Small scale farmers have for a long time been denied credit by financial institutions for lack of acceptable collateral.
This has seen some farmers miss out on opportunities to explore large scale or commercial farming opportunities, further encouraging the cycle of poverty to run on amongst them.
The situation is however set to change as a product developed by Peris Nyaboe and Rita Kimani gathers steam.
The two, both 25 years old, established FarmDrive in 2014 to help farmers access collateral-free credit.
The IT firm gathers information from small scale farmers and uses it to build credit scoring models that financial institutions can then use to provide loans to farmers.
Commercial banks review the profiles of the farmers from FarmDrive data centre to determine their credit-worthiness.
Ms Nyaboe said that the idea was inspired by their common back ground, in which they grew up watching peasant-farmer parents strive to make money out of their land.
“We grew up with parents who were farmers but never expanded their business because they had no access to credit and were stuck in the same cycle of poverty,” she said.
Their idea moves away from the traditional lending models where financial institutions rely on credit history and tangible collateral to issue loans to borrowers.
“Banks demand collateral resources that are not available for the unbanked farmers, most of who live on inherited farms-without title deeds. We are building a credit information database that banks can use to extend lending to them through risk assessment, without looking at credit history,” said Nyaboe.
Ms Nyaboe added that their system can predict a farmer’s yields and income (given the right environment), in a way determining how much a bank can lend a person.
The firm is also building data cells, an inventory detailing the economic activities of different regions and farm produce markets, to better understand communities and tailor-make services for their target clientele.
“We have come up with sophisticated algorithms that can accurately analyse data,” Ms Nyaboe said.
The firm is yet to hit profitability and is currently receiving financial backing from Engineers Without Borders Canada and Mercy Corps.
FarmDrive, which is currently working in the North-Rift region hopes to spread across Kenya, and ultimately the rest of Africa.
The firm has so far managed to gather information on 2,000 farmers out of which 300 have received loans from Musoni Microfinance, FarmDrive’s partner bank. Musoni is a pioneer digital microfinance in Kenya and runs a platform that has most transactions being carried out digitally.
“They are the first microfinance built to be mobile, so they process their loans through digital means and dispatch the money through mobile money platforms like M-Pesa,” said FarmDrive director of partnerships and external relations Mary Joseph, adding that loan application is done digitally, making the whole system efficient.
The firm began gathering information on farmers last year and hopes to reach a customer base of 10,000 before the year ends.
“We are currently in western region because it is Kenya’s bread basket. Our plan is to get into the entire Africa in the next two years as we aim to be a multi-country organisation,” Ms Nyaboe said.
The firm has also bundled up the credit services with a crop insurance package covering crops with insurance surveyor, Agriculture and Climate Risk Enterprise (ACRE) Africa, as one of the ways of protecting them from risks and making farmers comfortable when applying for credit.
The firm is also leveraging on the penetration of mobile phones in Kenya by sending information (on what, how and when to plant) to farmers and connecting them with suppliers and buyers, underlining the firm’s plan of getting involved in the entire cycle.
FarmDrive employs eight workers among them a soil biologist and a support team that engages farmers on the ground.