Flexible repayment at One Acre Fund

Published on

September 29, 2015

A One Acre Fund white paper explains how flexible repayment plans present a sustainable lending model for smallholder farmers:

Traditional microfinance institutions offer a limited number of loan products, short repayment periods with regular and fixed repayment amounts, and no grace periods. While these methodologies have made microfinance less risky for lenders and expanded access to finance to a large percentage of the unbanked population, this model is not suitable for smallholder farmers.

Smallholder farmers have irregular income due to the seasonal nature of their work, the long gestation periods required to see a return on investments, and their exposure to fluctuations in climate.

One Acre Fund has designed a loan product that allows farmers to have fully flexible repayments over a term of 10-­11 months. During the period farmers may make payments as large as they are able to, so long as they complete repayment by the deadline.

Using this model farmers are able to match their repayments with their cash flows, and crucially de­link repayments form unpredictable harvest income. As a result, One Acre Fund has a historical repayment rate of 99 percent.

Although adopting a flexible repayment plan means lenders have to adjust the way they manage credit and liquidity risk, and portfolio quality, the upfront operational burden is outweighed by the long­term benefit of reaching a new client base of smallholder farmers. 

About the Author(s)

One Acre Fund
Learning Lab Partner

The OneAcre Fund seeks to expand access to financial services and training for smallholder farmers in Kenya, Rwanda, and Burundi, ultimately enabling 181,000 additional poor farm households to improve their farming techniques, and increase their profits on every planted acre.

One Acre fund will also encourage microfinance institutions to expand into rural areas, helping pioneer and augment the capacity of a new sector of microfinance.  And the partnership strengthens OneAcre's core MIS and M&E systems, enabling continued improvement to its program design and greater cost efficiency in its operations, as well as increasing bandwidth to capture the most accurate and compelling evidence of impact. 

Browse One Acre Fund's own insights library.

Press release: One Acre Fund and The MasterCard Foundation Partnership 

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