In Kenya, smallholder farmers lack access to financial services and face high barriers to accessing commercial banks and community lending institutions. These institutions rarely approve loans to smallholder farmers or have a slow turnaround time for approval, preventing farmers from getting capital when they need it in the agricultural cycle. Smallholder farmers not only face the improbability of loan approvals, but even if they are approved, they often encounter hidden fees on top of already-high interest rates.

Musoni, a Kenyan microfinance institution, has developed a model that enables it to reach high volumes of often remote smallholder customers with its agriculture-specific Kilimo Booster loan, despite having interest rates that are as high as many commercial banks. Musoni is competitive in the microfinance sector because of its high-touch, transparent and efficient approach, which treats loan recipients as valued customers, builds relationships of trust and takes advantage of digital technology. Customers are willing to pay relatively high interest rates in exchange for easy processes, expert and trustworthy customer service and transparency.

At many Kenyan banks, customers usually need personal or family connections in order to schedule appointments, making it difficult to inquire about loan or repayment details. In contrast, at Musoni, customers can receive walk-in appointments for any issue. Musoni loan agents also visit farmer customers at their homes, building relationships that make lending easier for farmers and loan agents. Unlike many traditional Kenyan banks, Musoni wants to see its customers grow, and the relationships it builds help Musoni determine if and when customers are able to increase their loan amount. Also unlike many traditional Kenyan banks, Musoni is transparent about the cost of a loan. Although its interest rates remain high, it doesn’t have the hidden fees often associated with loans in Kenya, further building customer trust.

Musoni is able to reach rural, remote customers thanks to its new cash flow software and its practice of placing loan agents in every village where it works. Village loan agents visit farmers in person, and use the new cash flow analysis software the Grameen Foundation, with support from Feed the Future Partnering for Innovation, helped it develop. With this new software, Musoni loan agents are able to wirelessly submit farmers’ loan applications and track customer information, including repayment information and changes in income, making loan processing more efficient. In addition, this also means that farmers do not have to travel to the bank or complete a complicated loan application with considerable documentation requirements. If a Kilimo Booster loan is approved, it is deposited into the customer’s mobile money account within 72 hours. This client-focused approach benefits customers as well as Musoni, which profits from the decrease in time needed to complete each application. In addition to the software used by loan agents, Musoni also offers customers a mobile platform from which they can receive payment reminders and obtain other information about their loans, reducing the need to make visits to physical banking locations. Michael Chege, a Kenyan farmer, also points out that “Musoni is also flexible in case of disaster and willing to work with farmers to get payments in.” 

Musoni has successfully disbursed more than 16,826 Kilimo Booster loans valued at $6.5 million to date, proof that its high-touch approach, simplified loan application process and transparency makes it a strong competitor against other financial institutions, despite comparable interest rates and a difficult-to-reach customer base.