Episode 1: Feeding the next 1 billion Africans
Smallholder farmers in many parts of Africa have historically been overlooked for institutional financing. Only 20% of the $33Bn needed for smallholder lending is met at the moment, and yet, more than 60% of the population of Sub-Saharan Africa is smallholder farmers, and agriculture accounts for 30% of Africa’s GDP. In addition, only 1% of total commercial lending on the continent goes to agriculture. With Africa’s population set to double in the next 3 decades, to 2.5bn people, the need to meet that funding gap is urgent. Peris Bosire co-founded FarmDrive to address this challenge.
This is a pain point that has been close to Peris for a long time. Her mother, a teacher, used income from farming to help put her through school but was only able to access formal financing products because she had formal employment. According to Peris, “there is a whole range of people in agriculture who are left out of the credit system because they aren’t formally employed.” Having received early exposure to computer science in both primary and secondary school, where she went on to win national awards, and interned with Nokia and IBM in Kenya, her love for technology and exposure to financing challenges for farmers put her on the path to launch FarmDrive — a company that has unlocked $8m in agricultural financing in the past 2 years.
FarmDrive initially set out to address this problem through alternative credit scoring but quickly realized that the available financial products weren’t suited for this user segment. Taking out a loan with monthly repayments, for example, doesn’t make sense if a farmer only harvests once every 3–4 months. Smallholder farmers in Sub-Saharan Africa also lack certain risk mitigations, like crop insurance and government welfare plans, that would make investments a safer bet.
FarmDrive now supports other financial service providers, that lend in the agriculture value chain, to efficiently grow their portfolios, mitigate risk and reduce operational costs — which has already brought about a 20% increase in the value of loans allocated to agriculture from the financial service providers that they work with. By using a combination of advanced data analytics and machine learning algorithms, FarmDrive has developed a proprietary digital lending infrastructure. The product stack includes customer on-boarding infrastructure, identity verification, fraud detection, credit decision engines, collection and recovery solutions. Together with the data they already collect, this significantly reduces the risk for financial institutions and enables them to increase their lending to this user group. Some of FarmDrive’s clients include Safaricom (Kenya’s largest mobile network operator) that they partnered with to launch DigiFarm, Microfinance banks, insurance providers and NGOs, like One Acre Fund, that fund agriculture.
Following FarmDrive’s lead, a few other companies, primarily in East and West Africa, have been founded to address the same funding challenge. Peris hopes that commercial lending for agriculture can grow to a level that is indicative of the importance agriculture has on the continent — and she’s well on her way to making that a reality.
