Client-Focused Approach Helps Musoni Reach Smallholders
In Kenya, smallholder farmers lack access to financial services and face high barriers accessing commercial banks and community lending institutions. These institutions rarely approve loans to smallholders 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 approved, they often encounter hidden fees on top of already-high interest rates.
Musoni is a digital-based microfinance institution in Kenya that has gained smallholder farmers’ loyalty through its high-touch customer service, easy processes, and transparency. With support from Feed the Future Partnering for Innovation, Musoni partnered with Grameen Foundation to develop a software platform that has made its loan processes more efficient and helped it disburse 16,826 agricultural loans – called Kilimo Booster loans – valued at nearly $6.5 million.
Musoni has developed a model that enables it to reach high volumes of rural smallholder customers with its agriculture-specific Kilimo Booster loan, despite having interest rates that are as high as many commercial banks. Musoni is able to compete in the microfinance sector because of its high-touch, transparent, 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 and expert, trustworthy customer service.
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 farmers 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 these personal relationships 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.
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 use the cash flow analysis software, developed by the Grameen Foundation with support from Partnering for Innovation to wirelessly submit farmers’ loan applications and track customer information, including repayment information and changes in income, making loan processing more efficient. 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 quick application process. 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.
“Musoni is flexible in case of disaster and is willing to work with farmers to get payments in,” said Musoni client Michael Chege.
With a loan portfolio totaling more than $6 million, Musoni has proven its Kilimo Booster loans are a strong competitor against other financial institutions despite comparable interest rates and a difficult-to-reach customer base.