Taking Agriculture to The Next Level

By Albert Mwazighe
Did you know that the agriculture sector employs more than 40 per cent of the total
population and more than 70 per cent of Kenya's rural population. According to the
Food and Agriculture Organisation of the United Nations, agriculture is the
principal economic activity for the country, accounting for 26 per cent of the
country’s Gross Domestic Product.
Even so, lending to this sector is at an all-time low with only 4% of funding in the
form of bank loans going to farmers. Out of this 4%, the lion’s share goes to large
scale farmers. So where does this leave the smallholder farmer?
Banks argue that it is a challenge lending to smallholder farmers because given the
nature of their informal transactions, it is difficult to assess risk on credit.
Ordinarily, without sufficient funding towards agriculture, attaining food security
remains a pipe dream. Fortunately for the farmers though, with the emergence of
new technologies, some companies are offering a solution to their woes.
FarmDrive, a digital lending company that offers financial services in the form of
loans, digital payments and agriculture insurance to smallholder farmers has
developed a technology which seeks to make it easier for banks to assess credit
scoring for small farmers and assess how risky, or not lending to such a client
would be.
They say that with the advancements in data digitization and widespread use of
mobile phones it is now easier to assess credit risk using alternative data.
Therefore, they have developed a technology dubbed ‘RiPe’ which helps them
collect relevant data in the agricultural sector that aids them follow up on farmer
activities.
Led by the proprietors Rita Kimani and Peris Bosire, the company seeks to
radically transform the agriculture sector by using this platform to connect farmers
to banks and drive capital from where it is to where it is needed.
What the platform does is that it aids the company track farmer activities from
when they get assistance, to when they harvest, to when they sell their produce. In
addition, they advise on best farming practices, offer soil testing services and
access to markets to mitigate loss.
The company also offers insurance cover against tough weather conditions and
pests that may lead to crop loss. This they do in partnership with insurance
providers such as Pula and Acre Africa. The yield guaranteed informs the
premiums payable.
Since they began operations, 5 years ago, the company has managed to lock out
over Sh.300 million worth of farm inputs to about 33,000 farmers and 400 agro-
dealers and SMEs as a result of the model. They are hoping to unlock Sh. 10
million in capital in the coming financial year.
So far, they have managed to offer financial services through platforms such as
digifarm, a partnership project with Safaricom. On digifarm, clients access loans
by registering on the platform using ussd, after which they get a text message with
a voucher code. They then have to take the voucher to any one of their 120 depos
across the country, which after being validated, grants a client access to farm
inputs. The reason they offer financial services in the form of inputs and not direct
cash they say, is to ensure that money is not put into other uses apart from farming.
On digifarm, they have approved 61,435 loans to date, amounting to Sh 150
million worth of inputs. They award their loans and services at an interest rate of
about 5-10%. A loan can start from as low as Sh. 8000. Currently they have
240,000 farmers registered on the platform.
For credit to be productive you need to have market. The vision of DigiFarm, they
say, is to make the small holder farmer wealthier from the same piece of land by
granting them access to market. In Makueni for instance, they have connected
sunflower farmers with Bidco, a vegetable oil processor. Other regions that the
company has implemented the buyer model are Homabay, Migori, Bungoma,
Elgeyo Marakwet, Makueni, Nyeri, Meru and Tharaka Nithi.