One Acre Fund Business Model:
Value Proposition
One Acre Fund provides value to farmers by allowing them see large improvements in their incomes. This increase in income allows farmers to afford healthy food, attend school more often, and focus on building their futures and communities. Currently, more than 50 million farmers in sub-Saharan Africa go through annual cycles of hunger, resulting in child malnutrition and underperformance in school. However, within one year of joining One Acre Fund, farmers see a 50% average increase in income, allowing them to avoid these cycles of hunger.
Key Activities
In order to deliver this value to its customers, One Acre Fund has an adaptive and comprehensive set of activities.
Their services are adaptive in that they adjust their activities based on the individual country’s needs. Additionally, instead of coming in and teaching farmers how to make money with “cash crops,” they focus on preserving the particular culture of the country and only recommended simple differences which unlock harvest potential.
This increase in harvest potential is accomplished through a comprehensive set of activities. First, One Acre Fund provides flexible-repayment loans in order for farmers to invest in themselves. Second, they provide accessible and reliable deliveries of required materials, including seeds, fertilizers, and non-agricultural products such as lights. Next, they train farmers on sustainable farming practices which align with the current culture, such as introducing intercropping, crop rotation, and planting trees. And finally, they provide market facilitation in order to help farmers time crop sales to maximize profits.
Key Resources
The key resources that the One Acre Fund require include the physical agricultural and non-agricultural products that they provide to the farmers, the indirect products used to provide those materials, and the knowledge that the enterprise brings to the farmers. The physical products which are provided to the farmers include seeds, fertilizer, and non-agricultural products such as solar-powered lights and crop storage bags. The resources needed to provide these products to the farmers include trucks, warehouses, and offices where growth research and distribution plans are optimized. Finally, the intellectual resources include the knowledge provided to the farmers through training which allows them to optimize their productivity.
Distribution Channel
The main customers, the farmers, are primarily reached directly. Specifically, One Acre Fund utilizes a “Farmer’s First” approach, stressing the importance of trucks dropping the supplies off within walking distance from the farmers and training them directly. Other players are reached electronically. For example, potential donors can be reached via the website.
Revenue Stream
The One Acre Fund has two primary sources of revenue. 75% of expenses are funded through farmer loan repayments, meaning that the primary source of revenue is from interest obtained off loans. The remainder of revenue comes from donations.
Customer Segment
The primary customer segment receiving value from these products are the farmers. Although the One Acre Fund began with only 38 farmers in Kenya, it has since grown to serve 809,800 farmers (in 2018) throughout six sub-Saharan African countries including Kenya, Burundi, Malawi, Rwanda, Tanzania, and Uganda.
Additionally, this business provides value to several other groups. First, the One Acre Fund provides employment opportunities for locals in rural areas, with 95% of their 7,400 full time staff being locals. Furthermore, the One Acre Fun provides value for the respective governments by improving the health of their populations.
Customer Relationship
The most important customers for One Acre Fund are the farmers. With their “Farmers first” philosophy, the company focuses on building a good relationship with their customers by providing reliable deliveries, delivering the products within a walkable distance, and providing a comprehensive group of services including training. Additionally, they provide flexible repayment formats and allow the farmers not to repay if they aren’t happy.
The One Acre Fund also builds relationships with other customer segments, for example with the government by negotiating import permits, and working with them to provide background support for farmer outreach programs.
Key Partners
The One Acre Fund has several key partners from an organizational scale. For example, the organization has several key funding partners including the Global Innovation Fund, Children’s Investment Fund Foundation, USAID, and Pershing Square Foundation. These partnerships have included providing funding and working towards specific goals, such as working to improve nutrition.
Additionally, the One Acre Fund has many key partners which vary from country to country. Because the specific products and services vary in each country depending on the local conditions, the suppliers of seeds and other products vary between countries.
Cost Structure
The primary costs of this business include labor, supplies, and distribution. Labor costs include the salaries of local and non-local workers, such as drivers, warehouse managers, trainers, and office workers. Supply costs include the costs of seeds, fertilizers, and non-agricultural products which the One Acre Fund must purchase. And finally, distribution-associated costs include those for vehicles, warehouses, and maintenance. Additionally, costs include covering the small percentage of farmers (1-3%) who are not satisfied and do not repay their loans.
Sources:
1. http://nextbillion.net/one-acre-fund-empowering-the-one-acre-farmer
2. http://pershingsquarefoundation.org/case-study/one-acre-fund
3. http://www.thelifeyoucansave.org/where-to-donate/one-acre-fund
4. http://www.emersoncollective.com/articles/2016/04/5-questions-with-one-acre-fund
5. http://www.oneacrefund.org