If you are new to Prosper on Farms, Prosper on Farms does not give loans, charge interest, charge set-up fees, loan origination fees, loan administration fees, or require a deposit or any money from farmers for irrigation systems that Prosper on Farms provides to them.
Why does Prosper on Farms do this?
Let me tell you what the situation is like for a typical farmer in Zimbabwe, where over 90% of the agriculture is rain-fed.
THE SITUATION
The vast majority of farmers in Zimbabwe are small-scale farmers, and they live on less than US$2 a day in the rural areas practicing rain-fed subsistence agriculture.
The typical small-scale or smallholder farmer in Zimbabwe is a woman, who lives on less than US$2 a day, practices rain-fed agriculture in Zimbabwe which has 1 rainy season. She grows maize, the staple food, on 1 hectare or less, on average. The national average yield for maize in Zimbabwe is less than 1 tonne per hectare (16 bushels per acre). 1 tonne of maize is enough to meet the caloric intake of a family of 5 or 6 for a year. The Grain Marketing Board (GMB), the government grain buying statutory monopoly, buys grain at US$250 per tonne.
You can find a good-quality 1HP diesel-powered water pump going for US$250 in Zimbabwe. In the case of a bank loan to buy a US$250 water pump, a bank will require loan collateral or security that is worth at least the value of the loan principal plus interest.
One bank in Zimbabwe requires a deposit of 20% of the loan for irrigation systems, and that is for 30 hectares or more.
TRANSLATING THAT TO A FARMER
If the farmer, whose average maize yield is 1 tonne per hectare, sells her production from 1 hectare, the farmer earns US$250, which is the farmer’s annual farming income from rain-fed agriculture.
But the farmer and his family need maize to eat. Maize is the staple food and main source of calories in Zimbabwe.
Being a subsistence farmer means she is not growing this maize for sale, but for household consumption. 1 tonne of maize, which is the average national maize yield in Zimbabwe, can feed a family of six.
That therefore means all her maize production in the rainy season under rain-fed agriculture goes towards family consumption. Therefore, she does not earn US$250 from the sale of her 1 tonne harvest from rain-fed agriculture because the maize is not for sale.
So her income from farming is ZERO, or close to zero.
Banks require collateral to give her a loan to buy a pump.
LOAN COLLATERAL FROM WHERE?
Now, what kind of collateral do you think someone who earns almost US$0.00 a year will have? What kind of assets, and of what value would such a farmer who has no income have accumulated from farming for over 10 years?
Now, I said you can find a good-quality 1HP diesel-powered water pump going for US$250 in Zimbabwe, and one bank in Zimbabwe requires a deposit of 20% of the loan for an irrigation system.
A LOAN DEPOSIT OR DOWN-PAYMENT FROM WHERE?
Besides the fact that 20% of an income of US$0.00 is US$0.00, a deposit of 20% of US$250 = US$50. US$50 is the equivalent of 20% of 1 tonne, which is equal to 200kgs of maize. (I will exclude the cost of transporting the maize to the market, or let’s just say the cost of transport to the market will be zero.)
So to pay this 20% deposit, or US$50 deposit, to a bank, she will have to sell enough food to feed a family of 6 for 20% of a year, which is 73 days, which is about two-and-a-half months. Paying the US$50 deposit will literally be gambling with the lives of 6 people, just to have a water pump. Sure, and yes, the farmer could immediately grow food under irrigation and can pay off the US$250 within those 73 days but this is a risky move to a poor person. Anything could go wrong, worse with extreme weather events.
You could argue that food aid could cover for the shortfall but that is also a risky move. Sometimes food aid does not come on time, and have you ever witnessed food aid distribution in progress? Some families may be totally excluded for one reason or the other.
ALTERNATE INCOME FROM WHERE?
There are no jobs to speak of in rural areas of Zimbabwe. Most rural jobs are agricultural, and almost entirely seasonal, reliant on the rains, and that is a big “if” the rains come.
Now, where do you expect rural rain-fed subsistence farmers to find US$50 to pay a bank a deposit for a loan to buy a US$250 diesel-powered water pump? Yes, a diesel-powered water pump.
FOSSIL-FUELED PUMPS VERSUS SOLAR PUMPS
If you are wondering about solar-powered water pumps, solar-powered water pumps are even more expensive because they have solar panels and all. That means the deposit will be much higher, as much as at least 2 times higher. So most small-scale farmers would rather target a cheaper pump and worry about the diesel later.
In fact, solar-powered pumps that are sold on credit are even more expensive than if they are bought for cash in full.
OPERATING COSTS
After buying a diesel-powered water pump using a loan, because a diesel-powered water pump has lower upfront costs than a solar-powered pump, next the farmer will have to find the diesel to power the water-pump.
Now, where will the money for the regular diesel purchase come from for, say, irrigating the maize for the next 3 to 4 months while the maize is growing to maturity?
Diesel goes for more than US$1 a litre, yet a small diesel-powered water pump will require 5 litres to fill the tank.
The math just doesn’t work out in favour of smallholder farmers who almost all of them are currently practicing rain-fed subsistence farming and live on less than US$2 a day.
I have not even factored the bank loan fees and charges.
So, what can we do?
ENTER PROSPER ON FARMS
Prosper on Farms will give the farmer the irrigation system to use throughout the crop cycle and then recover the costs from the harvests. No loans, no deposit required, no money required from farmers. The farmer uses our brand new solar-powered pump to irrigate his or her crops and then helps us recover our costs using portions of their harvest(s). Prosper on Farms does not accept payment in cash because, as you know, money is evil. LOL.
Using our method, the farmer is so flexible and can even buy the pump or irrigation system from Prosper on Farms within 1 season.
HOW?
Rain-fed farmers, who do not have irrigation systems, average 1 tonne of maize per hectare in Zimbabwe.
A solar-powered pump or irrigation system can boost the maize yield per hectare by at least 2 times (actually, can even get to 20 times, to as much as 20 tonnes per hectare), which means with irrigation the farmer can now achieve at least 2 tonnes of maize per year, which means if a farmer achieves 2 tonnes through irrigation, she will still have 1 tonne of maize to feed a family of 6 for a year, and thanks to our irrigation system, she will have at least one more tonne of maize worth US$250 to sell, which is enough money to pay for a pump.
Of course there will be the cost of the diesel fuel for the pump. Keep reading.
Prosper on Farms prefers to have the maize production than to be paid money. The cost of transporting the maize eats into the income of the farmers, which is why Prosper on Farms prefers to have the maize than to be paid money by a farmer who has already incurred massive transport costs.
Instead of diesel-powered pumps, Prosper on Farms exclusively provides irrigation systems that are powered by clean energy such as wind, hydro, and solar. The initial capital outlay of clean-energy-powered irrigation systems is higher than for fossil fuels, but farmers can actually pay back the costs of these solar-powered irrigation systems. By giving farmers irrigation systems, no payment required, Prosper on Farms solves the chicken-and-egg on-boarding problem.
SOLVING THE CHICKEN AND EGG PROBLEM
With mechanized irrigation, a farmer can achieve at least 5 tonnes of maize per hectare, not 2 tonnes. That means subtracting 1 tonne of maize for household consumption for a family of 5 or 6 for a year, the farmer will harvest enough maize to pay back at least US$1000 for a solar-powered irrigation system for 1 hectare. This is besides the fact that the farmer will have 7 or more months to grow other crops for household consumption under irrigation. That means the farmer can definitely pay for an irrigation system for 1 hectare within a year.
THE QUESTION
Why the hell, then, would we ever want to a down-payment or deposit from farmers who have an annual income of zero dollars a year?
A farmer who lives on less than US$2 a day harvesting less than 1 tonne of maize per year will pay a deposit with money from where?
If the goal is to help farmers feed their families and to lift themselves out of poverty through higher agricultural productivity from mechanised irrigation, if Prosper on Farms asks for a deposit, it would mean that Prosper on Farms is only targeting and benefiting well-off farmers who can afford to pay a deposit, and excluding those who need irrigation systems who cannot even afford to pay a deposit, but are otherwise able to pay off an irrigation system given their previous production performance under rain-fed agriculture.
Prosper on Farms is giving access to irrigation and irrigation systems to all farmers, including those farmers who have nothing, but who have demonstrated production potential under rain-fed agriculture when rains have been good.
They are starting from zero, with nothing.
How can we ask a farmer who has nothing, to pay a deposit? It would be immoral, unjust, and highly unethical.
WHAT’S BETTER THAN A LOAN? PROSPER ON FARMS!
Unlike banks and others, we also don’t pressure farmers to pay up and Prosper on Farms does not take the property of poor farmers when they fail. If a farmer fails to meet production targets, we try to help the farmer, and if that fails, we take back our irrigation system, never to return. That is simpler and better than loans.