Financing Farmers In Rural Uganda - Cycle Connect Is A Social Business Making Tracks To End Poverty

We spoke to Molly Burke co-founder of Cycle Connect, our latest investment in our Ugandan Fund. Cycle Connect provides rural smallholder farmers with the necessary tools to propel them out of poverty.

“The story of Cycle Connect began when I was in university, where I met Muyambi our founder. He is from the South Western part of Uganda and grew up with a very modest background. He and his family were really what we would consider our target market clients now, smallholder farmers living in a remote area, far from resources. Muyambi and his family had to borrow his neighbour's bicycle in order to get to the health centre when he had malaria. In his words, “So there I was, a seven-year-old Ugandan boy, flopping around on the carrier of a neighbor’s bicycle, onward to the nearest hospital as someone pushed me. The trek, over ten miles in our remote area of Kiyaga, could take hours by foot. But I was lucky because one of our neighbors owned a bicycle.”

Muyambi earned a scholarship to attend university in the US, where he saw a grant opportunity for $10,000. At that point, 12 years ago, that was 20 million Ugandan shillings, and a significant start for him to do what he voiced passionately: to better his own country in Uganda. And so that's where the original idea for Cycle Connect began.

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Muyambi is still on our board today as our founder. I'm a co-founder as I was part of a group of students that helped develop this idea into a project. Since then, I've taken an active role in leading the company over the past five years.

I've always been interested in international development because I'm fascinated by different cultures and what makes people tick. It's amazing to think of our globe, with billions of people doing everything differently, from how we make breakfast to how we put our children to bed. The term social enterprise was growing in popularity at the time I was at university and I was drawn to it. I was working mostly on environmental sustainability - creating incentive programs to save energy to help combat climate change. I thought I would end up in that field, but when Muyambi needed help taking Cycle Connect off the ground -  I was there.

Our original idea revolved around the fact that bicycles were so important to these communities.  Muyambi saw the business component as key to the project. He had seen that there were a lot of nonprofits already servicing the region in Northern Uganda and he wanted to start something to complement these projects. But running as a business shows that the community is truly invested in your service and you can become financially sustainable.

We didn’t know it would result in a financing plan for bicycles. But that's ultimately what the student project became —a lease-to-own bicycle organisation.

What was clear then and is still clear today is the fact that rural populations are separated far from resources, both figuratively and literally. Many communities are over 50 kilometers from major trading centers or hospitals and are therefore excluded as far as market opportunity. Our ultimate goal is to move farmers out of extreme poverty and to connect them to opportunities and resources.

Being adaptive and responsive is key to who we are as an organization. We really believe in having a strong relationship with our clients. That means hearing from them and then responding accordingly. When thinking about routes out of poverty, financing for bicycles was one step. But we wanted to provide a pathway for our clients to continue to move upwards with bigger ticket assets for the same clients (also client retention is much more profitable for us as a business). Our clients were asking for income-generating products, they told us: “I paid off the bicycle I want something else. You know me, you know where I live, you know how I pay. So give me another opportunity to make money for myself.” Our initial thought was that there are other financial institutions in the area. But we also then saw that micro-finance as a business model was typically much more responsive to those in the urban and peri-urban areas. It's much more difficult for rural clients to then reach the town to pay off their loans at the branch.

We started with bicycles. But through this feedback process, we’ve added plows and motorcycles and farming machinery as assets in our portfolio. Enabling farmers to increase their incomes is ultimately what drives us.

Being a social business is critically important to us - it’s our ultimate driver. But we are also aiming to serve smallholder farmers who make up three-quarters of the Ugandan population and form a significant part of the GDP. So whether you're profit-driven or impact-driven, there is a market of millions of farmers to serve. This market opportunity is one that most institutions gloss over and don't pay attention to.

If we can get a subset of the population out of extreme poverty, then there will be huge ramifications throughout the entire country. People are living not just in poverty but in extreme poverty. Bringing people up to the next level is something we are totally committed to.  But it doesn't come without its challenges.

We're really interested in growing fast so, in order to do that, we are looking for financing. Yunus Social Business has stepped in as our first investor which is critical for us because it gives a big token of approval when we talk to other investors. As a business looking for an amount such as $100,000 for our portfolio, we sit in the ‘missing middle’ of investees. We have benefited greatly from grant funding up until now, but we are really beginning to see the barriers as an early-stage social enterprise.

From a business perspective, the challenges are inherent in trying to reach a rural population as it's far less efficient than serving urban clients. We are strategizing around collection costs and ultimately looking to scale our approach from Northern Uganda to around the country. The social mission of trying to reach farmers also creates challenges in terms of costs because there's a lower population density.

One particular component that I struggled with as a co-founder is living in an upcountry field office. We take a very client-first approach to how we run our operations and that means being close to them, but also can be somewhat isolating for the business as there are not as many networks or chances to learn from others.

We're focused right now on growing throughout Northern Uganda. By June 2021, we're going to scale into a new region and start moving from 4,000 clients per year to 10,000 - 15,000 clients per year - looking to continuously double year over year. We want to scale throughout Uganda and then ultimately enter a new market within East Africa. Our ultimate goal within the next 15 years is to be able to reach 1 million farmers per year throughout several different countries in the region.

It’s really exciting to see the passion of the Yunus team to provide further support such as client acquisition strategy,  assistance in structuring our financing, or our agricultural training. We're excited to be able to learn and grow from our investment partners.

Meet a Cycle Connect Client:

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Lamaro Kevin has been a participant of Cycle Connect since 2014. When Lamaro first took a bicycle loan, she found that one bicycle wasn't enough to meet the needs of her family and business. So she paid the bicycle off quickly and went on to invest in a second bicycle from Cycle Connect. She went on to invest in other productive assets from Cycle Connect, including a solar light loan and an ox & plow loan. She says she is looking forward to next applying for a motorcycle loan from Cycle Connect to help her continue to go the distance to achieve the dreams she has for her family.

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