Mosaic Agriculture

Cinch solves two problems:

1. Smallholder farmers cannot invest to generate a reliable income on less than 10 acres of land
2. Because smallholders collectively own large percentages of arable land in emerging markets, the agricultural sector is under-productive

We built a model farm to solve these problems. Cinch engaged a community of internally displaced persons (IDPs) in central Kenya to pilot our new approach to agriculture. These families leased land to Cinch, we invested in irrigation and brought a professional farming team. Cinch aggregated 53 plots as one commercial "mosaic" farm, growing high value horticulture crops.

 Cinch provides immediate opportunities:

1. Guaranteed monthly income from their lease
2. Jobs on Cinch's farm
3. A quarterly dividend whenever Cinch is profitable 

Smallholder farmers comprise 75% of the world's poor. Many organizations help smallholder farmers access capital. We believe that only a complete risk transfer, giving farmers guaranteed incomes, can help farmers build prosperity. 

Cinch is creating a path for smallholders to transition out of farming, while building long-lasting wealth. More than 2 billion people live in smallholder households with little prospect of escaping poverty. This poverty trap exists because making a stable income through farming requires investment, and poor farmers can't afford to invest.

Helping smallholder farmers means addressing poverty, as they comprise 75% of the world's poor. Many organizations believe the solution is to help smallholder farmers access to capital. We believe that only a complete risk transfer, giving farmers guaranteed incomes, can help farmers build prosperity.

How does Cinch transfer risk? We grow produce for farmers, including installing infrastructure and bringing a professional agronomy team. Those investments only make sense at scale, which Cinch reaches by aggregating plots together to create a "mosaic" farm comprised of many smaller parcels. Farmers bear no responsibility for these costs, nor do they suffer if yields are below expectations; that's Cinch's responsibility.

With a guaranteed income from Cinch's monthly lease payment, farmers can afford to live differently. As Cinch manages their land for them, farmers save their income and make transformative investments, like sending their children to school and improving their home. 

Cinch is a land transformation company that constructs commercial farms. Our commercial farms are unique: rather than a single tract of land, they are the aggregate of dozens of small plots. Farmers who previously farmed these plots themselves instead lease the land to Cinch. We call this "mosaic agriculture".

Our approach functions as a risk transfer: Cinch absorbs the costs associated with installing irrigation and buying inputs to grow higher value crops, while also bearing responsibility for selling those crops. The farmers who previously had highly volatile earnings from farming at small scale now earn guaranteed income in the form of a monthly lease payment. These farmers also have access to job opportunities on the large scale commercial farm Cinch has created with their land, and receive dividends according to how much land they contributed.

The impact is clear: farmers earn five times more than they did before, land is dramatically more productive and the agriculture sector in underdeveloped markets has taken a large step forward toward realizing its commercial potential. Farmers continue to own the land, while Cinch increases the value of the farmer's primary asset.

Village 2 in Solio, Laikipia County, Kenya has 2000 households. Last year, each earned an average of $400 USD. In some ways, Village 2 is remarkable: its residents were forcibly relocated in 2008 from a nearby forest. For leaving behind their entire lives, the government gave them 1/2 acre to live on, and another 4 acres to farm.

In other ways, they are unremarkable: like 2 billion others globally, they earn much of their income from farming a small parcel of land and fight a constant struggle to cover expenses. 

Farmers who joined Cinch are older, generally over 50, and rely on their children to financially support them. They live without running water, in houses that with dirt floors and no electricity. Virtually none have access to Kenya's NHIF healthcare insurance or NSSF social security fund.

We know who they are because we spend hours sitting in their homes, discussing their families and understanding their challenges. We also meet outside their homes, in the fields and sometimes at our office, and ask what they like about Cinch, and what they would change. We always listen and search for a middle ground to meet their needs, while building a sustainable business. 

We take a different view from many organizations: we don't believe smallholders should be farming. Advanced agriculture around the world looks the same, with large, increasing mechanized farms that benefit from economies of scale.

Cinch is trying to include smallholder farmers in the transition to commercial agriculture by farming for smallholders, who become shareholders of the farm we build on their land.

Many organizations focusing on how to make smallholders more efficient; we see that as an incremental benefit that doesn't address the underlying issue of poverty. Cinch focuses on helping smallholders prosper, even if that doesn't include them farming.

We are the only mosaic farm in the world. By "mosaic" farm, we mean a commercial farm, selling high value crops for export, owned by smallholder farmers. This is what is looks like:

Each individual plot is owned by a smallholder farmer, while Cinch installs irrigation equipment and grows crops. By consolidating the management of this land, Cinch benefits from economies of scale, reducing costs while increasing our bargaining power with buyers. As a result, we can sell our crops on forward contracts with guaranteed prices, which locks in revenue and builds a substantial operating margin. That profit allows us to pay dividends to farmers and continue to expand the farm.

This virtuous cycle has a massive impact on land productivity, increasing the revenue each acre generates from $500 per year (growing low value crops like maize for local consumption), to over $15,000. This model can break the poverty cycle of smallholder farming: instead of land constantly getting subdivided and losing productivity, Cinch allows smallholders to become shareholders in commercial farms.

Land rights and documentation are a key opportunity of Cinch's work. To help farmers monetize and build value in their land, we must help them demonstrate that they own that land. Our current approach involves geospatial mapping with GPS, then cross-referencing our map with the best publicly available information.

To better scale our onboarding process for new land, we're investing in a new solution that will allow multiple landowners to remotely "challenge" the property lines that we (or they) propose. The concept is to apply technology to document an already common practice: property lines are where the two neighbors agree they are.

We have a lot of research, testing and iterating to do before rolling this technology out to our farmers but the idea represents a new approach to one of the biggest barriers to investment in emerging markets.

The blue outlines below are plot boundaries that we've manually mapped with GPS units.

Below is a map of property boundaries kept by Kenya's Ministry of Lands:

As you can see, the primary distinction between these two maps is that, in the time since the official Ministry of Lands map was created, plots have been sub-divided. Solving that problem, of recognizing increasingly fragmented land ownership while aggregating the management of that land, is a core problem Cinch is working to solve.

We use GPS and KMZ files to document land boundaries on the ground, and verify those boundaries with neighbors on either side to confirm that we're leasing the right land from the right person.

• Current number of beneficiaries: 2,788 farmers, workers and family members
• Number of beneficiaries in one year: 34,000 farmers, workers and family members
• Number of beneficiaries in five years: 300,000 farmers, workers and family members

We see horticulture as the key to establishing a durable income for the billion poorest people on earth. Horticulture is unique in that profit margins are large enough that even a medium investment (less than $2 million USD) can create dramatically higher, sustainable incomes for a thousand people. 

In the next year, Cinch wants to broaden our impact by replicating our model farm across Kenya. From managing 200 acres in early 2020, we want to manage close to 1,000 acres by the end of this year. That expansion will demonstrate that our model is flexible enough to include smallholders in a wide variety of circumstances, such as different plot sizes, soil types and climates.

Our vision is to use reliable incomes as a foundation to extend goods, services and training to help our smallholders escape poverty and enter the middle class. We're already leveraging our proprietary data on our farmers' incomes to develop credit products, home improvements (like concrete flooring) and other value that will improve their quality of life. At Cinch, we are optimistic that smallholder farmers can thrive in the twenty first century by not farming at all. Instead, they are investors (and owners) of a farm we run on their land. We can build these farms anywhere from Arusha to Ho Chi Minh City and they will help people who earn $500 a year now quadruple their incomes. 

We have two primary challenges. First is to maintain our unit economics, which are distilled into "operating profit per acre per year" despite the uncertainty of farming. Second is to develop a scalable strategy to recruit farmers and transform land.

Maintaining our unit economics is difficult, as we already saw with flooding events in 2019 and 2020. Less than a year since launching, we have a clear understanding of our costs and their variability. 

On the revenue side, meeting our targets will require us to expand the number of acres Cinch is managing. Several bottlenecks will make this expansion operationally complex, but achievable. Second, deploying our infrastructure requires tight coordination across many vendors: hydrologists, borehole drillers, construction teams and irrigation experts. We are improving that coordination by developing a “playbook” that describes the sequencing of projects, who is responsible for what and when. 

We currently have a hands-on approach to signing up new farmers. That approaches has yielded important lessons on how to extend our limited resources. Onboarding a farmer often requires multiple meetings, consultations with their families and endorsements from existing farmers. Our goal is to find ways to condense this process into a recruitment strategy that leverages local ambassadors working on behalf of Cinch.

We have two primary challenges: 

1. Maintaining our unit economics, which are distilled into "operating profit per acre per year", despite the uncertainty of farming
2. Developing a scalable strategy to recruit farmers.

Unit Economics

Maintaining our unit economics is difficult, as we already saw with flooding events in 2019 and 2020. In our first year of operations, we have a clear understanding of our costs and their degree of variability. Our capital expenditure on items like boreholes and irrigation equipment is by contract and predictable. Input costs, like manure, seed, fertilizer and sprays to protect against diseases, can rise with supply chain challenges like Covid-19. 

On the revenue, there are two drivers: sales price per Kg, and yield (i.e. the amount harvested) per acre. We pre-negotiate sales prices on 18 month contracts to lock in predictable prices. Yield encapsulates all of the uncertainty of farming: soil pathogens, weather, pests and low germination rates can all reduce yield. Cinch is reducing yield uncertainty with multi-peril crop insurance, and a rigorous program of testing and iterating to improve our growing methods. Testing includes: different varieties of seed, manure and fertilizer, different spray programs and land preparation methods

Scaling

Our current approach to recruiting farmers is manual and time intensive: we meet with each farmer in-person, often several times, to explain Cinch's value proposition. We are now implementing a model where farmers self-organize into cohorts, so that we have a minimum viable amount of land before we start installing infrastructure on a new farm. 

Full time staff: 28

Part-time / casual staff: 600

Contractors: ~30, highly variable depending on projects in-flight

We bring together 3 unique skill sets:

1. Building products for financial inclusion of the underserved
2. Rigorous financial analysis and a strong investor network
3. Agronomy expertise in export horticulture, in Kenya

Working at Dalberg Global Development Advisors and Tala helped me understand user research and design techniques to build products and services for people who are traditionally excluded, like smallholders. With Dalberg, I interviewed hundreds of smallholders across several countries, which gave me the insight to develop our unique value proposition. At Tala, I learned how to iterate on a product (short term credit, accessible via mobile phone) and grow a user base to hundreds of thousands of customers. That experience will help Cinch build products farmers value, and scale those products.

Our CFO, Richard, previously worked in hedge fund management at Goldman Sachs. His skills have already helped Cinch raise and deploy capital more efficiently, which will be essential as we source debt to replicate our business model across 10 new farms in the next 2 years. We've used Richard's experience and network to attract patient capital that appreciates our impact goals, but demands a strong commercial return on investment.

Lastly, Boniface Koimburi, our farm General Manager, has decades of experience growing export horticulture in Kenya. His background has been essential to selecting our crops, developing a planting program and executing contracts with buyers. Those advantages will serve us as we expand into a more diverse crop portfolio, and increase the volume of crop production in the immediate future. 

We are exploring a collaboration with a local microfinance institution (MFI) to offer flexible payment terms for Cinch’s leases to farmers. Cinch currently offers monthly payments for our leases to farmers, which is better for our company’s cash flow and helps keep farmers’ incomes smooth. Some farmers have given feedback that they would prefer to receive their payments in larger quarterly or annual “lump sum” payments. These larger sums would allow them to use the money for larger projects like improving their houses or paying school fees.

It is outside of Cinch’s current scope to provide financing options on leases, so we are excited to parter with this local MFI to offer flexible payments in the form of loans, which Cinch will service on behalf of the farmer.

We are also exploring a partnership with Kenya's leading telecommunications company to build a model farm together. We are in early stages of exploring that collaboration.

Cinch serves two customer bases: smallholder farmers who own land, and commercial horticulture buyers.

For smallholder farmers, our "product" is a lease, paid in monthly installments, along with opportunities to earn a salary by working at the farm, and receive a quarterly dividend from Cinch's profits. For these farmers, the value proposition is clear:

Farmer's average monthly income in Solio, before joining Cinch: $49.30

Farmer's average monthly income in Solio, after joining Cinch: $147.66

This is a transformative increase in income for these farmers, allowing them to make investments like concrete floors for their homes, water tanks and pumps. They can also pay school fees for their children. Finally, by increasing the productivity of their land (with irrigation and other investments), Cinch is increasing the value of these farmers' main asset.

For commercial horticulture buyers, Cinch's products are high quality vegetables, grown on set schedules and in large volumes. We compete with other commercial farms on price and quality, and exceed them in terms of year-round availability of crops like French Beans and Garlic. Our buyers value year round supply so much that they secure advance orders on 18 month contracts, which locks in a fair price for both parties. In seasons when supply of these products is low, the buyer is paying a below-market rate to Cinch; the opposite is true in high seasons. Predictable revenue (for Cinch) and costs (for our buyers) are tremendously valuable in markets like Kenya, where market prices can be highly volatile.

Cinch takes an integrated approach to confronting the challenges of smallholder farming. While smallholder farming is a contributing factor to longstanding poverty, it is just one of many.

Being part of the Solve network, including connecting with Solver teams, would be a tremendous opportunity to look beyond the immediate problems Cinch is addressing and think holistically with capable partners. 

Cinch should exist within an ecosystem of products and services that help smallholders and their families graduate into stable incomes. Solve attracts a unique cohort of organizations that are tackling the same challenges; we're honored to connect with them.

Furthermore, we know the impact Cinch could have with the monetary and technical support of the Sustainable Food Systems prize. We create over two full time jobs for every acre we manage and over $250 in guaranteed income for the landowner. Cinch's vision for the future of agriculture is inclusive prosperity. We believe the Elevate Prize shares that goal and would be a peerless partner in achieving it.

We are not a tech-first company. Cinch recognizes that there is a human (and somewhat inherently non-scalable) component to building trust with smallholder farmers and asking them to make change their way of life to benefit their families. That said, we know that technology will play a powerful role in accelerating the growth of our business and extending our impact to millions of beneficiaries.

We are already using a digital platform to onboard farmers and workers on our farms. That platform allows us to capture valuable transaction data on their incomes, which Cinch pays. Having worked at an alternative credit provider, I'm aware of the value of that information to provide our farmers access to onward goods and services, like financial products. 

Cinch's core focus is managing land for our farmers; we need partners who can be thoughtful about helping these farmers build durable wealth with their new incomes.

Providing access to financial services

• Musoni- Offering lump-sum advances on farm leases for farmers who need greater amounts than Cinch's monthly lease payment
• Safaricom- Giving savings incentives for farmers to store their income and build wealth over time with M-pesa savings accounts

Documenting land ownership for farmers

• Meridia and Landesa- Creating digital deeds that allow farmers to document land ownership and use that ownership as collateral for onward services

Including farmers + families in essential services

• Kenya's National Hospital Insurance Fund- Providing undocumented farmers and their families access to basic health insurance
• Kenya's National Social Security Fund- Providing undocumented farmers and their families access to savings accounts

Our entire core group of beneficiaries, ~3,000 people, are Internally Displaced Persons (IDPs) who were forcibly relocated by the government of Kenya in the early 2000s. They have no savings, jobs or ability to invest in incomes. In most cases, Cinch is creating an income stream for older villagers who have been financially dependent on their children for monthly support.