Smallholder farming in Africa is a precarious existence. Low economies of scale, commodity price swings, out-of-date agronomic practices, and the effects of climate change conspire to trap farm families in a never-ending cycle of poverty. At the same time, Africa’s booming youth population is entering a saturated workforce without enough jobs to absorb them. In Nigeria, the continent’s most populous nation, that has led to a surge of gang violence and a wave of insurgencies over the last two decades.
Kola and Lola Masha, a Nigerian-born and US-educated couple, set out in 2012 to help mitigate the spread of both economic and physical insecurity. Their social enterprise, Babban Gona (“Great Farm” in the Hausa language), offers a rare model that not only makes farming lucrative and an attractive opportunity for Nigeria’s youth. It also has become a profitable and bankable business for commercial lenders. For the first time, they are committing capital to support smallholder agriculture at large scale—and in the process, potentially creating a pathway out of poverty for millions. Highlights of this episode include:
- why smallholder farming is central to the poverty problem in Africa (3:42)
- the wave of violence in Nigeria fueled largely by unemployed youth (7:21)
- the Mashas’ rigorous process to identify agriculture as a job-creation engine (9:44)
- trust groups, or mini-cooperatives, and other core elements of the Babban Gona model (14:22)
- the impact on the lives of farm families (25:39)
- how Babban Gona is raising capital to super-scale the model (32:36)
- and how it mitigates climate change and other risks (39:39).
Additional Resources:
Source articles for this episode include:
The Role of Smallholder Farms in a Changing World, on the challenges and potential of smallholder agriculture
Bending the Arc: How The Full Spectrum of Capital Can Enable Inclusive Growth in Agriculture, with a case study on Babban Gona (p. 29)
Politics as War, a Human Rights Watch study of the 2007 violence in Port Harcourt and its roots in the economic and educational inequities for youth
The full transcript of the episode is below.
* * *
Jonathan Levine 00:02
It was 2007 and Kola Masha was coming home. After years of studying and working in the United States, the young business executive was returning to Nigeria to take on a big job: helping to revive the country's national fertilizer industry, which had fallen on hard times.
Kola Masha 00:25
Really what excited me was, they wanted to help drive an African agricultural Green Revolution, similar to what had happened in Asia in the ‘60s and ‘70s. I was moving to a town called Port Harcourt, known as the Garden City. It was a lovely place.
Jonathan Levine 00:45
But no sooner had he landed that he realized something was wrong.
Kola Masha 00:49
So I come out of the airport in Port Harcourt. And I'm met by a car with two policemen with two of the largest guns I've ever seen. And we're racing through traffic to get to the hotel before the curfew sets it. And, you know, it was just very apparent, the rapid decline of Port Harcourt.
Jonathan Levine 01:15
Gang violence and other criminal activity was tearing the city apart. A surge of poor and unemployed young men were fighting over the political spoils of Nigeria's oil wealth.
Kola Masha 01:26
And it became very clear that we had a serious problem.
Jonathan Levine 01:35
From the Stanford Social Innovation Review at Stanford University, this is Uncharted Ground—stories about the people at the forefront of global development and their journeys in social innovation. I'm Jonathan Levine. Kola Masha's homecoming was short-lived. In less than a decade away, the peaceful Nigeria of his youth in the 1980s had given way to an epidemic of violence and crime. Over the next few years, he says he came to understand why.
Kola Masha 02:07
The problem was rising insecurity, and the underlying cause was a dramatic growth in youth unemployment.
Jonathan Levine 02:15
For two years, he and his wife, Lola, studied the problem of youth unemployment, and they came up with a solution: They would create millions of jobs in agriculture by making farming profitable enough that young Nigerians would want to do it—and in the process, transform the meager existence of subsistence farming into a desirable opportunity. Today, 86,000 smallholder farmers have signed on to their plan. And their for-profit social enterprise, called Babban Gona, is on an audacious path to grow that number more than ten-fold. Their goal is to serve one million farmers over the next four years and raise an unprecedented half-a-billion dollars to finance them.
Kola Masha 03:03
We are trying to create a system to attract the scale of capital needed to support that number of young farmers. In turn, we would then be creating an economic buffer that would halt the spread of violence and insurgencies.
Jonathan Levine 03:24
If Babban Gona can make the vast landscape of smallholder farming profitable, it could temper Nigeria social tensions. It could also accelerate that Green Revolution across Africa and alleviate poverty in the process.
Jonathan Levine 03:42
Of all the food produced in Sub-Saharan Africa, about 80 percent comes from smallholders, mainly family farms operating on less than two hectares, or about five acres. That makes them critical players in the world's food security situation, and there's never been more pressure on them. The COVID pandemic has exacerbated food shortages even as Africa's population is booming. It's expected to soar 85 percent by 2050. And climate change is wreaking havoc on farmers' ability to feed them all. And yet, these small farmers themselves are some of the poorest and most vulnerable people on the planet.
Jenny Scharrer 04:23
The African continent is facing severe hunger and poverty issues.
Jonathan Levine 04:28
Jenny Scharrer is a country director at KfW, a big German development bank. She spent a decade investing in agricultural businesses in Sub-Saharan Africa.
Jenny Scharrer 04:37
If you look at all the people living in poverty—that's nearly half-a-billion people—70 percent of those are smallholder farmers. So unless you crack the problem of smallholder agriculture, you will not solve the problem of poverty in Africa.
Jonathan Levine 04:58
Nigeria is a lynchpin in Africa's smallholder problem. Not only is it the most populous country on the continent. It's also home to a high concentration of smallholders. The key challenge is that productivity is pitifully poor.
Jenny Scharrer 05:13
On the African continent, depending on the crop, you're looking at 20 percent to 40 percent of the productivity that same crop would have in industrialized countries. Even among other developing countries, Africa, and Nigeria in particular, is still lagging far behind in productivity.
Jonathan Levine 05:34
Farmers in Nigeria typically operate on small plots inherited from their families, and most use methods that haven't changed in generations. As a result, crop yields are so low that more than two-thirds of Nigerian smallholders earn less than $1.90 a day. That leaves them little if anything to invest in their farms. Most small businesses rely heavily on bank loans to grow. But that's not an option for these farmers. Edward Diener is Chief Operating Officer for King Philanthropies in California.
Edward Diener 06:06
The local regional financial organizations don't touch these customers. They're outside any banking system.
Jonathan Levine 06:15
With no hope of getting ahead, the generational cycle of rural poverty has driven millions of young people to cities in search of a better life. Ten years ago, Halliru Sale nearly left his family's two-hectare plot near the village of Salauwa in northern Nigeria, in search of a blue-collar job.
Halliru Sale 06:33
We had no money to buy modern fertilizers. We didn't know anything about chemicals to kill weeds. We had a vast field of land, but in the end, we couldn't produce more than seven or 10 bags of maize. I just saw farming as unbearable and very difficult. My parents started like this and ended like this. I lived the same life. And I didn't want my children to have this kind of life. I just wanted out.
Jonathan Levine 07:03
But the reality is, there aren't many opportunities for discontented farmers like Halliru. Cities are overcrowded, and that often drives them to migrate abroad. Once they're vulnerable, Kola Masha says they become easy targets for recruitment by insurgency groups, especially young people.
Kola Masha 07:21
As oxygen is to fire, so are unemployed youth to insecurity. And we have a tremendous number of unemployed youth, not just in Nigeria, but across the continent. In Nigeria alone, from 1990 to 2010, about 20 million youth entered an oversaturated workforce, causing youth unemployment to spike to over 60 percent, triggering not one, not two, but three insurgencies.
News clip 07:49
The oil-rich Niger Delta in southern Nigeria has been a hotbed of violence...
Kola Masha 07:54
in the early to mid 2000s, we have the growth of the Niger Delta militancy.
News clip 07:59
Ceremonies around the world today for those girls kidnapped one year ago in Nigeria by the group Boko Haram...
Kola Masha 08:06
Towards the latter part of the 2000s, we saw the rise of Boko Haram.
News clip 08:11
In Nigeria an age-old conflict between herdsmen and farmers, a conflict that is becoming increasingly violent...
Kola Masha 08:19
More recently, you've seen a tremendous rise in banditry around other parts of the country.
Jonathan Levine 08:26
As bad as it's been, Kola says the future looks even worse.
Kola Masha 08:32
If you look now, from 2010 to 2030, we now have four times the number of youth—80 million people entering that same oversaturated workforce. So really, if 20 million youth entering the workforce in 20 years triggered Boko Haram, Niger Delta crisis, banditry crisis, what would four times that number do?
Jonathan Levine 09:02
The question haunted Kola and Lola Masha for years. As Kola traveled around northern Nigeria making deals for the fertilizer business, Lola was working as a consultant for McKinsey and Company in the US.
Lola Masha 09:15
We both had the joint mission-vision-objective of doing something better at home, right. Of taking sort of the wealth of knowledge, opportunity, frankly, privilege that we had gotten, and thinking of ways to improve the way things work back in Nigeria. We were not sure exactly how.
Jonathan Levine 09:44
By early 2010, Kola says the security situation was getting bad. So he and Lola took a road trip to Benin a few hours away, sat on a beach, and sketched out their options.
Kola Masha 09:56
The first problem we were trying to solve was the jobs problem. What sector could be a job-creation engine?
Lola Masha 10:04
I have the consultant background, Kola had the business background. We literally thought of it as a case study, essentially. We were extremely structured with it.
Jonathan Levine 10:13
The criteria, Kola says, were simple. The sector had to be big, with big growth potential, and labor-intensive, but not require more than limited skills. They quickly winnowed the list to two industries, agriculture, and construction.
Kola Masha 10:29
And really agriculture was hands-down the sector that checked all of those boxes. And so we then said to ourselves, okay, if agriculture is that job-creation engine, how do we unlock the potential of agriculture as a job-creation engine.
Jonathan Levine 10:43
With more research, Kola drew inspiration from the case of Thailand in the 1980s. He says the country's agricultural productivity started to soar with the injection of capital. And that enabled small farmers to invest in agricultural inputs, like fertilizers and seeds, to grow their yields.
Kola Masha 11:02
So we settled on a strategy that would increase the profitability of small-scale farmers, that would draw millions of young people into the sector, effectively as agricultural entrepreneurs. So the next question we had to ask ourselves was, okay, why are smallholder farmers poor? And how can we enable them to make much more money? And it was at that point that I looked back on my heritage.
Jonathan Levine 11:32
Kola's father is Nigerian, but his mother was American. She grew up in South Dakota, and her father farmed soybeans on a small spread there in the early 1900s. For years, Kola says his grandfather struggled to survive with poor yields and low economies of scale. Until farm cooperatives started expanding around the country. A local co-op helped him reduce costs and improve productivity, get better prices for his crops, and secure loans through the newly minted Farm Credit System...
Kola Masha 12:03
...To the point where, you know, my grandfather was able to make enough money to send my mother off to university, where she then in turn, met my father...
Jon Levine 12:14
...And they married and moved to Nigeria in the 1970s. Remembering that family history planted an important seed in the Mashas' business plan. By mid-2010, Kola's job in the fertilizer business had provided enormous experience and contacts. In three years, he'd set up a nationwide network for distributing fertilizer and seeds, and a huge ag extension service to educate farmers about how to use them. With all that under his belt, he quit his job, while Lola supported them financially working for Google in Africa. They set up a consulting partnership to explore opportunities for their agriculture venture. And in one of their first assignments, the Bill and Melinda Gates Foundation asked them to develop a commercial strategy for a new fungicide product it was promoting.
Lola Masha 13:07
The Gates project gave us the freedom to explore that space even more, to think about commercial models that can scale and that can work.
Jonathan Levine 13:17
As part of the project, Kola did field research in northern Nigeria, interviewing different stakeholders, getting to know farmers and their working habits.
Lola Masha 13:25
That journey led to saying, okay, you know what, there's actually a lot more that could be done in supporting smallholder farmers.
Jonathan Levine 13:36
Then, inspired by his grandfather, Kola pursued a fellowship in early 2012 to study farm cooperatives around the United States. He wanted to find out what made them successful. He came back with a few consistent themes.
Kola Masha 13:50
The first was grassroot-level leadership—fellow farmers leading fellow farmers. The second was access to professional services—to deliver services efficiently and effectively. And third, was access to investments to scale—and benefit from additional economies of scale.
Jonathan Levine 14:12
In a nutshell, those lessons became the blueprint for Babban Gona. In the Hausa language, it means Great Farm.
Jonathan Levine 14:22
[Farmer chant] You can hear farmers chanting all around northern Nigeria these days: "Babban Gona—better your life." Because that is what the model is designed to do. It all starts with what the company calls Trust Groups, small teams of three to five smallholders. They mostly grow maize or corn. Each group operates like a mini-grassroots cooperative, supporting each other throughout the season, helping till each other's land, cross-guaranteeing each other's loans. Kola says he borrowed the concept from the early days of the micro-finance industry when mutual support and peer pressure ensured that small groups of women borrowers succeeded in their cottage businesses.
Kola Masha 15:07
Trust is at the core of everything that we do. If one of the members of your group is unable to fulfill their loan obligation, you commit to step in and support them.
Jonathan Levine 15:17
Babban Gona selects one leader to head each group. To choose them, the company has developed an extensive psychometric test to screen hundreds of thousands of farmers over the years. It asks dozens of questions—to assess basic intelligence, willingness to adopt new technology, the likelihood they'd default on their loans—all to help determine who would make a great leader. The Trust Group leader then has total authority to select who's in their group, how they function, and responsibility for making sure everyone meets their production commitments.
Kola Masha 15:49
We're franchising that entity and supporting those Trust Group leaders to run those operations very effectively.
Jonathan Levine 15:58
Other elements of the Babban Gona model borrow some tried-and-true practices that ag extension services have used for decades. The company sources high-quality seeds, fertilizers, and chemicals at low prices. And then it provides them to farmers on credit, so no one has to put any cash upfront. Babban Gona also trains the farmers extensively on how to use them. And field officers visit each farmer every couple of weeks to make sure they apply those lessons.
Kola Masha 16:26
The whole idea of supporting a smallholder farmer to access the products and services they need to improve their yield—we know this works, right? This has been time-tested. The challenge lies in how do I now deliver this product and services in a manner that is efficient, so that you're able to attract the type of capital you need to scale. That's really, I think, at the core of the innovation.
Jonathan Levine 16:52
Some of that innovation comes at harvest time. [Market sounds] By the end of the season, typical smallholder farmers are desperate for cash, so they sell their entire crop just as supply is flooding the market and crushing prices to their annual lows. Babban Gona, though, buys its members crops at market prices. And then the company stores the crop for several months and waits to sell until prices are often 25 percent to 50 percent higher. Remember Halliru Sale, the farmer we met earlier who almost quit farming? He's now a Trust Group leader.
Halliru Sale 17:35
This is the most fascinating thing about Babban Gona. They sell our maize after prices go up and then distribute the profit back to us—95 percent to the farmer and 5 percent commission for Babban Gona. It's far more than farmers can get at harvest time and adds to our profit.
Jonathan Levine 17:55
That access to higher market prices is a critical difference between Babban Gona and some other ag support programs on the continent—better-known nonprofits like One Acre Fund in East Africa and MyAgro in West Africa. Jenny Scharrer of the KfW development bank says Babban Gona farmers who grow common cash crops like maize could sell anywhere to anyone paying market price. But most stick with Babban Gona.
Jenny Scharrer 18:23
What's genius about Babban Gona is that Kola managed, through a whole series of incentive schemes, to make farmers stay loyal and come to him because they see a massive benefit for themselves.
Jonathan Levine 18:38
There are other big differences too.
Kola Masha 18:41
We are supporting them complete end-to-end, right. Everything: land preparation, tractors services that would plow their fields, the harvesters that harvest their fields, the transportation services that would move the grains from the field to the stores, physically store their grains for them, physically help market those products for them and remit back the profits from those transactions. It was a complete, holistic package that was very, very different from what is traditionally done.
Jonathan Levine 19:12
That's a huge attraction to farmers, especially young farmers who need the most help to survive. Babban Gona designed its services specifically to appeal to them. And it's why more than two-thirds of the members are young—under the age of 35. The full range of services also helps Babban Gona solve a long-standing problem: how to serve farmers at the bottom of the pyramid and still make a profit. Kola says that's been difficult for two reasons.
Kola Masha 19:42
The first is that they tend to have very low purchasing power. So the amount of business that you can do with them is relatively low. Second, they live in very hard-to-reach locations. So the cost to serve them is very high. This would not be a typical customer that most people would rush to serve.
Jonathan Levine 20:04
Babban Gona's model solves both of these problems.
Kola Masha 20:07
We overcome the low purchasing power challenge by financing our solution.
Jonathan Levine 20:13
Farmers get everything on credit, so there's no need for cash upfront. Babban Gona solves the second problem of high costs in two ways. First, a lot of cell phone-based technology helps to automate everything, from fertilizer deliveries to monitoring crops in the field. And that lowers costs. It also helps to keep their field staff lean. Just a single field officer acts as the point of contact for every farmer's business. But more importantly, to offset high costs, Babban Gona charges farmers a small fee on each of the many services that it provides—fertilizer purchases, transport services, grain sales. By combining the lower overhead with all those small fees...
Kola Masha 20:55
...you can still charge a very low margin and make it financially viable.
Jonathan Levine 21:01
Jenny Sharrer says that is far different from most other government or nonprofit ag support models on the continent, which rely on state funds or grants to survive. Being financially sustainable makes Babban Gona bankable to big investors. And that is something of a breakthrough.
Jenny Scharrer 21:18
From that perspective, I think Babban Gona has gone the most radical way, the most holistic way. It has shown that there are models where smallholder agriculture can be fully profitable while generating impact. And this is super-exciting for the continent, and for Nigeria in particular. Kola really did crack the nut.
Jonathan Levine 21:46
Back in 2012, before the first Trust Group ever met, before the first field was tilled—all of this was still just a shared vision of Kola and Lola Masha.
Kola Masha 21:56
We started on this journey recognizing that we wanted to support a million farmers by 2025.
Jonathan Levine 22:02
But even Kola realized that was a tall order for someone who'd never touched a plow. He had prestigious credentials—an engineering degree from MIT, a Harvard MBA, executive leadership training at General Electric, which was renowned in its day for management excellence. But he'd never gotten his hands dirty, literally, in the field.
Kola Masha 22:24
So the first step was actually going and farming one and a half hectares myself.
Jonathan Levine 22:30
He leased a plot of land near a small village in northern Nigeria. Lola remembers her husband was away for about six months.
Lola Masha 22:37
It was a very difficult time because I had a full-time job, I was back in Lagos. And he just felt he had to understand the challenges that the farmers were facing himself, right. He had to get into it, what it means to harrow the land and plant manually, and spacing the seeds in the ground.
Jonathan Levine 22:58
Did you think he was crazy to do that?
Lola Masha 23:02
Well, I mean, I believe very much in the vision and actually recall on one of his trips back. And he said, "Lola, this is so hard." He says, "I'm in a village where I'm eating noodles, breakfast, lunch, dinner. I can't trust the water. I don't speak the language. No electricity. No really functioning waste system." He says, "Look, I really don't know if I can do this."
Jonathan Levine 23:33
But he persevered. And out of all of it, she says, came something invaluable.
Lola Masha 23:39
A deeper level of trust with the community. So if you think of it from the farmers' perspective, right, they've had NGOs come and go. They would have someone come pitch a program to them--if it's a borehole in the village, or if it's a solar system, whatever—it's often not sustainable. And they often don't see the deep commitment from these partners. And here they see this guy, not from the area, but fully committed to what they do. Not telling them what to do, but having a learning mindset, working hand in hand with them, to brainstorm, to engage to think through how to make things better. And I think that was a very key positive end result from that.
Jonathan Levine 24:29
Fresh off the farm, Kola started recruiting the first members for Babban Gona in late 2012. Knowing trust would be an issue, he started in a county where he knew the head of the United Nations Millennium Village Project. It had been operating for several years, and the director offered to make local introductions. Even then, it was a tough slog.
Kola Masha 24:50
One afternoon we stopped by this village called Nacala. There was a big mud pit, and the farmers were building bricks for their homes. And, you know, we went down into the pit, sat down, spent an hour chatting with the farmers there. I think we were lucky enough to get at least one out of, I think, the nearly 20 farmers to join up.
Jonathan Levine 25:13
So you got one out of the entire mud pit. What did the rest of them say? Why didn't they do it?
Kola Masha 25:21
Well, you know, farmers are very smart people, and they probably were like, you know this, this sounds good. But their ability to deliver would probably be very low. So we had to really overcome that distrust.
Halliru Sale 25:39
When I first heard what Babban Gona was offering, I didn't believe my ears.
Jonathan Levine 25:44
Halliru Sale from Salauwa village was one of those very first farmers to hear Kola's pitch.
Halliru Sale 25:51
They told me that my farm could produce enough food to feed my family, even to send my children to school, and buy other worldly materials. But I never believed that would happen. To me at the time, farming was just something to do because you have nothing else to do. I was on the verge of leaving to find a job in the city, but I decided to take a gamble.
Jonathan Levine 26:14
What happened next still astonishes him. The first year, he says he received seeds, fertilizers, and chemicals from Babban Gona. Field officers came to his farm and showed him how to use them.
Halliru Sale 26:31
We used to plant seeds just any which way—70, 80 centimeters, even a meter apart. But from Babban Gona, we learned to space them no more than 20 centimeters, so that we get the most yield from the land.
Jonathan Levine 26:45
By the end of that season, Halliru says his maize harvest was about 8,000 kilos or quadruple his normal crop. With the extra income the next year and every year since, he has leased or bought more land. Today, his farm encompasses 20 hectares. That's 10 times what he started with—plenty to feed his household of 15 children, and then some
Halliru Sale 27:12
My income has increased significantly. Last year, I finished building my big 10-room house. I now own my own motorbike, and my children are all in school. As I'm speaking to you, my firstborn son is actually in university, the first one ever in my family. He is even studying agriculture so he can bring back the modern techniques he's learning to help the family and the community. Before, I never even dreamed that I could achieve all this.
Jonathan Levine 27:45
That first season, Kola signed up about 100 farmers to Babban Gona—barely half his target. But as the early recruits like Halliru proved out the model, 600 signed up the next year and 1,500 the year after that. Today, Babban Gona has 86,000 members, a four-fold increase in just the last two years. Still, I was skeptical that Halliru's experience was typical. So I asked him.
Halliru Sale 28:18
This story is not just typical of me. I know plenty of people in my community and even beyond who are doing way, way better because of Babban Gona.
Jonathan Levine 28:27
In fact, the typical Babban Gona farmer produces two to three times the average smallholder maize yield in Nigeria, and many are far higher. Increasing productivity, though, is just the starting point in Babban Gona's plan to move farmers out of subsistence-level poverty.
Kola Masha 28:47
Step two is then enabling our members to grow their landholding, right. If you're able to take a farmer that is farming one hectare today, and you double their income on that one hectare, now you've doubled their income. Great. Now if you take them from one hectare to farming three hectares, you've just increased their income six-fold.
Jonathan Levine 29:08
He says most farmers add to their land holdings as soon as the second year, and Babban Gona farmers altogether now have 140,000 acres under cultivation. But Babban Gona doesn't stop at increasing landholdings to create wealth. In the last few years, it's added new opportunities to help farm families generate non-farm income as well. It trains and finances them to set up independent businesses—retail stores, agricultural dealerships, even motorbike sales—all kinds of products and services that are in high demand in rural areas, but where broken supply chains often don't function.
Kola Masha 29:47
They're now able to take that income from their farm and now invest that and have other business opportunities. So it's that layered effect where they're able to really achieve truly transformational life-changing opportunities because they're able to make significantly increased incomes.
Jonathan Levine 30:11
Rhoda Ephraim is a maize farmer from Gikangunda village in Kaduna state.
Rhoda Ephraim 30:16
The increase in productivity has really helped my income. All five of my children are now in school. I could never imagine it before. But with the help of God, and Babban Gona, they are all in school.
Jonathan Levine 30:32
Rhoda has been farming with Babban Gona since 2013. In the early years, she doubled the yield on her half-hectare plot, and then she doubled her land. But she says even the life-changing benefits from that extra farm income don't compare to the return she makes from a small bodega she set up in her home two years ago, financed by Babban Gona. She sells palm oil, spaghetti, soap, and other hard-to-find items to neighbors and clears about 10,000 Nigerian Naira, or $24 a week.
Rhoda Ephraim 31:05
The money is much more than I earn from farming. And it's more reliable. With farming, I only know how much I get at the end of the year. But with this business, not a week goes by that I don't make these sales. My life is much, much better than before.
Jonathan Levine 31:23
Rhoda is one of about 18,000 women Babban Gona has financed over the last two years—with the goal of increasing female membership in the business. The company's Women's Economic Development Initiative trains them to run a retail trading business and then, like the farmers, stakes them with credit to get started. Lola Masha became Babban Gona's Executive Director a few years ago, and she says the initiative's goal is more than strictly financial gain.
Lola Masha 31:51
Research has shown that when a woman makes extra income, she reinvests that income into the household—nutrition, health care, and education for the family. When a man makes extra income, often times it goes outside the household. So from that lens, as we think about secondary impact, one dollar will go further if it's generated by the woman. So that's the central thesis with which we are driving incomes and involvement by our female members.
Jonathan Levine 32:36
At the core of the Babban Gona story, of course, is money. Advancing credit to tens of thousands of farmers and shopkeepers—whose numbers keep doubling every year—takes a lot of it. Kola figures each farmer needs $500 to $1,000 in credit each year to reach their potential. Nonprofit ag support programs in Africa mostly rely on grants and donations. And there isn't enough grant funding in all of Africa to reach the scale he had in mind.
Kola Masha 33:06
We knew from day one, we would want to get to a million farmers by 2025. We knew the need in Nigeria was that by 2030, we could get to potentially 10 million. You know, simple math showed us that we needed to raise somewhere in the range about half-a-billion dollars. And so the model to scale would require significant amounts of debt financing.
Jonathan Levine 33:31
He started small. The first $20,000 in loans came in through the crowdfunding program Kiva, and another $50,000 from a wealthy Nigerian woman in 2012. Over the next three years, Babban Gona raised about $800,000 in loans from DFID, the UK's Development Fund for International Development. Even that was a drop in the bucket compared to what the company would need. But it laid important groundwork for attracting future investors.
Kola Masha 34:00
It proved that the Babban Gona model could work and that we could repay our loans.
Jonathan Levine 34:06
Then in 2015 came another catalytic investment, this time from the Gates Foundation: $4 million in the form of equity in the company. That laid the foundation for building a clever three-tier capital structure, which Kola borrowed from a pioneer in the US community development industry. It's called the Community Reinvestment Fund.
Kola Masha 34:28
One of the key models we looked at was Community Reinvestment Fund, to understand how they had evolved from their early days in the mid-'90s, with maybe about $5 million in capital, to growing to the point where they now have about $3 billion in capital that they've raised to support small businesses in disadvantaged communities.
Jonathan Levine 34:50
That model had never been used before to raise money for smallholder farmers. But Kola could see that it paved the way to big commercial lenders. Here's how it works: It started with a relatively small base of equity investment, like the $4 million from Gates. That helped raise a larger tier of loans called subordinated or junior debt from foundations and socially minded impact investors. And that, in turn, helped attract senior debt from big commercial lenders. The thing is, each stage helped reduce the financial risk of the next stage. So the commercial lenders were sitting on top of a fat layer of capital to protect them, in case the company defaulted or went bankrupt. With that protection, they could feel comfortable committing much bigger sums of capital.
Kola Masha 35:39
For every $1 they raised from social investors, they were able to then go out and raise an additional $3 from commercial investors.
Jonathan Levine 35:49
Kola copied the scheme, and by 2018 raised an additional $25 million—an extraordinary amount for smallholder farming in Africa. The commercial money was from investors like FMO, a big Dutch Development Bank, and Nigeria's own sovereign wealth fund—the kinds of institutions that never before invested in small-scale agriculture. Kola is now in the process of raising another round of capital, this time $90 million, from big players like Citibank and the International Fund for Agricultural Development. That's a UN agency that typically invests only in sovereign nations—never before in a private company like Babban Gona, much less one in smallholder farming.
Edward Diener 36:34
These are folks who don't have high risk tolerance profiles, but they have very large sums of money to place. So it's exciting that Babban Gona is getting to the place where actors such as those names would really look at placing money in the senior debt.
Jonathan Levine 36:54
Ed Diener of King Philanthropies played a key role in making it happen. But it wasn't easy. The hardest part of the scheme was persuading foundations to put up that middle layer of loans, that was crucial to securing the big commercial lenders. Not because they didn't believe in Babban Gona's mission.
Edward Diener 37:13
You have to understand that extremely few foundations are wired to do anything other than make grants. For foundations to consider something as sophisticated as a subordinated loan, it's a big headache! But they get there when they confront opportunities such as Babban Gona that are hard for them to resist, but which require them to think differently.
Jonathan Levine 37:37
Ed took up the gauntlet when he was general counsel at the Skoll Foundation back in 2018, and provided some of the junior debt for that funding round. He also helped Babban Gona marshal all the complex legal documentation required by commercial lenders. So that now, he says foundations like his current employer at King Philanthropies have an easier time signing on to future rounds. And even as those private investments come together, Kola is already moving on to new sources of capital.
Kola Masha 38:07
The next major phase is now tapping into the public debt markets.
Jonathan Levine 38:12
Earlier this year, Babban Gona received an investment-grade debt rating from the leading rating agency in Africa. That's a signal to investors that the company is a relatively safe place for their money—a big vote of confidence in its financial stability. And it opens the door to issuing public bonds, the type of investments made by pension funds and other large institutions.
Kola Masha 38:35
We expect to launch our first public bond by the end of this year. And over the next two to three years, we should be able to raise somewhere in the range of probably $20 million to $40 million.
Jonathan Levine 38:48
This progression of commercial funding is not simply a boon to Babban Gona's farmers. It could also be a key to unlocking new capital for the whole field of smallholder agriculture in Africa. Jenny Scharrer's bank, KfW, is investing in Babban Gona's latest round. And she says one study a few years ago estimated a gap of roughly $180 billion between what Sub-Saharan ag producers of all sizes need, and what they're getting from banks. Among smallholders, barely 1 percent of their needs are getting met.
Jenny Scharrer 39:24
There is this massive need, and only with commercial funding do we stand a chance to close that gap. It sort of explains why Kola is so instrumental in solving this whole problem.
Jonathan Levine 39:39
If commercial capital is the key to pulling more and more smallholder farmers out of poverty, then mitigating risk for investors is the key to securing that capital. And Kola faces a lot of risks, says Ed Diener--starting with climate change,
Edward Diener 39:56
The part of Nigeria where he is focusing his efforts is really on the frontline of climate change. Northern Nigeria is in terrible danger of becoming too dry for a number of traditional leased crops. And subsistence farmers have the least ability to navigate through that.
Jonathan Levine 40:22
Babban Gona puts heavy emphasis on drought-tolerant seeds and other climate-smart practices. But Kola doesn't rely on that. In the last few years, the company has teamed up with insurance companies to design policies that protect farmers against two particular perils that severely affect them: weather and commodity price swings. If commodity prices drop below production costs, Kola says farmers receive a payment that makes them whole. In the same way, Babban Gona uses weather indexing to help deal with climate change.
Kola Masha 40:56
Weather index insurance basically says if you are within a certain quadrant of land, say, this 10-kilometer by 10-kilometer area, and the satellite systems assess that rainfall patterns in that area were either excessive or too low, it triggers a payment to you.
Jonathan Levine 41:17
These insurance policies are only part of a whole quiver of tools that Babban Gona has deployed to reduce risks. Technology plays a big part. For example, the company developed a satellite-based artificial intelligence system that's been trained on more than 2 million images of maize fields taken over the last several years. It helps farmers and field officers monitor the health of crops, so they can respond quickly to problems and optimize yields.
Kola Masha 41:44
We're using advanced image processing. If you're able to take a picture of a farm, we can analyze that image and basically tell you multiple different parameters on the health and wellness of that farm—pests, soil health, weed pressure, etc., etc.
Jonathan Levine 42:02
Why all of this matters, of course—the insurance policies, the crop monitoring, the careful selection of Trust Group leaders—is to ensure farmers meet their production targets and earn enough from their crops to repay the loans from lenders.
Kola Masha 42:17
It's really that comprehensive package that has enabled us, now going on a decade, to maintain a 99 percent repayment rate.
Jonathan Levine 42:30
And that high repayment rate, in turn, helps raise more capital to support even more farmers. To make all this work, Babban Gona itself, as a for-profit company, has to remain a bankable business for investors. But profitable only up to a point.
Kola Masha 42:54
The priority is not to make money. The priority is to raise the debt you need to continue to grow and serve more members. That's the focus.
Jonathan Levine 43:03
As long as Babban Gona meets minimal levels of profitability to satisfy investors' requirements, he says, that's all that matters. Kola estimates company revenues from this year's harvest will total about $60 million dollars. That's a four-fold increase from just two years ago, and the company is just profitable enough to continue to grow. And if management ever tried to increase profits at the farmers’ expense, they would have a say in it, because the farmer members own a big chunk of the company. Back when the Gates Foundation invested $4 million in the business, those equity shares were distributed to farmers to make sure they have a voice in how the business is run. As a group, they control about 24 percent of the company today and even have veto rights, Kola says, over things like how much the company charges them for fertilizer.
Kola Masha 43:57
You know, we wanted to ensure that we were building an organization that would be working for our members, the farmers.
Jonathan Levine 44:04
So at the end of the day, farmers are not just suppliers in the market. They're also stakeholders in the business, and that assures the social mission of the company will always be front and center.
Jonathan Levine 44:20
2021 is a breakout year for Babban Gona. After working in just five states in the northwest region of Nigeria for nearly a decade, it has expanded to more than half of the country's 36 states. And Kola Masha's ambitions don't stop at the border. He has a plan to replicate his model across Africa through a fellowship program that trains others to do the same in their own countries.
Kola Masha 44:46
We take aspiring social entrepreneurs and put them through a rigorous five-year process with a goal, at the end of the day, to enable them to build their own Babban Gona in half the time that it took us to reach break-out scale.
Jonathan Levine 45:01
The first two fellows, from Senegal and the Democratic Republic of the Congo, are already in training. Five more are being recruited for next year.
Kola Masha 45:10
The goal is that by 2030, we want to have at least replicated ourselves 100 times.
Jonathan Levine 45:16
So with all of that effort, will it make a difference beyond Nigeria?
Jenny Scharrer 45:20
Will it change the continent?
Jonathan Levine 45:22
Jenny Scharrer isn't so sure.
Jenny Scharrer 45:25
Well, it will only change the continent if you can find many, many more Kola Mashas. And there aren't that many more that bring the business acumen, the dedication, vision, and leadership to the table in the way that he does.
Jonathan Levine 45:40
And then there's the question of whether Babban Gona has made a difference to security in the country—the reason Kola and Lola Masha embarked on this journey in the first place... Is there any evidence at this point that all your work in the last 10 years—has it had any impact yet on mitigating the violence, do you think?
Lola Masha 46:00
Ah, how do I answer that question? So I would say within the communities that we work with, are those communities better off? Better off in the sense that they not only have increased income, but they use that extra money to improve their homes, to improve their ways of living, sending their kids to school, all of that? The answer is yes. 100 percent yes. How far does that impact go in reducing violence across the country? The reality is that Nigeria is a 200 million population country. And we've worked with, cumulatively I think, about 250,000 farmers so far. So we will be ludicrous to state that we've completely changed dynamics across the country. That's the aspiration that we're aiming for. But within the areas that we work, we've definitely seen clear improvements that are measurable, quantifiable. Those regions are better off.
Jonathan Levine 47:03
Anecdotally, there's some evidence for that. Yahaya Mudi is a traditional leader from the village of Dokantegwai, where most of the farmers are Babban Gona members. He says they've been fortunate not to have had any recent bombings or kidnappings in their area, but they used to have plenty of other problems
Yahaya Mudi 47:24
We had a big issue with cattle rustling—bandits would come at night and steal cattle from our farms. We also had a lot of gambling and drug use among our youth. But this has mostly stopped in the last six years because of Babban Gona.
Jonathan Levine 47:40
Really, because of Babban Gona?
Yahaya Mudi 47:43
Well, maybe not all because of Babban Gona. But it was the lack of jobs that drove people to these kinds of menaces. And now families have a means to take care of themselves, and the youth are busy with their farm lives.
Jonathan Levine 48:00
Babban Gona itself employs a staff of 3,000—many of them young people from the villages as field officers and other positions. They pay handsomely, says Halliru Sale, the Trust Group leader from Salauwa. And that's on top of the new farming opportunities for young people.
Halliru Sale 48:16
You hardly see a youth anymore moving from the village to the city to look for work. Babban Gona has really helped to stop migration. And it helps to stop them from joining up with the bad people who commit atrocities.
Jonathan Levine 48:31
If he's right, that would be the best evidence of all that Babban Gona is on its way to creating jobs for the glut of unemployed youth in Nigeria, and building a better life for millions of subsistence farmers.
Jonathan Levine 48:55
Glad you could join me today on the journey to Nigeria with Babban Gona. If you enjoyed this story, please give us a review or a rating on your favorite podcast app, and tell your friends. And if you have a comment or a question for the team at Babban Gona, we'd like to hear from you. Just go to ssir.org/UnchartedGround, click on this episode, "From Plow to Prosperity," and find the comment link near the top of the page. In our next episode, the Northern Triangle countries of Latin America are some of the most violent in the world. And that violence can leave lasting trauma for children—and affect their development the rest of their lives.
Celina de Sola 49:38
When you're exposed to trauma, it does affect your ability to learn because you're trying to survive.
Jonathan Levine 49:44
Caring for the mental health of Latin America's children. That's next time on Uncharted Ground. This episode was written and produced by me. Jennifer Goren edited the story. Tina Tobey Mack edited and designed our sound. Isa Shuaibu translated for our Hausa speakers. And Isa, along with Laolu Oloyede and Bilkisu Zubairu, provided their English voices. Our thanks to Kola and Lola Masha, their farmer-members, and the entire team at Babban Gona, for sharing their story with us. Uncharted Ground is produced and distributed in partnership with the Stanford Social Innovation Review at Stanford University, and online at ssir.org. I'm Jonathan Levine, and you've been on Uncharted Ground.