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‘Lack of financial identity limits access to credit for smallholder farmers’

Access to credit is perhaps the most common challenge farmers in Nigeria cite when asked of their major problems. UKA EJE, co-founder & CEO, Thrive Agric in a Zoom interview with CALEB OJEWALE, explained how the company, beyond being seen as a crowdfunding platform, has been working to ensure individual farmers have the right profiles to access better credit, and  market opportunities. Excerpts:

Did Thrive Agric start in response to a need or because there appeared to be a new trend in everyone trying to do crowdfunding?

Growing up in Benue state, I noticed a lot of agricultural activity and initially, it was not a case of “I want to participate”, rather I had questions running through my mind before the decision to participate in agriculture. There was an incidence during the Tomato-Ebola crisis where Tomato was sold for as low as N500 (per basket) in Benue State, but going to Lagos, I noticed that tomato was sold at about N20000 per basket. It was really a shocker for me.

One of the questions I was asking was ‘how do you reconcile N500 naira per basket to N20,000?’ Then people will explain that it is scarcity, demand and supply, and all of those things in between and those are the things that influence prices to skyrocket.

For me, I couldn’t logically reconcile how that made sense, especially when you notice that these farmers have the potential of scaling more, of doing more and then that’s all that they had.

I noticed that there was a broken market-linkage chain that existed.  You produce X and you’re trying to distribute that X and you notice that you don’t even know who the end user of that X you produced is going to be. The closest person you know to that X or the commodity is the person who comes in front of you and determines that price. So for me, I felt it was unfair. I felt there was a lot going on that needed to be corrected. Initially it was myself and then my co-founder. We decided that what if we put these farmers in a cluster. So, we decided that let’s be that middleman, first, on an empathetic level. We moved these goods and then gave a percentage profit of whatever we make.  We made them to want to do business. We attracted a lot of people so we got overwhelmed. It got to a point where we couldn’t buy all of these things that the farmers had to give us. It was because our price was better than anywhere they could get it. At that point of being overly overwhelmed, we decided, what if we did something around production.

We decided to start farming, with a few friends, about four of them who I knew from the University. So it wasn’t what we now know as crowdfunding. It was first from the empathy of the problems of the farmer in assessing market then it was now, guys we can expand this thing. We started over a WhatsApp conversation and aggregated money then (about N1.2 million from all of us then) and worked with the farmers for maize and we aggregated soyabeans and moved to my friend whose Dad owns a processing company.

From there, my co-founder who is very technology inclined suggested that beside doing this the traditional way of speaking with clients, we can decide to expand our awareness of what we’re doing. We started with about 150 farmers then, to 500 within that year and then we started expanding. This is what has led to what we are doing at the moment to scale.

So far, how much have you been able to raise for farmers within this period and how many farmers have you been able to impact?

We have been able to raise about $7 million, which should be about N2.5 billion so far, since inception. We have been able to reach about 35,000 farmers; from 2017 to 2019 ending, in terms of farmers we have been able to link to access to input, access to markets, all-inclusive.

35,000 Farmers, N2.5 billion what has this translated to in terms of output?

We have done about 150,000 tons of maize, rice, soyabeans and a little bit of sorghum, which are the major crops we do. Aside crops, we also work with poultry farmers. We have  done about 3.7 million birds as at last year.

With all that you have done within the time of operating, what are the major challenges faced within the industry?

One of the biggest challenge we face is getting access to cheaper loans. As much as we are known for crowdfunding, it is not the best way of funding farmers. Scaling can be a little bit impeded and especially when  you have a large amount of farmers you want to reach. You cannot reach them if you limit it to crowdfunding.

In the same vein, getting access to credit facilities from the banks take a while considering that agriculture is seasonal. As much as these are problems that we hear every time, these are problems that should keep being said until something, especially from the ends of the government, is done in giving really single-digit loans to farmers. That is the best way to solve this problem.

There are quite a number of incentives or initiatives that the government has been able to put in place. One of the things that has made that to fail is the time it takes for the supposed beneficiaries of these loans to receive them.  You can get low yield if you do not get credit at the time you are supposed to get it. It is very important that every financier structures Agric loans not only by loan interest but by time it must be disbursed. I think many financial institutions need to start putting things in place.

Going by an earlier remark, I am wondering; are you taking bank loans to finance the farmers or why the emphasis on it?

Whatever loan amount we raise is on the farmer, and the farmer will be wary when he notices that interest rates are high and is going to affect rate of returns.

Our model is we get an amount of money, for instance, N100,000 to repay N120,000 so that interest is on the farmer because that’s the direct investment on that small holder farmer. If 20 percent of the 100k is N120,000, that is too heavy on that farmer especially if scale is the focus.

The N2.5 billion that has been raised so far, is this entirely from what you crowdfunded, or is this inclusive of the bank facilities?

It is a mix of both. When we started it was almost 100 percent. As we kept growing, we started doing more like 90-10 percent, until towards the end of last year; it was 40 percent of the banks and institutional partners, and 60 percent crowdfunded.

What do you think can be done to make finance more available to smallholder farmers in Nigeria?

In answering this question, it is hard to separate entities like Thrive Agric. This is because there has to be an entity that profiles the farmer, and is ready to do the operations.

While some person could walk into a bank and get a loan, because there is a credit history that has been tracked over time, it is not the same experience with smallholder farmers. This makes it difficult for  financial institutions to fund them. Trust has to built by financial records over time and data.

For the farmers, you cannot see that data, which is financial, record and should create trust to lend. Another thing is the banks do not have the time to build visibility for the operations. This creates the tendency to stick to dealing with organizations who can organize these farmers and then because of them are able to see the farmer as being credit worthy. And then, for financiers who want to dive even deeper, they ask questions like, how can I build a credit profile for a farmer? So those are the kind of things technology helps us to achieve.

If we work with farmers for two years, we try to determine things like, how is the farm’s performance so far and how can we position this farmer as an entity by himself to get access to credit just like the average person with a credit profile that can be tracked.

Generally there’s a problem of database in Nigeria, which we are all aware of and perhaps gets worse for rural dwellers like farmers. So, how are you addressing that issue of creating ‘financial identity’ for these farmers?

Initially, it was difficult. Many people see our technology essentially as the Thrive Agric website but it is the most minute part of our operation. Our technology is primarily on farmer on boarding, farmer operations, sales of farmers’ products and then we’re able to express that technology through the agents that work with these farmers. We spend weeks and months, deploying agents to hundreds of farmers in different communities.

They gather the information on these farmers; Profile data, BVN (many of them do not have it), sit down with them and conduct psychometric tests. By psychometric test, I mean they try to know how their responses are in terms of profits; if they are really business people as it pertains to their farming activities. For every farmer that we are able to interview, we filter out the farmers who did not qualify versus the farmers who qualify. Then it is based on this that we would fund them. We had to build the system where farmer onboarding is done, and one agent captures about 250 to 500 farmers.

How many farmers do you have in the system?

We currently have about 121,000 farmers captured in the system.

You’ve onboarded 120,000 farmers, but only done business with about 35,000 right?

Yes, 35,000 farmers as at last year.

The 121,000 farmers are across how many states?

We are currently in 6 states; Kano, Kaduna, Bauchi, Jigawa,  Kebbi, and a part of Jos, Plateau State.

Many people consider agriculture unpredictable, as there is a lot of risk in it. How have you been managing the risks that come with your farming operations?

First by doing the regular things, and by this I mean making sure that half of our loan amount also has insurance covers for the farmers.

Furthermore, we ensure that whoever is the financier has visibility of the operation. This starts by ensuring the onboarding process is intact and covering information regarding farmer location, mapping their land, and all the little details that help us to even know who is the legitimate farmer. One of the problems that we notice from agric intervention programs where funds are disbursed is that there is no visibility of who the farmers are, leading to high risk (of default).

There is no one watching after the loans are given, if it gets to the farmers, and there is no one watching what the farmers are doing. This is important because at the point where you notice for instance, that there is something that looks like a disease outbreak, it can be controlled.

If that is not managed through someone walking through the activities of the farmers end to end, at the point when seed is given, seeds are sown, the timing for weed control and what to do when there is a lot rain, then, there could be a disaster (in output).

We address this by properly allocating extension service agents through the application we built and even to support every single thing going on. We call it Agriculture Operating System (AOS).

When a financier entrusts us with funds, they are watching what is happening, so we cannot come in the end to tell them stories. Asides the confidence, at the points where it looks like there may be an impending disaster, farmers are informed of measures to take.

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