Managing Risks in Farming
No Risk, No Reward right ⁉️
Farmers, Mkulima in Swahili, are frequently exposed to the uncertainties of weather particularly in developing countries like Nigeria and Kenya. Like that uncertainty isn’t enough, you add on price uncertainty which further worsens production efficiency. It is no wonder many farmers live on the edge of extreme uncertainty, sometimes falling just below, and sometimes rising just above the threshold of survival. Never quite comfortable, always struggling. Perhaps the greates of hustle culture out there!
Farmers are often at the mercy of the weather and the prices that can be earned for their harvests.
Sounds exhausting just thinking about it, but surely there must be a better way to manage these risks in farming? Indeed there are! Farmers make decisions every day that affect their operations, so the goal should be optimizing upside risk and mitigating downside risk. While decisions may not be predicted with complete accuracy, historic trends and forecasts can be used as guard rails towards the right direction.
Managing risk is particularly important as farmers become more commercial. Risk affects production and thus food security, as well as farmer income and thus economic status. For instance, a seemingly insignificant risk of an equipment breaking down can yield an exponential cost of the market price for the farmers harvest due to selling at a later time when the market is down. Borrowing money can also be risky with sudden changes in interest rates throwing a spanner into the works. Feeling the heat yet, it will be hard not to!
Optimal decision making is a great approach to managing risk and a principal activity of management. For effective decisions to be taken, farmers need information on many aspects of their farming operations while also building an understanding of the interrelation of different decisions. The more complex the risk, the more difficult it becomes for farmers to make an informed decision as all decisions have outcomes or consequences.
This is why our team at Farmz2u are driven to mitigate risk for our farmers through the decisions they make. It’s hard to know if a decision you are about to make is right or not, but with accurate information which requires reliable data you can be closer to being right than wrong. With this, we aim to empower the next generation of smallholder farmers in Sub-Saharan Africa. With Africa estimated to have 20% of the world population by 2025, smallholder farmers who produce more than 60% of what is consumed must operate at a commercial scale.
Farmz2u’s ability to manage risk for the farmers and supply side partners we work with is our value proposition! Most communities in Sub-Saharan Africa struggle with access to data for efficient and profitable farming. Our Farming Management Platform is a web application that supports smallholder farmers from pre-farming to post harvest.
With our Digital Loan Product we derisk loans between smallholder farmers and financial institutions. Using agricultural specific data like the yield of previous harvests and farm insurance, we identify the ideal borrower profile for lenders. Thus increasing access to funds for farm production growth through increased loan velocity and repayment.
With our Input Marketplace, farmers from can access products from verified vendors. This mitigates the risk of purchasing counterfeit products or exorbitantly priced services. It also mitigates the risk of suboptimal use of capital in executing farm operations. The Digital Loan Product and Input Marketplace are connected through an loan utilization feature facilitated through a wallet.
Finally, our Aggregating Service connects harvested produce across smallholder farmers and large scale buyers, ensuring non-value adding middlemen are excluded, eliminating trade gap and ensuring information symmetry. This reduces the risk of the farmer earning uneconomical margins on harvested produce.
