For the past 60 years, economists have been researching and discussing asset diversification and Modern Portfolio Theory. Developed first by the Nobel Economist Harry Markowitz in his 1952 paper, Portfolio Selection, Modern Portfolio Theory is the study of “a choice of the mean and variance of a portfolio of assets” (1). Modern Portfolio Theory investigates the benefits of diversifying one’s wealth across different assets, be it land, houses, stock, bonds or other asset classes. A key hypothesis in the field is that through the diversification of assets, particularly among assets that are not correlated to the same market forces, households can reduce their risk exposure to sudden losses in wealth when one sector in the economy tanks (2). 

Even before Modern Portfolio Theory was popularized in the field of economics, writers, poets and historical proverbs have discussed diversification for hundreds of years (3). Daniel Bernoulli, a Swiss mathematician in the 1700’s, understood the value of diversification to limit one’s exposure to large risk when he suggested that “…It is advisable to divide goods which are exposed to some small danger into several portions rather than risk them all together.” (4). Shakespeare wrote about the implicit benefits of diversifying through his character Antonio in the Merchant of Venice who celebrated that his fortune was not in one place but spread across different ships and locations (5). The proverb “don’t put all your eggs in one basket”, a phrase used to express the risk of going all in on one venture, has been found as early as 1662 in the Italian Proverbial Phrases and 1710 in the Oxford Dictionary of English Proverbs (6). For a long time, people have known that allocating too much of one’s time, energy and wealth in one area might be painful should those investments fail.

While traveling throughout Kenya to visit smaller farmers as a Kiva Fellow, I have been struck by the diversity of crops and animals that each farmer has, despite the small size of their land. Not only do most farmers have multiple crops growing in their fields, but they also choose to own a variety of livestock. After several visits in the field, I realized that each of these farmers are, in fact, practitioners of Modern Portfolio Theory. Their choice to diversify is not random but a conscience, strategic effort to reduce the risk associated with only growing one crop. Should the harvest of cash crops like maize or tea fail from shocks like drought and disease, many of these farmers will be at significant risk given the limited access to insurance and poor savings rates among poorer, small-scale agricultural farmers in Kenya (7, 8). Farmers, therefore, are actively mitigating this potential risk through diversification.

A terrific example of this Pilista. She manager of her family’s farm based in Kapsabet, Kenya. In Kapsabet, the primary crop grown and harvested is tea. Tea is big business in Kenya and is the country’s largest export, with Kenya exporting almost $1 billion USD worth of tea per year (9). Pilista has been harvesting tea at her family’s farm for her whole life. It continues to represent the bulk of her family’s income.

Pilista with her grandchild and her newest dairy cow



Pilista’s tea farm


Despite her traditional business, Pilista has been actively diversifying her farm and her family’s income beyond just tea. Over the past 10 years, Pilista has been using microfinance as a tool to purchase other crops and animals for her farm. By working with VisionFund Kenya, a microfinance institution and partner of Kiva for over 6 years, Pilista has taken out loans to grow banana trees and purchase several dairy cows. Not only have these decisions grown her family’s income, allowing her to pay for her family’s school fees, but they have empowered her to feel more comfort of the long-term viability of her farm in the face of a changing climate. “In the past 15 years we have seen major changes in the rainy season in Kapsabet,” says Pilista. “Our tea farm needs reliable rain…without rain it will be hard to only harvest tea and we will need to focus on other crops.” Through her diversification strategy, Pilista is reducing her family’s risk exposure to should her tea farm fail.

Pilista’s newest dairy


Some of Pilista’s banana trees


In a world of monoculture and economies of scale in the agricultural business, it is invigorating to see farmers in Kenya activity diversifying the crops and animals they own, particularly through leveraging institutions microfinance for the necessary capital. I did not anticipate to find practitioners of Modern Portfolio Theory in rural Kenya. However, seeing the resilience and strategic decision making these communities are taking to reduce risk and grow their income has been inspiring.



To make a loan to a VisionFund Kenya borrower on Kiva click here. If there are no active loans posted, check back later as new borrowers are coming.
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Sam was born and raised in Los Angeles, CA and graduated from Grinnell College in 2011 with a B.A. in economics. After graduation, he moved to Chicago, IL where he worked as an Associate at L.E.K. Consulting, a management consulting firm focused on strategic consulting services and commercial due diligence. Sam later moved to New York City where he worked at AOL for 3 years in multiple roles focused on business strategy and investment decision making. Sam is incredibly excited to be traveling to Kenya as a Kiva Fellow, working at the intersection of business, development and community driven finance to help individuals improve their businesses and the quality of their lives through partnering with Kiva.
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