If the world is really serious about ending poverty in Africa, then it needs to create market-based solutions. Simply increasing aid to the continent year-on-year is not enough. There is an answer, however, and it lies with Africa’s farmers. By supporting them to improve their harvests, they can pull themselves and their communities out of poverty with dignity.
The One Acre Fund, which represents Africa’s largest network of smallholder farmers, helps provide the necessary tools and financing they need to grow their way out of hunger and poverty. World Finance spoke to Eric Pohlman, the organisation’s country director in Rwanda, to learn how he and his team are better serving local farmers, so that they can create long-term solutions for escaping poverty for good.
What motivated you to become a senior partner in the One Acre Fund?
Having lots of opportunities growing up, I felt an obligation to give back. Originally, I thought I would do that through public service in the US, but, by chance, I ended up studying abroad in Senegal and that changed my worldview. Spending a semester at the Cheikh Anta Diop University in Dakar. I saw a lot of opportunity in Africa, there is certainly an entrepreneurial buzz.
Senegal itself has an amazing culture and it captivated my interest. So I shifted my studies at university and started looking at traditional development studies. Eventually I gravitated towards more business-based approaches. After school, I spent two years in the Peace Corps in Cameroon in the Extreme North province and then joined One Acre Fund immediately after that, which was back in 2007, and I have been with the programme since.
One Acre Fund sustainability: Total Farmer Loan Repayments, USD
Source: One Acre Fund
What does One Acre Fund do?
Our fundamental goal is to make farmers more prosperous. We serve smallholder farmers in East Africa as they face a number of common problems – mainly basic market failures in the region. Many farmers do not have access to information or training, and often impactful technologies do not reach rural areas. This includes everything from seeds and fertilisers to solar lamps. But even when farmers do know about these products or have received training through public extension, they often do not have the money needed at the start of the season to invest.
So what we do at One Acre Fund is develop a basic market bundle that offers a complete package tailored for the smallholder farmer in East Africa, which aims to address these shortfalls. It all starts with training through a field officer who is based in the community. We then develop a delivery system to get impactful products like seeds and fertiliser out to farmers before planting. We provide these services on credit, so farmers can pay back slowly over six to nine months, which better fits the household revenue flows. And then, finally, we have some post-harvest solutions that help farmers store their harvest at the end of the season.
In order to keep the One Acre Fund supporting farmers, how do you make the business profitable?
In order to serve more farmers, we are really focused on being as efficient as possible. So right now, farmers fund 70 percent of our core programme operations. The other 30 percent is coming from donors and over the years as we scale up, we will benefit from some efficiencies in delivery. We hope to see our subsidy go down over time, with the ultimate goal to be entirely farmer funded. But we are in new markets, we are in riskier places, so it is appropriate as a young start-up we are not financially sustainable at this point.
What are some of One Acre Fund’s greatest achievements so far?
Just a few weeks ago in the programme, we delivered farm inputs to our 100,000th customer, which is a big milestone for the programme here. Right now, we are serving 280,000 customers across East Africa, so it is a big farming population. We have lit over 100,000 households with solar lamps, which is really exciting. Most of our clients that we serve are off grid, so when the sun goes down their homes are dark or lit by kerosene.
Another big accomplishment of the programme is that we have started to demonstrate that farmers have a strong willingness to pay for good services. We’ve lent over $20m, and to date we have a 98 percent repayment rate, which is pretty impressive, considering the context that we are working in. We hope that we can act as an example for other micro-finance institutions and other businesses to start treating farmers not as beneficiaries, but as customers. These are all great accomplishments for the organisation, but really, I think our greatest victories are found in the individual stories of the farmers we serve.
One of our clients is a mother of six and, like many of our clients, she had never used improved farm inputs [seeds and fertiliser] before we started offering services in her village. But in her first harvest using improved farm inputs, she saw a huge increase. She then invested that surplus in buying a new cow. That was three years ago, and today, that cow has given birth to two other cows and upon visiting her recently you can see the pride in her face that she has started to become prosperous and self-sufficient.
On average, the programme that we offer creates about $120 of new income for farmers per year. That may not sound like a lot of money, but it is often the difference between whether you choose to educate your kids or not; whether you decide to go to the hospital or not; and whether you decide to invest in another productive asset. That really is the difference between subsistence farming and wealth creation. It’s those farmers’ stories where we see our biggest accomplishments.
How does the work at One Acre Fund provide a better solution to the problem of poverty?
I think that a lot of food aid follows a giver-recipient model. This kind of model puts all the power in the giver’s hands and none in the recipients. This model is only appropriate in crisis scenarios, like in the event of a massive natural disaster or huge population displacement caused by a violent conflict in the region.
In those scenarios, the decision is very clear; people need support and they need it fast. It works in the short-term. But the giver-recipient model cannot handle any type of complexity or development or market creation. It is a brain-dead approach. It makes one person the decision-maker and the millions of recipients turn off their agency over themselves, losing their voice in the process.
What we need is market-based solutions, where you basically turn the giver-recipient model on its head. You empower the recipient by turning them into a customer, so they’re the ones making decisions. The giver then becomes an innovator. They have to figure out what works and what doesn’t. Together that combination is powerful. It is where long-term solutions come from.
What is your opinion of farming subsidies?
I can understand a government’s desire to support farmers. Farmers are the most important profession in any given community. They create the food we eat, and food is the single largest determinate of health. Farmers have the ability to grow surplus, and surplus is what originates a market economy. It is what allows, in the initial stages, for a vibrant economy to develop.
On one hand, I get where governments are coming from. Rwanda has a farm subsidy for its farmers and in less than seven years it has helped shift the country from a net food importer to a net food exporter. There is now food security here for the first time. That is an example of an effective farm subsidy. On the other hand, there are a lot of farm subsidies that are not farmer first. If you look at a number of farm subsidies in the US like maize or soy for example, these deflate global prices and put farmers in parts of the world at a competitive disadvantage. They pervert the economy.
Is there any way to balance the concerns of maligned farmers in both developed and developing nations?
I think that we need to reorient [farm subsidies] in developed countries. In these countries, one percent of the population work as farmers, so a subsidy that artificially deflates the price of food is probably good for the economy. But we live in a globalised world and that artificial cost to produce maize or soy for example, negatively impacts most of the African continent, where 90 percent of the population is engaged in farming.
How do we balance that? Well, I think it is unlikely that farm subsidies, given their political history, will change. But I do think that reorienting subsidies in developed countries, so that we re-incentivise farmers to plant a more diverse crop base and to serve local and regional communities’ food needs would build a much stronger society, as well as having the secondary benefit of making communities in developed countries healthier.
What other challenges need to be confronted in order to reduce poverty in Africa?
One, we need a lot more investment in the region. I would focus first on agriculture (see Fig. 1), because I believe it is the foundation for any vibrant economy. I read recently that 33 percent of Africans expect within the next one or two years to start their own business. There is a lot of entrepreneurial drive there. If we can match that with appropriate investment, then I think we will start to see many more innovative market-based solutions.
We also need good governance and better infrastructure. Those help to create the environment necessary for a vibrant economy. It is hard for that to happen without both of those. There are a number of bright spots across the continent where things are working. Rwanda is one of the best case studies, where good governance and really smart investments in infrastructure have made it one of the fastest growing corners of the world right now.
What are some of the more common misconceptions about poverty that are most harmful?
I think the biggest is that farmers are not capable or unwilling to pay for services and products that are going to make their lives better. That misconception perpetuates the giver-recipient model. It makes micro-finance institutions scared to work in rural areas or increase their agriculture-lending portfolio. Micro-finance has largely focused on urban areas where they have higher population densities. You see very few banks out in rural areas where it is more expensive to serve customers.
So I think that misconception is pretty harmful and we have a lot of evidence to the contrary. In the past eight years, we have seen over a 98 percent repayment rate, with hundreds of thousands of farmers. The difference is, farmers are willing to pay for stuff that works, so it is on the plate of every company or social enterprise to figure out what works for their customers and provide services they want to buy.
What does the future have in store for you and the farmers that you serve?
I intend to serve farmers well into the future. Rwanda is my home. It is one of the most exciting places in the world right now, so I want to keep doing what I am doing. For One Acre Fund, as a whole, we are going to keep growing our impact and keep innovating new ways to better serve farmers. And for the farmers we serve, their future will hopefully be full of big harvests, healthy children, and educated families. These farmers are the keystones to building prosperous communities across Africa.