KAMPALA – A collaborative blended finance model implemented by Heifer International and Hello Tractor is significantly improving access to agricultural financing for underserved smallholder farmers across Africa, according to a new report. The study by Aceli Africa and Dalberg highlights the effectiveness of combining different types of capital with local innovation and strategic partnerships to foster profitable and inclusive growth in rural economies.

The 2024 Aceli Financial Benchmarking Report analyzed approximately 32,600 loans valued at $1.98 billion disbursed by 41 lenders in Kenya, Rwanda, Tanzania, Uganda, and Zambia between 2020 and 2023. The findings position Hello Tractor, a key partner in Heifer International’s initiatives, as a leading entity in agri-SME finance. Notably, Hello Tractor demonstrated higher profitability than traditional commercial banks, non-bank financial institutions (NBFIs), and social lenders included in the analysis.

The report revealed that 100% of Hello Tractor’s borrowers were previously unbanked, contrasting sharply with the 22% reported by commercial banks. Furthermore, Hello Tractor maintained a robust portfolio health of 95%, exceeding the 86% average for commercial banks. Despite working with borrowers considered higher risk, the company achieved a 7.2% profitability rate, outperforming the industry average of 3.5% for commercial banks and reversing negative returns for most social lenders (-16.8%) and NBFIs (-6.8%).

This success is attributed to Hello Tractor’s pay-as-you-go model, which features 60-month loan terms and a growing network of local after-sales support hubs. Heifer International’s role in the partnership includes facilitating the training and certification of local youth as technicians. This ensures consistent maintenance and operation of tractors, building trust among both financiers and farmers.

Adesuwa Ifedi, senior vice president for Africa Programs at Heifer International, emphasized the significance of the findings. “This report validates our long-standing belief that rural communities offer significant investment potential,” she said. “By strategically blending innovation, trust, and local expertise, we are demonstrating that smallholder farmers can be central to Africa’s agricultural transformation.”

Hello Tractor’s approach to underwriting loans based on the value of the asset (tractors) rather than solely on individual credit histories has been crucial in extending financial opportunities to previously excluded populations. With a $2.5 million investment from Heifer International, 88 loans were facilitated, with 76% ranging between $50,000 and $200,000. These first-time borrowers achieved a 100% repayment rate.

Jehiel Oliver, CEO of Hello Tractor, highlighted the impact of the collaboration. “Our partnership with Heifer International through the Mechanization for Africa Initiative has clearly shown that smallholder farmers and rural entrepreneurs are viable and profitable customers,” he stated. “With the backing of long-term capital, robust after-sales support, and data-driven operations, we can finance a new generation of rural entrepreneurs who are generating significant impact within their communities.”

The Aceli report underscores the potential of blended finance to unlock commercial capital for agri-SMEs. Hello Tractor’s model, characterized by low credit losses and tech-enabled cost efficiency, challenges traditional views of lending to rural borrowers as inherently risky.

Heifer International’s strategy, exemplified by this partnership, focuses on: catalyzing local innovation by investing in solutions tailored for the African context; leveraging the power of partnerships between philanthropic and commercial entities; and establishing clear pathways to profitability in smallholder finance, moving away from reliance on subsidies.

Ultimately, the collaboration between Heifer International and Hello Tractor offers a model for revitalizing African food production systems through impactful partnerships, driving innovation, and fostering change through inclusive finance and effective local implementation. As agricultural mechanization continues to expand across the continent, this partnership provides a valuable blueprint for unlocking Africa’s vast agricultural potential.

Since 1944, Heifer International has partnered with over 52 million people worldwide to sustainably end hunger and poverty. Operating in 19 countries across Africa, Asia, and the Americas, including the United States, Heifer supports farmers and food producers in strengthening local economies and building secure livelihoods that provide a living income.