Agrilife: Bringing the agriculture value chain finance ecosystem to life

“In times of change, learners inherit the earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists” – Eric Hoffer

I had the chance to listen to Mr Lamon Rutten, Manager of Policies, Markets and ICTs at the Technical Centre for Agricultural and Rural Cooperation (CTA), speak just ahead of the Fin4Ag International Conference now underway in Nairobi. He personalised how the re-prositioning of agriculture took place in his homeland, The Netherlands, from a poverty stricken sector to a major economic driver by positing to the divergent experiences of his grandparents and their peers who we were farmers at the turn of the Century. The lesson behind the story was that every revolution is fuelled by a generation of innovators who decided the results they wanted to see.

Listening to the Fin4Ag Plug and Play demonstration by the Agrilife Platform, I felt that Africa is also on the verge of a revolution: a revolution driven by process, technological, financial and policy innovation. In this blog, I share how Agrilife, a cloud based platform, is bringing to life the agriculture value chain finance ecosystem.

The Agrilife platform

Agrilife is a cloud-based technology platform designed to use mobile phone and web platforms to enable groups of smallholder farmers as well as other agriculture value chain actors to access financial services, markets and other services. Agrilife was developed by Mobipay Kenya Limited in 2012 to address the challenge of a smallholder dominated African agriculture sector that is largely excluded from formal agriculture finance and product markets.

Working with groups of smallholder farmers can have both positive and negative consequences, but the Agrilife platform has taken advantage of the group concept for a cost-effective launch.

Taking advantage of the numbers

Through targeting groups of farmers either in cooperatives or farmer or commodity associations, the Agrilife platform shares responsibility among value chain actors and reduces the rate of defaulting amongst contracted farmers. The platform creates a synchronised system forgenerating and sharing value among value chain actors.

Milk as Collateral. Forget the CASH!

During the demo of Agrilife at the Fin4Ag Conference, one of the audience members asked:

“When a smallholder farmer gets information on their mobile phone, who pays for the service?”

The answer from Mr Charles Kiinde, Agrilife Sales and Business Development Leader was:

“The market pays…” and he elaborated.

To sum up his explanation, I will introduce you to Karanja, a Kenyan smallholder farmer who farms dairy and sorghum on his 8 ha plot and is on the Agrilife platform. Karanja sincerely needs two things, a market for his milk, and cash for his sorghum inputs. Nu Kenyar Dairy (NKD, a hypothetical dairy processor), as well as a reputable credit appraiser and local input/agro-dealer, are also linked to Agrilife. Agrilife then becomes a “one-stop-virtual-agri-info-shop” (quite a long name, but pretty much sums it up).

Linking these value chain actors, Agrilife reduces transaction costs, e.g. for field officer and programme manager of a development organisation who could only know of Karanja’s needs if he was part of a household survey (whose data they are yet to analyse). By analysing data of thousands of other farmers like Karanja through mobile money transactions, a credit appraiser in partnership with Agrilife identifies Karanja and other farmers as “credit-worthy” to an input supplier based on his constant transactions with NKD.

Through a simple SMS short code, Karanja can access credit to purchase inputs based on the milk he will sell to NKD. By the way, two important things should be noted here:

Karanja uses his milk as collateral and there is no cash in transit!

Karanja makes the credit requests via his mobile phone through a short code, the credit appraiser utilises virtual mobile data, the input provider provides the inputs on credit. All this happens on a virtual platform that is safer, easier and faster!

When Karanja sells his milk, he uses a bluetooth enabled digital scale, which transfers the transaction’s “weight details” straight to the information system so data discrepancies are minimised. This approach will ultimatelyincreasevalue for money for all value chain actors.

Old habits die hard

But old habits die hard! The “conventional” collateral financing system is a philosophy that has been in existence for a very long time and things have changed. Historically, financers did not have to care about the performance of borrowers, but today financial markets have become more volatile, and this habit has to die. Financers have to care about the performance of the borrowers becausethe better the borrower performs,greater the demand for finance to expand operations, which will in turn increase the volume of business for all actors. Further, linking all actors through a platform like Agrilife increases value of doing business by sharing revenue and more rationally distributing risk. Such a scenario brings to life the agri value chain ecosystem!

Photo credit: CIFOR

Blogpost by Harrison Manyumwa, Social Reporter for the Fin4Ag Conference.