Imagine yourself as a smallholder farmer in Kenya. To grow your crop, you need to buy some inputs. Since you don’t have much money to pay for them, you ask for a loan to a local bank.

Due to seasons timing, you have only 4 weeks to plant. However, the bank takes more than that only to approve your loan, which means you won’t be able to execute things in time this year.

To help smallholder farmers to overcome this and other challenges, Tulaa is providing them a solution that gathers several stakeholders in just one platform.

In our 14th episode, Hillary Miller-Wise tells us the challenges Tulaa faced to get traction as well as the elements that helped it to be part of the life of more than 15,000 farmers.

SHOW NOTES

POVERTY TRAP

What are the problems that Tulaa is solving today?

The problems we’re solving have to do with the fact that smallholder farmers across Africa—of which there are about 15 million households that depend on smallholder agriculture—they’re stuck in a poverty trap.

That trap really has to do with the fact that they’re producing well below capacity. And we think there are really four drivers of that poverty trap.

The first one is they can’t get quality inputs when they need them. Things like fertilizer, seed, and products like that. One of the reasons is that they don’t have the cash when they want to buy it.

Secondly, they also can’t get access to loans to purchase those goods because the banks believe that they’re too risky of a customer.

Third, they often don’t have good information and training on how to grow the crop, especially in a context of climate change, where they have to adapt their practices.

Finally, is access to the market. Typically, these farmers will wait for a broker to come to the farm and offer them a throwaway price—and the farmer really doesn’t have any other alternative.

A MARKETPLACE

Let’s understand now how Tulaa is providing a solution to these problems…

The way that Tulaa is tackling these problems is through a marketplace. What we call “online to the offline marketplace” for smallholder farmers to access the different goods and services that they need to overcome those challenges.

What we do is: we use technology, like mobile technology, mobile money—like M-PESA—and artificial intelligence to enable buyers and sellers to transact more easily.

Let me give you an example: farmers can place an order with us for fertilizer. At the same time, they can apply for a loan to purchase the fertilizer. If they’re approved for a loan—and we do our own loan assessment based on a number of different data sets—we send them an SMS that has an electronic voucher—a code—in it.

They bring that code to the retail shop, and the retailer uses our application to fulfill the order. We’re then paying the retailer for that stock.

So, we’re not disbursing the loan as cash to the farmer, it comes in the form of inputs. Then, of course, the farmer has to pay us back over the season.

Similarly, on the market linkage side, we’re predicting when farmers are going to harvest and how much they’re expected to harvest. Right now, what we’re doing is building chat-bot technology to be able to communicate with them automatically, to say: “we expect that you’re going to harvest next week and it looks like you’re going to get 50 bags of potatoes. How much would you like to sell on the platform?”

The farmers then give us bookings for what they want to sell and then we link them to wholesale buyers in urban markets.

There’s no cash in the system at all. So, when we think about going to new markets, we need to focus on markets where the use of mobile money is relatively high.

THE BEGINNING

How has this startup started?

The idea was developed when I was CEO of a different company [Esoko]. We started to develop this idea and then the platform inside of that business. At a certain point, at the shareholder level we decided to spin it out into a separate company. So that happened in July of 2017.

Esoko is a pioneer in the use of mobile technology to reach smallholder farmers and was primarily providing market and agronomic information.

When I joined, the goal was to try to get closer to the transactions that were happening in the supply chains. That’s how we developed this concept which eventually became Tulaa.

STEP-BY-STEP

How was Tulaa platform in the very beginning?

Well, we started with the input side first. We knew we couldn’t build everything at once. And the input side is a little bit more straightforward because it is a more structured supply chain.

There are large brands—like Syngenta, Bear, Yara—multinational companies, who are then selling to distributors, and the distributors then are supplying the retailers. It’s a bit more structured than the off-tech side.

Initially, our goal was to act as sort of an honest broker across all transactions, connecting buyers and sellers for every transaction, including the credit component.

We were partnering with banks and MFIs [Micro Finance Institutions], with the intention of bringing these qualified leads to the banks and MFIs to then finance. What we found is that that didn’t really work. And there were a few reasons for that.

One is the customers that we were targeting. We know now that 71% of our customers have never had input financing before. So, they’re really not in the financial sector, they’re financially not-included. So, part of what we’re focusing on is financial inclusion.

The other reason is that the banks and MFIs have processes a bit more set in stone, and it was taking a long time to make loan decisions. And the challenge that happens, especially with climate change, is that no one knows when the rains are going to start. So, farmers are very rational and what they do is they wait until the rain starts. Then, they all go to try and get the inputs at the same time.

LET’S DO IT OURSELVES

They [the farmers] have a three or four-week window to plant. So, by taking weeks to make a loan decision, it means that a lot of farmers were missing out.

Because we had the relationship with the customer, we had the data on them and we were seeing that some of the customers were having a bad customer experience with the banks and MFIs, we decided that we needed to do this ourselves. That’s one of the bigger shifts that happened since we started.

We then launched the market linkage—which is the last piece—...