COVID-19 Africa Watch talks to Folu Okunade, Chief Strategy Officer & Chief Operating Officer, Hello Tractor, about the pandemic’s impacts on small-scale farming and the burgeoning ‘agri-sharing’ economy in Africa.
The following are a few of the main takeaways from COVID-19 Africa Watch’s conversation with Folu Okunade, Chief Strategy Officer and Chief Operating Officer, Hello Tractor:
- One of the challenges faced by African farmers is access to tractors or tractor services. Mechanized tractors can increase the speed of labor by 30 to 40 times, as compared to manual labor.
- The COVID-19 pandemic and mitigation policies have impacted the agricultural sector in Kenya by increasing the prices on inputs such as seeds and fertilizers and by restricting the movements of needed laborers. Farmers need better and easier access to inputs, and they need access to finance. And they are worried they don’t have the right kind of partners to help guide them through this period.
- One solution to the access to finance issue may be a pay-as-you-go tractor financing model.
- In addition to its work to expand access to tractor services, Hello Tractor also employs and offers training products for a group of community-based booking agents, local youth and women who help book tractors on behalf of the farmers, building the necessary economies of scale.
The interview was conducted by Irene Nyambongi, an IFC-Milken Institute Capital Market Scholar from the Central Bank of Kenya. A transcript is available below.
Hello, my name is Irene Nyambongi. I work for the Central Bank of Kenya and I’m an alumna of the IFC Milken Institute Capital Markets Program. Today I am delighted to welcome Folu Okunade, the Chief Strategy Officer of Hello Tractor, an innovative AgriTech business that’s based in Kenya. Welcome, Mr. Folu.
Thanks, Irene. Good to be here.
Okay, so to kick off the conversation, could you briefly describe the concept behind Hello Tractor and the so-called “agri-sharing” economy?
Thanks for that question. We often get compared to the Uber of tractors in Africa, but I don’t really think that captures the full scope of what Hello Tractor is. Hello Tractor started to really put a dent in the challenge of the lack of supply of mechanization of tractors in developing economies, here in Africa and in Asia as well. And the way we thought about going about this problem was to better organize the demand that’s already in the market, thereby unlocking a lot of the unmatched demand, the pent-up demand for tractor services that we know are in the market through this sharing platform. So we have existing tractor owners that we connect to farmers that are in need of tractor services. It allows the tractor owners to earn more income through servicing more farmers and allows more farmers to do their work – sometimes 30-40 times as quickly as manual labor and all in all cheaper over the life cycle of farming. We thought, ‘Let’s create this sharing platform that allows this connectivity between the tractor owners and the farmers.’
What key impacts have you seen from the pandemic on small-scale farmers? And given the second wave that’s been hitting Kenya and other countries recently, what really keeps you awake at night?
A lot of things keep me awake at night. What we’ve heard from our farmers is really the need for us to do more, which has been really challenging, because during COVID-19, a lot of times, we’re not able to do more. I think some of the impacts that we’ve seen are an increase in prices for inputs, and obviously there’s movement restrictions, so our true competition is really manual labor and so, when manual labor is not available at the scale at which it used to be, and there’s not enough tractors servicing the farmers, then there’s a big gap in the market.
I think it’s allowed us to actually listen to our farmers and our customers a lot more. And what we’re hearing from the farmers is they need access to more inputs, ready access to it; they need access to financing. And these are things that we’ve started working on as a business as well – we have a network of tractors and tractor owners that are servicing farmers already – how do we augment those services with a solutions platform that really looks at the end-to-end service delivery to a farmer? How do we combine things like inputs – like seeds and fertilizers – to go along with the tractor to the farmer while they’re there doing their plow or their ridge.
On the flip side of that, how do we help the farmer with enough information around prices and around off-takers and agri-schemes that they can sell their produce to. And that’s actually really helped our product development as well, because it’s helped us think about what additional services we need to really make this platform meaningful for our customers, to increase the stickiness of the platform and really the community that we’re building, and to help the farmers not just during the COVID-19 period, but after.
And then the hope is that now going into 2021, we’re in a much stronger position because we understand our current customers, we understand what they need, we’re building products to address their needs over and above just providing quality tractor services at a point in time.
So, what role has Hello Tractor played in educating smallholder farmers on the need for crop and livestock insurance?
We have a new saying at Hello Tractor, “Come for the tool and stay for the farmer network.” And what that really means is that we’re building something more than just an app or a tool, we’re building a community, we’re building a network where farmers can go for certain needs, tractor owners can go for certain needs as well. We employ a group of community-based booking agents. These are youth and women in their local communities that actually help to book on behalf of the farmers. They help with aggregating the demand for the farmers such that the tractor owners can actually supply the tractor services with economies of scale. And then they help educate the farmers as well. We’re putting in some features and products where there’s additional training to booking agents, where there are certification programs where a booking agent can be certified on maize crop and the different planting methods. We’ve partnered with some other organizations around disseminating information around conservation agriculture, and deep-ripping methodologies or methods of farming.
If I could take you back to your introductory remarks, you did mention that the Hello Tractor model relies on an application, which I believe would be internet based. I wanted to find out: how do you bridge this gap considering internet coverage, especially since in the rural areas, parts of rural areas in Kenya, it is not very reliable?
Good question. One of the things that we actually did again, during COVID-19 times, is relook at our digital engagement strategy in line with our market development strategies. And our app is mobile based, it’s smartphone based. And so, one of the reasons we work with booking agents is because the likelihood of them being more comfortable using an app or going to the web and booking services is higher than your average farmer.
“The first step of taking farmers or any customers through a digital journey is to meet them where they are.”
But we also realized, rebooting our engagement strategy with farmers, is the first step of taking farmers or any customers through a digital journey is to meet them where they are. Most of our customers, most of our farmers, are using phones that are not smartphones so we need to make sure that we get the messages to the farmers however we can. We’ve looked at different methods of making sure we can text the farmers, or even investigated the use of a USSD as well. But what that really led to is this focus on empowering and utilizing these youth and women community-based booking agents to really act as that empowered liaison to the farmer.
As we wind up, what does the future look like for small-scale farmers and for agri-sharing in Africa, particularly in terms of technology and international partnerships?
We actually have a product that we’ve been developing – we’ve been tweaking – and we’re ready to pilot. Now, we’ve started doing the market development piece of it called the pay-as-you-go tractor financing model. And that’s really similar to the rent for hire that you’re mentioning. The idea is that we’ve got now a network and a community of tractor owners and booking agents and farmers. We know where the demand is over the last five years we’ve been in the market. We started in Nigeria and now we’re in 13 countries across Africa and Asia. We know the trends in demand, we know the availability of supply. We can see that from our data. So we’ve built this model, which really tries to use data as collateral and tries to lower the barriers for financing of mechanization assets.
“Organizing the demand in a very thoughtful way will lead to this unlocking of the supply markets for mechanization.”
And we’re working with MasterCard to roll this out and to ensure that we can finance tractors in a way that does not crowd out otherwise really good borrowers who just may not have the high levels of collateral that a traditional bank would be looking for. But we base the financing on their history of transactions as well as a book of work that we give them, because we know where the demand is, and we have some signed agreements with farmer organizations, where we can say, even if you don’t come with work, we can give you a book of work for the next four seasons or four years. Then with that book of work that we’ve given you, you would have paid off the loan of this tractor asset. And then after that, it’s yours to do whatever you want with. We really think that organizing the demand in a very thoughtful way will lead to this unlocking of the supply markets for mechanization.
Is there anything else you’d like you’d like to share with the viewers maybe that we may have left out?
We just had a study done by 60 Decibels, an independent study on our farmers. And it looked at overall their satisfaction levels, but also what they’re going through during the COVID-19 pandemic.
“Farmers are worried that they don’t have the right inputs and, and the right kind of partners to help guide them through this period.”
And to nobody’s surprise, there’s a lack of cash needed to run their operations. Farmers are worried that they don’t have the right inputs and, and the right kind of partners to help guide them through this period. Hello Tractor is in the business of building up a marketplace that provides the farmers with what they need when they need it. One of those core things is mechanization, but it goes over and beyond that. We’re talking to input providers, whether it be seed fertilizer, or other inputs, financing being an input as well. We’re talking to growers and off takers on the other side of the equation as well. And I think we just welcomed the different partnerships in all the different countries that we operate, even the ones that we don’t operate in yet, to help us in building this marketplace that is beneficial for both sides – both the supply and demand side – of the market.
Thank you so much, Mr. Folu. It’s been a pleasure having you today. The Milken Institute and I thank you again for these insights and for your time. Please keep up the great work you’re doing. Goodbye and stay safe.