Creating a Financial Vehicle that Black Farmers Can Trust: A Conversation with Olivia Watkins of Black Farmer Fund

Watkins discussed the economic and social inequities that Black farmers and food businesses face, including barriers to accessing financing from traditional financial institutions. She pointed to the drastic decline in the number of Black farmers in the US, down from about 925,000 at its peak in 1920, to only around 35,000 today. Demonstrating the disparity further, white farmers in the US make an average of $42,875 annually, compared to a net loss of $906 for Black farmers.

Black farmers and food businesses seeking a financial vehicle that they could trust was the impetus for the creation of the Black Farmer Fund. Watkins saw that “there was an opportunity to create something that was not only able to address the wealth gaps that we saw in our community, but also to create a community around Black farmers and food business to create an ecosystem.”

Watkins described the three main pillars of Black Farmer Fund’s operations: Invest, Empower, and Organizing.

Invest

Watkins explained that the fund offers two main types of funding: debt and grants. The fund is also exploring the potential to make equity investments. Compared to most sources of capital, she said that the fund offers “patient” capital, with a long repayment tenor, low interest rate, and flexibility on how senior/junior the debt will be.

Watkins shared that the fund closed on a $1 million pilot fund last year. So far, they have received 50+ applications, and have selected eight to fund (across both loans and grants). Black Farmer Fund’s average loan size is $39,500, and average grant size is $50,000. For loans, the average interest rate was 3%.

One of the other ways in which the Black Farmer Fund is set apart from other investment firms is its community-based investment process. They have a “Pilot Community” made up of local community members, their version of a traditional investment committee. Unlike other funds that may have a community/advisory board with no real decision-making power, the Pilot Community is legally empowered to have final decision-making authority.

When asked why the fund makes investments in other food-business entrepreneurs, beyond Black farmers, Watkins replied that “by investing in other market-makers, we can create business-to-business connections. A chef in our community sources products from other cohort members, and actually bought out the entire stock of turkeys from one of our community farms last year.”

Another audience member asked whether the fund has experienced any loan defaults. Watkins shared that they have not experienced any defaults yet, but have built a loan loss reserve of 20% into their financial model, a level which allows them to return capital to investors and also continue to support farmers facing negative economic shocks. Unlike traditional lenders, Black Farmer Fund doesn’t see a default as the end of their relationship with a cohort member, but rather a learning opportunity. They examine what went wrong, and, most importantly, how the fund could continue to support the cohort member. Watkins noted, “relationships have not been used in favor of our farmers; is there a way that we could turn that around and use relationships to support our farmers?”

Empower

Watkins highlighted the second pillar of their work, “Empower,” as a key differentiating element of their model. They recognized early on that financial support is not the only thing that their cohort members needed. She emphasized that the majority of Black farmers live in social and economic isolation. Watkins recognized that the fund needed to invest in farmers’ skill development, as well as in other parts of the food ecosystem. Each cohort member is supported by a technical coach, as well as being offered bookkeeping assistance. The fund also facilitates skill-sharing within the community, such as bringing in a beekeeping expert based on interest from their apple-growing members.

Organizing

Watkins emphasized that Black Farmer Fund engages with a broad array of partners in the larger food ecosystem. In addition to advocating for appropriate local and national polices, the fund collaborates with other key players. Watkins shared a very compelling example:  one of the fund’s members built a relationship with the Corbin Hill Food Project to distribute their produce in New York. To support this, the fund was able to increase its funding to the farmer so he could invest in a larger truck and meet packaging expenses to better serve this new market.

Overall, the Black Farmer Fund has become a trusted partner to Black farmers, providing not only financial support but also technical assistance and linkages to the broader food ecosystem.