risky, provided and continues to provide incredible impact and upside returns for smallholder farmers.

The story

Early in its evolution, Juhudi Kilimo recognized that fostering trust within rural communities was paramount to its success. They lent through Chamas – community groups – which worked together to access loans and guaranteed each other’s repayment, the perfect social underwriting mechanism. By engaging with these groups, Juhudi Kilimo not only provided much-needed credit but also sensitized farmers to the benefits of its unique loan products to buy productive assets, like cows, to improve their livelihoods.

As Kenya experienced a surge in mobile phone penetration, Juhudi Kilimo embraced a new era. The wealth of data within mobile devices and the efficiency of tech-enabled algorithms prompted a strategic pivot toward mobile loans. This shift shattered geographic barriers, empowered smallholder farmers to access loans effortlessly through their mobile phones, and significantly reduced the need for local agents. This reduction in need for sales agents enabled Juhudi Kilimo to extend support beyond digital access to providing physical training, business management, farming extension services, and financial literacy training to empower smallholder farmers. 

This impact is felt by over 90,000 customers, and is articulated by one: “My first loan I used to buy a motorbike which is giving me daily income, my second loan I used it to buy a dairy cow and the remaining cash I used to pay school fees for my children.

Juhudi Kilimo now has more than 90,000 customers. Its story is one of overcoming barriers, adapting to change, and persistently championing the cause of the underserved. It’s a story of innovation grounded in a vision that sees beyond financial transactions – a vision that sees the potential for a brighter, more prosperous future for Kenya’s smallholder farmers.

“I used my first loan to build my house and now I have my own privacy unlike when I was staying in a small house with no bedrooms. I used my second loan to start a business which is doing well and is helping me with savings. And I used my last loan to buy a dairy cow, which is giving me daily income through selling milk.”

Customer of Juhudi Kilimo