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This is the third in a series of examples of companies successfully overcoming challenges to find profitability in smallholder markets. This week, we are looking at Store It Cold, which is commercializing its innovative cold storage solution in Central America.


Store It Cold is on a mission to bring affordable cold storage to smallholder markets around the world. Store It Cold’s product, the CoolBot, lowers and regulates the temperature controls of a standard window air conditioning unit, transforming an insulated room into an affordable cold storage unit that costs one-tenth that of a traditional cold room. This results in extended shelf life, higher quality produce, and reduced rejection rates.


For many Central American cooperatives, aggregators, and exporters sourcing from smallholder farmers, traditional refrigeration is an unattainable expense. This lack of affordable cold storage leads to higher spoilage and rejection rates, hurting the incomes of both aggregators and farmers. To address this challenge, Store It Cold partnered with Feed the Future Partnering for Innovation, a USAID-funded program, to commercialize the CoolBot in Honduras and Guatemala.

 

Since starting with Partnering for Innovation in 2016, Store It Cold has already achieved several notable successes through engaging directly with aggregators, farmers, and other stakeholders. To date, Store It Cold has sold 40 CoolBots in Honduras, including to two seed banks that supply more than 40,000 smallholder farmers, with an additional 2,569 farmers benefitting from companies that source from smallholders.

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Flexibility for Getting to Success

Key to Store It Cold’s success is being able to pivot from its initial “do it yourself” to delivering a CoolBot kit with all the necessary materials to set up and use the technology. Initially, Store It Cold sold the CoolBot on its own with instructions for how to set it up, which included purchasing additional materials. But the company has since been testing offering a complete package, such as a mobile unit to give companies more flexibility in where they place their cold room. It is also testing a refrigerated truck unit to move the cold chain even closer to the farmer.

 

How did Store It Cold arrive at the decision to update how it sold its game-changing technology in order to sell in a new market? Through embracing flexibility and fostering innovation.

 

Flexibility and adaptiveness to customers’ demands. Store It Cold is highly receptive to customer feedback, and demonstrated great flexibility in adapting its product and business strategy to better meet demand. In response to feedback that Honduran customers did not want a do-it-yourself solution, Store It Cold created a bundled product that includes the CoolBot, an air conditioning unit, and an insulated room. After realizing that it was not feasible to sell the CoolBot directly to smallholders, Store It Cold pivoted to larger companies that source from smallholders, and identified missing links in the cold chain, such as refrigerated trucking. Store It Cold’s flexibility has allowed it to overcome the constraints and challenges of entering a new market.

 

Initiative and innovative mindset. Store It Cold continually fosters innovation and initiative among its staff, which has been key to the creation of several new products. This support of and investment in the ability of employees to innovate enables Store It Cold to adapt and pivot products and strategies easily. Store It Cold developed a mobile unit for demonstrations and added flexibility and a refrigerated truck unit for transportation. While the refrigerated truck is still in beta testing, it has already completed several trips without incident.

 

By embracing flexibility and innovation, Store It Cold is successfully commercializing the CoolBot in Central America, facilitating the entry of smallholder farmers into cold chains, and becoming an industry standard.

Opportunity International Bank Malawi has been working to expand financial services and products for smallholder farmers in Malawi. In partnership with Feed the Future Partnering for Innovation, OIBM successfully scaled up services to base-of-the-pyramid customers in rural areas, specifically for groOIBM.jpgundnut, soybean, and orange-fleshed sweet potato value chains.


During the partnership, OIBM disbursed more than 5,000 loans (50 percent of borrowers were women) with an average loan size of $93, and trained more than 10,000 farmers in good agricultural practices and financial literacy. 9,272 farmers benefited from OIBM’s banking services. One key to OIBM’s success was its focus on providing intensive training and support to its smallholder farmer customers.


Recognizing that an educated customer is a less risky customer, OIBM conducted not only conducted “group sensitization” sessions with farmers about its financial products, but coupled that with additional training on financial literacy and good agriculture practices. OIBM implemented these additional trainings by partnering with NGOs and government extension service providers. This helped keep costs low so that OIBM products could bring profit to the bank, and the bank could keep providing financial services to smallholder farmers in Malawi

 

Training farmers in financial literacy and good agricultural practices reduced OIBM’s risk for working with smallholder farmers, who tend to lack disposable income or hold assets that banks generally use to reduce their risk, since the bank can simply seize and sell an asset to cover their losses for a defaulting customer. When OIBM customers understand how to calculate “money-in” and “money-out” in terms of calculating their costs versus income for paying off a loan or credit product, they pay their bills on time. And when customers apply good agricultural practices, of which many lack knowledge, they improve their yields, making more to re-pay their loans and perhaps even expand their farming business, requesting higher loan amounts and other financial products that ultimately are more profitable for OIBM to administer. The trainings also incentivized farmers to access the financial services in the first place, and even sign up for more when they found success with their initial participation.

 

Farmers like Sophilina, who lives in the small village of Chilima in Lilongwe District, participated in the OIBM trainings and accessed OIBM loans. With access to these financial services, she was able to establish her own nursery for orange-flesh sweet potato vines. 

 

The lesson from this story for any entrepreneur or business working in base-of-the-pyramid markets is clear: Understand and invest in your customer in complementary ways. Doing so helps them to use your product effectively, benefiting them in multiple ways and creating stronger, better customers who can “graduate” into using higher value versions of your products. It is good for your customer, your business, and ultimately, the communities that you are working in.

 

How can your company integrate some of these practices in order to build a strong customer base in smallholder markets?


See more on the partnership: Equipping Malawian Smallholders to Increase Yields; Empowering Rural Women through Good Agricultural Practice Training


sophie sikwese

Opportunity Bank Malawi

Mark Sevier

SAKINA DAUD MANDANDA

This is the third in a series of examples of companies successfully overcoming challenges to find profitability in smallholder markets. This week, we are looking at Tecnologia e Consultoria Agro-Pecuaria (TECAP), an input supplier in Mozambique that has developed a blended wholesale and retail model to reach more smallholder customers with mechanization and inputs.


Lack of access to improved inputs and equipment is a major hindrance for farmers in Mozambique. Farmers often have to travel great distances to obtain the inputs and mechanization equipment they need, making it a costly process and delaying their work. Agricultural retailers also face lack of or delayed access to mechanization and quality local products. However, one input supply company in Mozambique, TECAP, is blending wholesale and retail to build a supply chain that ensures that smallholder farmers and retailers have easy access to the inputs they need, when they need them, and at a price they can afford.


TECAP’s unique wholesale input and mechanization equipment business model, coupled with a network of agrodealers, franchisees, and agriculture development agents (ADAs), has resulted in significant reach into the Mozambican market. Investment in its distribution network and a product range of both local and imported products is increasing sales and the number of farmers accessing improved inputs. The keys to TECAP’s success are its wide distribution network and diversity of products.


TECAP’s distribution network of agrodealers, franchisees, and ADAs allows it to bring products and services closer to where smallholder farmers live, so farmers save on transportation expenses and time. Smallholder farmers can also purchase the inputs they need from a range of retailers selling TECAP products. TECAP ADAs, who also work as sales agents, demonstrate to farmers how improved inputs can improve yields and incomes, helping farmers see the value of investing their resources in improved inputs. In addition, TECAP trains agrodealers and franchisees on how to use the products they sell, so that they in turn can explain to customers how to correctly use products, avoiding loss of returns by misuse and increasing customer loyalty.


Farmers and retailers are also attracted to TECAP because of its diverse range of products. TECAP imports products in bulk, making them cheaper, and also buys local products to increase the variety of its stocks. This combination of imported and local products makes it a unique wholesaler in Mozambique with a wide distribution network that guarantees on-time access. TECAP’s bulk purchases of inputs and mechanization equipment allow it to competitively sell products in its farmer houses and through its franchises. Over the past year, TECAP, with the support of Feed the Future Partnering for Innovation, has reached 49,547 farmers and generated $1,721,836 in input and equipment sales since operationalizing three “farmer houses” – medium-size input supply shops that cater to individual farmers as well as small retailers – in Nampula, Tete, and Manica.


How are you making yourself competitive in smallholder markets? Tell us about it in the comments below!

This is the second in a series of examples of companies successfully overcoming challenges to find profitability in smallholder markets. This week, we are looking at Twiga Foods, a tech company in Kenya that has successfully entered the urban produce supply chain with support from its strong human resources department and design-centered approach.


In Kenya and in many workplaces around the world, the human resources department is not considered an important tool when it comes to business growth. When a company expands rapidly, managing personnel is always lower in priority. In Kenya, when undergoing a large or rapid expansion, rather than using their human resources team to recruit and train quality, local, long-term staff, most tech companies hire expatriate consultants who have impressive pedigrees but are expensive and do not necessarily yield good results because they lack understanding of the local context. But one company has made human resources its number one priority, and, in addition to a strong research-focused design strategy, is finding success in smallholder markets. Twiga Foods, a tech company in Kenya that is connecting rural vegetable growers with urban produce vendors using a mobile business-to-business platform, has sustained high growth by focusing on human resources and design principles.


Twiga does not view human resources as an isolated department, but rather as an integrated part of its operations that should provide its other business units and employees what they need. The HR department collaborates closely with other departments to understand their recruitment needs and identify the best people to carry out the company’s strategy. Instead of hiring expensive outside consultants, Twiga recruits Kenyans and provides them with trainings on growth and planning strategies, business practices, and corporate culture. Because Twiga is growing quickly, its human resources department continuously reviews the effectiveness of its staff and leadership trainings while focusing on its corporate culture. With so many new employees joining the company as it expands, Twiga is working to standardize its onboarding trainings to ensure that the quality of these trainings doesn’t suffer. It holds employees to high standards of conduct; for example, it follows a zero tolerance policy on sexual harassment, which is uncommon in other workplaces. In a recent anonymous survey of all staff, employees expressed a high level of respect for company leadership, which suggests the focus on a positive corporate culture and training works.


Twiga’s other important strategy is to continually analyze its model and practices, which is why it formed a design team to evaluate every part of its operations, including its farmer strategies. A research and data focused design approach allows emerging companies to monitor their progress and customer feedback. Twiga’s design team uses design principles for growth and planning Twiga’s collection centers and interactions with smallholder farmers. Through its farmer surveys and observations, the team noticed a lot of the farmers would side sell to brokers and under-deliver the quantity of produce they had promised to Twiga, even though Twiga pays more than local brokers. Farmers preferred the brokers’ quick and easy purchasing approach to Twiga’s, for which farmers must accumulate their produce, deliver it to Twiga’s collection point, and then receive their payment via M-Pesa mobile money. As a result, Twiga’s design team came up with a quicker way to weigh farmers’ produce to make their process more convenient and retain suppliers.


Thanks to these corporate strategies and the support of Feed the Future Partnering for Innovation, Twiga Foods is expanding its network of rural collection centers, where it collects produce from smallholder farmers for sale to urban vendors, from the existing eight to 33, benefitting 7,500 new smallholder farmers.


Next week, we will highlight another successful company and its work in tapping into smallholder markets. How are you making yourself competitive in smallholder markets by improving management practices? Tell us about it in the comments below!

By Daniela Martinez Berrios

Knowledge Exchange Intern, Feed the Future Partnering for Innovation


This is the first in a series of examples of companies successfully overcoming challenges to find profitability in smallholder markets. This week, we are looking at Musoni, a digital-based microfinance institution in Kenya that has gained smallholder farmers’ loyalty through its high-touch customer service, easy processes, and transparency.


In Kenya, smallholder farmers lack access to financial services and face high barriers to accessing commercial banks and community lending institutions. These institutions rarely approve loans to smallholder farmers or have a slow turnaround time for approval, preventing farmers from getting capital when they need it in the agricultural cycle. Smallholder farmers not only face the improbability of loan approvals, but even if they are approved, they often encounter hidden fees on top of already-high interest rates.


Musoni has developed a model that enables it to reach high volumes of often remote smallholder customers with its agriculture-specific Kilimo Booster loan, despite having interest rates that are as high as many commercial banks. Musoni is able to be competitive in the microfinance sector because of its high-touch, transparent, efficient approach, which treats loan recipients as valued customers, builds relationships of trust, and takes advantage of digital technology. Customers are willing to pay relatively high interest rates in exchange for easy processes, expert and trustworthy customer service, and transparency.


At many Kenyan banks, customers usually need personal or family connections in order to schedule appointments, making it difficult to inquire about loan or repayment details. In contrast, at Musoni, customers can receive walk-in appointments for any issue. Musoni loan agents also visit farmer customers at their homes, building relationships that make lending easier for farmers and loan agents. Unlike many traditional Kenyan banks, Musoni wants to see its customers grow, and the relationships it builds help Musoni determine if and when customers are able to increase their loan amount. Also unlike many traditional Kenyan banks, Musoni is transparent about the cost of a loan. Although its interest rates remain high, it doesn’t have the hidden fees often associated with loans in Kenya, further building customer trust.


Musoni is able to reach rural, remote customers thanks to its new cash flow software and its practice of placing loan agents in every village where it works. Village loan agents visit farmers in person, and use the new cash flow analysis software the Grameen Foundation, with support from Feed the Future Partnering for Innovation, helped it develop. With this new software, Musoni loan agents are able to wirelessly submit farmers’ loan applications and track customer information, including repayment information and changes in income, making loan processing more efficient. In addition, this also means that farmers do not have to travel to the bank or complete a complicated loan application with considerable documentation requirements. If a Kilimo Booster loan is approved, it is deposited into the customer’s mobile money account within 72 hours. This client-focused approach benefits customers as well as Musoni, which profits from the decrease in time needed to complete each application. In addition to the software used by loan agents, Musoni also offers customers a mobile platform from which they can receive payment reminders and obtain other information about their loans, reducing the need to make visits to physical banking locations. Michael Chege, a Kenyan farmer, also points out that “Musoni is also flexible in case of disaster and willing to work with farmers to get payments in.” 

 

Musoni has successfully disbursed 16,826 Kilimo Booster loans valued at $6,425,457 to date, proof that its high-touch approach, simplified loan application process, and transparency makes it a strong competitor against other financial institutions despite comparable interest rates and a difficult-to-reach customer base.


Next week, we will highlight another successful company and its work in tapping into smallholder markets. How are you making yourself competitive in smallholder markets? Tell us about it in the comments below!

The United Kingdom’s Guardian newspaper has a section covering news explicitly about social enterprises.  Foundations, from Rockefeller Foundation and Omidyar Network to small family foundations, are funding them. A growing group of “impact investors” are also investing in them. So what are they, these social enterprises?

 

In October, members of the Feed the Future Partnering for Innovation team attended the Social Capital Markets (SOCAP) conference where thousands of social enterprises and entrepreneurs met, alongside impact investors, government donors, and accelerators. At SOCAP, participants discussed the state of the impact investment sector and the role and definition of social enterprises and “accelerator” support organizations, which provide capacity building to social enterprises. There were numerous sessions to further define and codify concepts of social enterprises and the investment landscape, all looking at varying definitions and ideas. 

 

I kept my ears open for the most common themes about “what a social enterprise is”, and here is what I found:

 

  1. A social enterprise is a company or any organization that has profit as its bottom line, as well as a social impact bottom line putting people, planet, and profit on equal footing. 
  2. A social enterprise is any organization that provides solutions to societal problems through a commercial or money-making approach.
  3. A social enterprise is any organization that, as its mission, couples financial sustainability and social impact into their core business model/operations.

 

What these three themes have in common is that a social enterprise does not need to be a business; it just needs to have both a commercial and a social focus. For more conventional businesses, integrating a social enterprise model into their work can enable them to integrate social impact into their ongoing commercial operations. For traditional non-profits, developing a social enterprise spin-off can complement the social mission while making it a more financially independent nonprofit (rather than depending on donations). For newer start-ups – both non-profits and for-profits – being a social enterprise provides a pathway for making social impact and financial sustainability central to operations from the outset.


So, what is the bottom line for what a social enterprise is? First, a social enterprise is not a new phenomenon or type of organization. The sector is formalizing itself as one where business is done by making both money and social impact a priority in strategies and operations.  Second, a social enterprise makes money while making positive social impact.

 

SOCAP acts as a hub for bringing the sector together not only to further define itself, but to grow and do better. Organizations such as the Global Impact Investor Network (GIIN) and Toniic are educating investors to make better investment choices in social enterprises, and standards such as IRIS educate social enterprises on how to measure their social and financial impact. Entrepreneur networks and awardees, such as the Ashoka Fellows and the Skoll Awards, showcase what successful social enterprises and entrepreneurs look like. 


Below are some articles and resources helping to define social enterprises. Before you check them out, I’m curious: Do you define your organization or business as a social enterprise? If yes, what makes your business/organization a social enterprise? If not, how do you define your business/organization’s social values? Please share in the comments section below!


A few helpful resources:

 

One of goals of the Partnering for Innovation team at SOCAP was to bring back what they learned to you, members of the AgTechXChange! The last Learn! article featured advice on what type funding to look for, while this one focuses on looking at what makes a  “social enterprise” or “social entrepreneur.” You can find the first article here.

Raising capital is a key part of any business and can often make the difference between failure and long-term success. However, even with a great business model and sales pitch, raising capital can often be the most difficult part of any new venture. That is why it is so critical to strategize how to raise capital and what it means for your business. This may seem like an overwhelming task, but there are a number of tools and resources out there to take advantage of if you plan ahead.


Recently, members of the Feed the Partnering for Innovation team attended the Social Capital Markets (SOCAP) conference where a number of investors, accelerators, and entrepreneurs shared tips to guarantee successful investment for growth. One of the goals of the Partnering for Innovation team was to bring back what they learned to you, members of the AgTechXChange! This Learn! article, and the next few weekly ones, will feature practices tips and advice learned at SOCAP that will hopefully help you with your enterprise.


Finding Investments: Where to Start


Knowing where to start can often be the biggest hurdle. There are countless investment models, and knowing which ones are best for your business is critical to long-term success. Some of the most important considerations you may need to think about are your current financial status and your long-term goals and timeline for growth. This will help you decide what type of investment structure will benefit your business the most given its current status. Entrepreneurs, start-ups, even already-growing businesses must conduct their own research and learn about the pros and cons of all of the options before deciding what is right. Using business and social networks is paramount in learning as much as possible about the different investment models and what they entail from firsthand experience.


If you are a young company, investment from high net-worth individuals, or angel investors, can be very strategic. It can also be the most efficient way to raise capital. These investors often make “yes” or “no” decisions within one or two meetings, injecting finance to a company quickly. This is in sharp contrast to many venture capital investors, who often require a number of meetings with the entrepreneur or business development team and have lengthy due diligence processes before funding is provided.


Grant capital can also be strategic for young businesses and businesses entering new markets or product lines, as it provides much needed funding without the expectation of financial returns. This is especially beneficial if your business is operating in an emerging market. Grant capital can assist in supporting your business as you plan for the next phase of capital. It often serves as a much needed bridge between start-up and readiness for more traditional forms of investment.


Smart Money, Not More Money


While the offer of a high dollar value investment may sound very appealing, it is critical to consider if the size and the structure of the investment is right for your business and its growth stage. Smaller investments in the form of grants or impact investment are often the most appropriate for small and young businesses. More traditional debt and equity investments are often more appropriate for well-established businesses ready to scale. Similarly, the structure of the capital you seek should also fit well with your business model. In emerging markets, especially in agriculture, patient capital is often the most favorable investment structure for businesses. Patient capital is structured so that returns are not expected right away, but rather over long periods of time. This allows for more flexibility and eliminates some of the risk of entering or expanding in emerging markets.

It can also be very helpful to identify investors for filling capacity gaps in your organization. This is especially true for young businesses that may need advice on how to scale successfully. Finding an investor with experience in a specific sector or area of business can be key to growth. It can also be helpful to find a well networked investor, as they can serve as vital advocates for you and your business and make valuable connections to other key stakeholders in the industry. A well connected investor can often provide capacity-building support through intermediaries in their network.


Another aspect of “smart money” is to stay consistent with your company’s financial and social goals. Do not change your pitch to fit what you think investors want to hear because that can lead to committing your business to pursue strategies that don’t benefit the goals of your business. It can even mean signing up for strategies and activities that distract from your bottom line. Being consistent in your messaging throughout all conversations will help to identify an investor that is a good fit for the business rather than one that changes the course of your business in directions that weaken, rather than strengthen, it.


Know the Investment Process


Before committing to any funding, make sure you know and truly understand what will be expected of you and your team. Particularly, understanding the due diligence process can help you plan the level of effort and staff capacity you will need to successfully secure investment. Many investors, especially in venture capital, have rigorous due diligence processes requiring time-intensive commitments from the entrepreneur. Know the timeline of the process and the type of information you will be required to share, and weigh the time and resources it will take to complete the process against the size and structure of the investment. You may occasionally find that what is required of you is more burdensome and resource intensive than the money is worth.


As you progress through due diligence, it is also critical to set expectations for relationship management, communication, and reporting between all parties early on. Ask up front how involved the investor expects to be in your business. As mentioned earlier, experienced and well-connected investors can be key to business growth, while a highly hands-on investor without the right experiences or networks can turn out to be oppressive and counteract growth. Setting expectations early on will ensure a successful relationship between you and your investor.


Some More Resources


Knowing where to start, being smart about the type of investment (and investor) you pursue, and knowing the actual investment process are just three of many for businesses to consider. Talk to other entrepreneurs and seek their advice for success or learn from their stories of failure. There are also many online tools and resources available that can help set you up for a successful investment experience. Here are just a few we learned about at SOCAP:

  • Accelerator Selection Tool: An online listing of accelerator programs, some that include investment, are together in one easy-to-search listing! Find out why it was developed, and how it works, here.
  • IRIS Standards:
  • Toniic Knowledge Center: Toniic is a community of impact investors and their knowledge center posts research, blogs, and more that can further refine (and identify) what types of impact, donor funding, or grant capital is available and appropriate. For example, their “venture philanthropists  and impact investors” report highlights how venture philanthropists and impact investors are working together to fund early-stage impact enterprises around the world.

Lack of access to information is one of the largest factors constraining growth in smallholder markets. For smallholder farmers, this knowledge gap prevents them from using the inputs, applying the data, acquiring the credit, and reaching the markets needed to increase their productivity and contribute to improving food security in their communities. For companies and financial institutions, it is often difficult to access reliable, timely, useful, and comprehensive data about rural, low-density smallholder markets. For these organizations, this knowledge gap heightens perceived risks, limits their customer base, and increases operating costs – reducing the incentive to expand into smallholder markets.


Fortunately, rapid advances in geographical data technologies (geodata) and information and communications technologies (ICTs) are closing this knowledge gap, helping smallholder farmers and financial and agricultural companies work better together. Geodata and ICT applications, such as real time weather, market, and pest data can help farmers increase their productivity and access markets and finance. In turn, these ICT platforms can provide financial institutions with information about these farmers, lowering farmers’ risk profile and making them more attractive potential loan recipients. Additionally, these technologies can also decrease financial institutions’ operating costs by making it easier to keep records of farmers’ performance, better understand farming, and bring down transaction and monitoring costs, making these institutions more efficient and enabling them to reach more customers. Grameen Foundation Kenya Office and Musoni, a microfinance institution in Kenya, recently started using a new SMS-based ICT platform for its customers, allowing them to access and manage their accounts from their phones. At the same time, the company fully digitized its loan operations with a tablet-based platform, reducing the amount of time and effort required for loan officers to manage clients and enabling them to dramatically increase the number of smallholder customers it could reach.

 

For companies, integrating geodata and ICT platforms into a business model can offer a number of benefits. First, young farmers are more attracted to agriculture when new technologies are involved, and are often willing to act as early adopters in their communities. Second, improved data plays an invaluable role in tailoring marketing campaigns, such as through segmenting, marketing, and positioning. These technologies can also distinguish a company from its competitors, making it more attractive to potential customers by offering an informational service along with its other products. These technologies also lower the cost of providing extension services. When properly packaged and paired with in-person interaction, these platforms can improve farmers’ productivity and incomes. Finally, ICT platforms can help companies integrate smallholder farmers into formal markets. For example, in Haiti, SOLUTIONS S.A. and GeoNova are using the AgroTracking platform for farmer group registration and to formalize produce collection points and facilitate transportation between farmer groups and exporters’ packaging plants. The platform’s traceability system enables exporters to meet traceability requirements in US and European export markets.


However, companies should also be aware of a number of challenges. First, smallholder farmers are very risk adverse and may not have access to certain technologies, such as smartphones, or may be digitally illiterate. As a result, technologies should be built with smallholders in mind, packaged to their needs and abilities and paired with in-person contact. Simple SMS platforms or voice messaging services for illiterate farmers can be useful. Second, geodata and ICT platforms advance rapidly, so companies must work hard to stay up to date and modern. Third, the policy and regulatory environment also has a significant impact on using these types of technologies. The personal data gathered by these platforms can be considered sensitive and thus may be regulated by the government. ICTs raise important questions about data ownership and privacy. Finally, many of these new technologies may require significant initial investment and have low early uptake in low-density rural markets. Outside funding or subsidies may be necessary for long-term sustainability.


Geodata and ICT platforms have a huge potential to change agriculture for farmers and for companies. Do you have experience working with geodata and ICT? If yes, tell your story below!


Learn more about how geodata and ICT platforms can help both smallholder farmers and the companies that work with them: ‘Geodata and ICT Solutions for Inclusive Finance and Food Security’ report).

Last week, Evan - an intern with the AgTech Team - wrote about a key message she heard at the Global Innovation Summit in Washington, DC: the importance of human centered design (HCD) in scaling innovations. This bottom-up approach focuses on integrating customers, including smallholder farmers typically thought of as "beneficiaries," into what products/ services to innovate, how to build solutions, and how to distribute them.

 

After reading Evan's insights I wanted to share how one of the partnerships we invested in on behalf of USAID - with Grameen Foundation and Musoni - used HCD to improve banking services to bottom-of-the-pyramid customers. I am going to cheat a little, because Grameen Foundation explained the processes and results themselves in past Connect! posts. Here is the full link, and below are excerpts that capture how helpful HCD can be to companies working where all of us AgTechXChange community members work: emerging, and mostly agricultural, markets!

 

With funding from Feed The Future Partnering for Innovation and technical support from Grameen Foundation Musoni has designed and implemented a USSD solution, Musoni Mobile, which provides customers with account information and account management capability. The design process applied human-centered design approaches to make it user friendly for the customer who was engaged and involved in the entire process. The decision to use USSD and not a mobile application was informed by Musoni’s customer profile and the desire to deliver a simple solution that would be accessible, affordable and useable by people at the bottom of the pyramid.

 

The result of this end-user focused approach is demonstrated by the speed at which uptake numbers are growing. Less than two months after the pilot was launched, over 6,8772 clients have registered for the service and carried out more than 12, 857** transactions, all of which have registered a 100% success rate. Not a single transaction has failed. Achieving such a success rate is commendable for any technology solution, but it requires considerable effort to accomplish.

 

You can see that by using HCD, Grameen Foundation and Musoni's work together could reach thousands of clients, quickly. How does that look for individual clients? Let's find out about one farmer, Ruth (full story here), who went from being a farm hand to a farm owner!

 

Ruth remembers clearly when things changed for her family. It had been tough supporting her children while her husband struggled with alcohol. She spent her days working as a farm hand in her community in Kenya and her evening fetching water and firewood and preparing the family meal.  It was hard to afford food.

 

When Ruth joined Musoni, she saved up the little she had until she was able to get educational loans for her daughter's schooling.

Her third loan - a Kilimo Booster loan - gave her the break she needed for her family. Developed by Grameen Foundation and Musoni, Kilimo Booster is designed for smallholder farmers and offers repayment terms that match a farmer’s crop and cash cycles.

 

Ruth was able to buy a cow and rent plots of land to farm, and has continued to expand her business with additional loans.

Since Kilimo Booster’s launch in 2013, Musoni has disbursed over US$10million in loans to more than 6,000 farmers. Over the next year, Grameen Foundation will help it expand its outreach significantly through targeted marketing campaigns to reach even more farmers like Ruth.

 

Do you have experience working with HCD? If yes, tell your story below! Also, check out an interview with Steven Carleton, a self-proclaimed fanatic of customer experience and operational excellence, who has worked with industry giants like Apple, Genentech, and most recently, as COO of Global Shipping at eBay. He talks about the importance of being "customer-centric" and walking in the customer's shoes, in any size company! He also shares that senior leadership, including at C-Suite level, need to be driving company culture towards being customer-centric. Being customer-centric is certainly central to human centered design!

The Global Innovation Week from September 28th to October 6th, 2017 was a forum for innovators, investors, and implementers to converge in Washington DC to exchange ideas about how innovation is integrated and implemented in international development. To help kick off an entire week of presentations and gatherings, an entire day was dedicated to the Scale to Impact Summit, with conversations and presentations about  the challenges and barriers faced by innovators and their new technologies in the quest to increase impact and spur development.

 

One key message of the Scale to Impact Summit was the importance of human centered design in efforts to scale innovations in development. This bottom-up approach includes beneficiaries in strategy for what to innovate, how to build it, and how to distribute it. Using this method ensures that beneficiaries receive maximized support; and an innovation, process, or project that is designed to be effectively utilized by beneficiaries is more likely to achieve success with scale.

 

One innovator shared their experiences with incorporating human centered design as an approach to scaling their technology. Reel Gardening is a company that encases natural, high-quality seeds inside a biodegradable, nutrient-rich paper tape, making the growing process fast, easy, and effective. The process saves up to 80 percent in water consumption and yields quality, pest-free plants. However, the key farmer demographic could not afford to purchase the products offered by Reel Gardening, and school feeding programs - another target customer - weren’t buying the materials designed for schools because they were far too large in land area to sustainably maintain. These challenges could have been prevented using human centered design methods for inspiration, ideation and implementation. Realizing this, Reel Gardening tweaked their product for schools, producing smaller teaching plots and working with schools to incorporate agriculture in their curriculum.  They also incorporated a “buy one, give one” model, so they could leverage sales to a higher social strata in order to help the poorest people in the most need.

 

MyAgro used human centered design to create their product of mobile payments to incrementally pay for agricultural inputs. Realizing that smallholder farmers are not a homogenous or static group, MyAgro sought to help them overcome the expensive agricultural inputs with different packages to purchase seeds and other inputs incrementally or on layaway. They continued to integrate human centered design when they received feedback from customers who wanted more support; MyAgro then developed a network of local agents and vendors.

 

The approach used by Feed the Future Partnering for Innovation to negotiate milestones with potential private sector partners is reminiscent of human centered design. These milestones are carefully crafted with the consideration of partners, involving them directly in the planning process, but also motivating and incentivizing them to reach milestones that will improve their business strategies and operations in order to reach more smallholder farmers. This upfront, collaborative, and streamlined milestone-based approach is in itself an innovation, and was also showcased at Global Innovation Week.

 

MyAgro and Reel Gardening successfully incorporated human centered design in order to increase their scale, and Partnering for Innovation involved a variety of stakeholders in partnership development to create strong, successful partnerships. In agricultural development, farmers should be first, and human centered design is one way that organizations can ensure that innovation meets farmers’ needs.

 

Evan Bartlett is the Knowledge Management and Acceleration Support Intern for Feed the Future Partnering for Innovation; she is also pursuing a master's degree in Global Human Development at the Walsh School of Foreign Service at Georgetown University. 

One exciting innovation in agricultural technology is biological control products. Not only do these pest management products have huge market potential, but they also are environment-, farmer-, and consumer-friendly alternatives to traditional chemical pesticides. Unlike synthetic pesticides, biological control products are derived from natural materials such as animals, plants, and microbes, and are consequently less toxic and more targeted, while remaining highly effective at plant protection.

 

xHPjv2b.pngThis market has experienced rapidly accelerating growth. Since 1993, biological products have grown from being a $100 million to a $3 billion industry, and are projected to reach $5 billion by 2020 and $11 billion by 2015. In the future, the biological control market can potentially capture a $34 billion share of the $60 billion total plant protection market.

 

Despite this enormous potential, there are still a number of challenges both for companies hoping to enter this industry and for companies hoping to commercialize biological products in smallholder markets. First, there are a huge number of companies already competing, some, like Monsanto and Syngenta, already dominate the agricultural input industry and have significant resources and expertise. This means that market access is a significant barrier for smaller or local companies who do not have the same access to financial and human capital. Second, smallholders are often unaware of biological control products and are accustomed to using chemical pesticides, or no pesticides at all. This means that companies must invest in developing product knowledge and demand.

 

Whether you hope to enter the market or are a small biological control producer hoping to scale-up or expand across countries, we have identified a number of important considerations you should look at first:

 

1. Understand what the global and regional market trends are. North America and Europe represent the biggest shares of the market, while Latin America is the fastest-growing. While as a whole Africa represents a smaller share of the market, some countries that are already major agricultural exporters, such as Morocco, South Africa, and Egypt, have active biological control product markets. When considering the biological control product market in different countries, it is important to consider the type of crop, how it is used (if it is domestically consumed or exported), and the price-point of farmers.

 

2. Understand the key market drivers, and what market potential it offers you. The main driver of growth is consumer demand to reduce chemical pesticides. Consumers increasingly consider the health and environmental impact of their food, and biological control products offer a safer solution. Manufacturers are drawn to biological products due to the significantly lower cost of development, reduced pest resistance, and fewer regulatory hurdles. While new synthetic pesticides can take over 11 years to go from development to market and cost upwards of $286 million, biological products take only 3-5 years and cost between $25-50 million.  Farmers, in turn, are driven to use biological control products because they are safer for themselves, their families, and their lands. In addition, the products are also proven to increase crop productivity and quality, allowing them to sell and export more. Knowing these key drivers is essential to develop a targeted marketing plan and business strategy.


3. Understand the intellectual property framework. If you are developing a new innovation, or hope to expand into foreign markets, it is very important to consider intellectual property laws and patents. Patents play a key role in helping small companies compete, promoting innovation, and protecting inventions. For companies hoping to patent biological control products, there are several important considerations. First, in order for your invention to be eligible, it must be different from what occurs normally in nature. For example, if you alter microbes, or combine microbes that are not naturally found together, then you could patent them. However, if you just take a microbe out of nature and do not change it, you would not be able to patent it. Second, you must do extensive research to ensure that your invention is not already patented. Third, different countries and groups of countries have different intellectual property laws and standards, so you must research what is required in each country prior to expanding. Fourth, understand the difference between patents – which, while expensive and have expiration dates, offer formal protection – and trade secrets – which are free and have no expiration date, but require you to protect them.


4. Understand your comparative advantage. While large companies may have more capital and resources, local companies can use their knowledge of local markets, customs, and environment to their advantage. The most competitive producer of biological products in Chile, for example, is a company which developed a product derived from local organisms and as is such is especially adapted to the local climate and conditions.

 

To get the full story about global trends in the biological control product market and how they could impact your company, watch the recent Tech Talk:

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This is the final post in a series about real life case studies to demonstrate how companies can successfully develop and use business models that gain traction in smallholder markets. Last week, we looked at how local sales and service providers can help overcome distribution challenges. This week, we discuss how the outgrower model can benefit both companies and smallholders.


Smallholder farmers experience many challenges, including the inability to procure high-quality inputs, access knowledge about good agricultural practices, and access markets. This lack of accessibility can be improved by farmers developing long-term relationships with agribusinesses. To formalize these relationships, agribusinesses often adopt an outgrower model, where the business contracts with farmers to produce crops that the business will buy at harvest in exchange for providing farmers with services, technical assistance, and inputs during the rest of the season. This arrangement ensures that agribusinesses that require specific volumes and quality of harvested product have guaranteed production and farmers receive an agreed upon price. Outgrowing is most often adopted by agribusinesses using farmers to grow their certified seeds to buy back later, which they sell on to the wider rural population, and by agribusinesses procuring high value commodities from farmers for processing. Feed the Future Partnering for Innovation, a USAID-funded program, supports numerous companies that use an outgrower model, including Tolaro Global in Benin, Good Nature Agro Products in Zambia, and Txopela Investments in Mozambique.


From the Real World

Tolaro Global is a cashew processor in Benin that sources cashews from smallholder cooperatives. In addition to sourcing from them, Tolaro also provides advisory services to its 2,300 smallholder farmers, including training on tree pruning, orgaprocessing_by_Tolaro.jpgnic composting, fertilizing, and cashew harvesting and storage techniques. Tolaro is formalizing its relationship with the farmers to ensure a high-quality product for its roasting and seasoning processing facility. Not only does Tolaro guarantee a market for the farmers’ cashews, it also gives these suppliers a unique profit-sharing opportunity by providing class B equity stock based on the volumes and quality of cashew nuts supplied.


In Zambia, Good Nature Agro Products is a supplier of certified legume seeds. Good Nature relies on an outgrower model with more than 5,200 smallholders to produce quality seeds. Good Nature, through its 200 private extension agents, provides technical and advisory support and high-quality foundatio seed to outgrower farmers. The outgrower farmers then produce their own seeds to sell it back to Good Nature. Good Nature cleans, sorts, and packages seeds to be sold on to retail and institutional buyers. For Good Nature, the outgrower model is essential to ensuring seed quality and volume.


Txopela Investments, an investment firm, and its partner COPAZA, a farmer cooperative, have co-invested in the creation of Sociedade Beneficiamento Sementes (SBS), which they are building into a profitable supplier of agricultural inputs in Mozambique. An integrated outgrower farming model to reach new customer segments with improved seed is part of the business strategy for making SBS profitable. Outgrowers produce basic seed, which they sell to SBS for sorting and processing. SBS then sells improved seed back to these outgrowers to use themselves for growing crops as well as to sell to other farmers in their community. This model enables farmers to grow more produce of better quality, which Txopela aggregates and sells to value-added processors.


Through these partnerships, Partnering for Innovation has identified several important considerations for companies wanting to adopt an outgrower model. First, successful outgrower models must be built on strong relationships between the outgrower farmer and the agribusiness. The relationship must be based on trust and fairness, with both parties financially benefitting. Agribusinesses making this investment must be committed to a long-term and mutually beneficial relationship. Second, formal agreements are not normally enforceable in developing countries, and so the agribusiness and outgrower must be open and transparent in their communication and expectations for the relationship. Third, the outgrower models work best when applied to high valued commodities and/or specialized agricultural inputs such as hybrid and improved seeds. These crops and inputs normally require a high level of quality and consistency to receive higher prices and margins. Finally, agribusinesses must be prepared to invest in their outgrowers both through technical extension services and financial support of and access to quality inputs.

This is the fourth post in a series about real life case studies to demonstrate how companies can successfully develop and use business models that gain traction in smallholder markets. Last week we looked at the consumer financing model. This week, we discuss how using local sales and service providers can overcome distribution challenges.


Rural smallholder farmers often lack the access and capacity to directly procure products and services from agricultural input companies. In turn, these companies face high costs and logistical difficulties reaching farmers. As a result, agricultural input distribution systems are nascent and limited in many developing countries, and unable to meet the needs of smallholders. To address this challenge, some agribusinesses identify and train local community members to act as sales and service providers. These entrepreneurs then independently sell and distribute the companies’ products and services into underserved rural communities for a fee. Feed the Future Partnering for Innovation, a USAID-funded program, supports numerous companies that incorporate local sales and service providers as integral components of their business, including The Metal in Bangladesh, TECAP in Mozambique, and Hello Tractor in Nigeria.


From the Real World

The Metal is a leading agro equipment distributor in Bangladesh. It hopes to capitalize on the unmet need for rice and wheat harvesting services in Bangladesh by introducing a low-cost, high-quality mechanized reaper. However, it realizes that while there are millions of smallholders, most of these producers have plots too small to justify investing in a reaper. To distribute its product, The Metal targets local service providers who can purchase reapers and then offer reaping services to local farmers. The Metal supports these providers with a comprehensive training and support program. To raise public awareness, The Metal complements its sales with a widespread marketing campaign that includes demonstrations in fields and at community bazaars to educate farmers on the reaper’s benefits.  The benefits of this business model are threefold: The Metal benefits by diversifying and expanding its mechanization equipment offerings, local service providers are able to earn additional revenue, and smallholders are able to reduce their labor costs.

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Tecnologia E Consult oria Agro-Pecuaria (TECAP) is a large supplier of improved agricultural inputs and mechanization services in Mozambique. Through its partnership with Partnering for Innovation, TECAP seeks to expand its geographic coverage and enter the smallholder market segment. To accomplish this, TECAP is establishing three new agro-input stores in Nampula, Tete, and Manica and investing in a distribution network of agrodealers, franchisees, and agriculture development agents (ADAs). TECAP trains ADAs in business development, enabling ADAs to operate as rural entrepreneurs receiving commissions on the sale of inputs and mechanization equipment. This rural market distribution strategy allows TECAP to reach

more farmers, serving as the impetus for future market expansion.


Similar to farmers in Bangladesh, Nigerian smallholders’ plots are small, meaning the need for individual tractor services is seasonal and limited. To solve this challenge Hello Tractor relies on a network of youth entrepreneurs who work as local service providers, or “agripreneurs” to sell its “smart tractor” services. Hello Tractor identifies and trains youth agripreneurs on financial and business management so they can earn income providing mechanization services to their communities. Hello Tractor’s smart technology allows smallholders to request tractor services as needed via SMS, enabling them to increase their productivity without having to invest in their own tractors.


Lessons Learned

Through these partnerships, Partnering for Innovation has identified several important considerations for companies planning to develop a distribution model based on local sales and service. First, it is important to identify the right entrepreneurs. Not only must these entrepreneurs be familiar with the communities they aim to serve, but they must also be highly motivated and passionate about improving smallholders’ productivity. They also must be risk takers and business-minded. Second, companies need to understand the capacity gaps of local service providers and develop a comprehensive training program to address these needs. Training must focus on business and financial management as well as technical information about the product or service. Third, companies must think through their strategy for helping scale their services providers’ businesses. With the proper support, local service providers can expand, purchasing more tractors, for example, and hiring employees of their own to expand their services. Fourth, companies must continuously raise public awareness among smallholders to generate demand for the products and services offered by the local providers. Only by ensuring an end market will the local service provider model be able to expand. Finally, companies must develop strong linkages with financial and government institutions. Local sales and service providers need access to financing to grow their businesses. This, coupled with government policies such as short term subsidies, greatly enhances the ability of local providers to succeed.


Next week, we will discuss how the outgrower model can help businesses to have guaranteed production and smallholders to have a guaranteed end buyer.

This is the third post in a series about real life case studies to demonstrate how companies can successfully develop and use business models that gain traction in smallholder markets. Last week we looked at embedded rural advisory services. This week, we discuss how consumer finance can be provided effectively and profitably to smallholders.


Smallholder farmers often lack access to finance, limiting their ability to invest in inputs and services that increase productivity. Innovative consumer financing includes a range of financial solutions tailored to the unique needs of agriculture, such as accounting for crop cycles and seasonal cash flows. These solutions expand credit access and limit a lender’s financial risk. Feed the Future Partnering for Innovation, a USAID-funded program, supports a number of innovative financial institutions that are bringing better banking services to smallholders, such as Opportunity Bank in Mozambique and Malawi and Musoni in Kenya.


From the Real World

In Mozambique and Malawi, Opportunity Bank, with support from the financial NGO Opportunity International, provides financial products to smallholder farmers who normally lack the access to savings or collateral required for loans by traditional banks. Opportunity Bank tailored its loan products to account for crop cycles and defrayed risk through group loans that hold farmers accountable for each other during repayment of the loan. Loans can be used for purchasing inputs, transport, or mechanization services. Through this model, the bank benefits by developing an underserved market while farmers acquire the financing they need to increase yield and take advantage of market opportunities.

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In Kenya, Musoni is a cashless, paperless microfinance institution committed to serving rural smallholders. With support from Grameen Foundation, Musoni developed the Kilimo Booster loan, a product tailored specifically for smallholders that offers flexible terms and a customizable grace period based on a farmer’s seasonal cash flow.  In addition, Kilimo Booster is designed for the farmer’s convenience. Loan officers visit clients at their farms, approved loans are dispersed within three days of applying, and everything – from application to repayment – happens through a client’s mobile money account. This is a major shift from how traditional banks work with smallholder clients, and is made possible by Musoni’s tablet-based mobile application software that streamlines the application and loan management process.


Lessons Learned

Through these partnerships, Partnering for Innovation can summarize several important factors that can help financial institutions enter smallholder markets. First, mobile technology can be an important solution to reduce high transaction costs while maintaining loyalty and retention through interactions. Second, financial institutions will be more successful if they work with other key stakeholders to further their reach and help mitigate risk. These include working with extension agents to provide technical and financial training and with offtakers such as traders, brokers, and food processors to ensure farmers get fair value and timely payment for their commodities. Third, financial institutions targeting rural farmers must build the capacity of field staff to better understand agriculture and the technical and business challenges that face smallholder farmers, collectives, and associations. Finally, any financial institution working with smallholders must build internal commitment to these clients for the long term from the senior management level down to field operators. It is important that shareholders and financial backers support this vision and are willing to take on higher risks and lower returns to generate social impact and develop an emerging market.

Last week, we used real life case studies to demonstrate how companies can successfully develop an aggregator model. This week, we will discuss how rural advisory services can be integrated into a profitable business model.


In developing countries, smallholder farmers often lack the basic agronomic and business knowledge to increase productivity. This knowledge gap is often the result of weak or absent rural advisory services. Agribusinesses are uniquely positioned to provide these quality rural extension services. Private sector-led rural advisory services can both help a company’s bottom line and provide farmers with essential agronomic and business knowledge. When farmers have access to better crop production information and advice, they are better able to take the risk of investing in improved agricultural inputs, leading to higher productivity and incomes. For companies, building the capacity of smallholder farmers builds stronger ties and loyalty, leading to increased sales revenue of agriculture input and offtaking services, and more reliable supply chains. Investing in extension services leads to long-term benefits for farmers, shareholders, and the business. Feed the Future Partnering for Innovation, a USAID-funded program, supports numerous companies who embed advisory services in their business models, including Phoenix Seeds in Mozambique, Opportunity Bank in Malawi, and Tolaro Global in Benin.


From the Real World

In Mozambique, Phoenix Seeds is identifying 200 lead farmers as distributors for their seeds and training them in establishing demonstration plots based on good agricultural practices. These demonstration plots showcase numerous growing practices to educate farmers on land preparation, spacing, and proper handling and application of agro inputs. These lead farmers also raise awareness of Phoenix Seeds’ products, facilitating seed sales to neighboring farmers.

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In Malawi and Mozambique, Opportunity Bank contracts third parties UT Grain, Greenbelt Fertilizer, and Catholic Relief Services to provide its smallholder customers with GAP training to improve their productivity and financial literacy training to improve their basic understanding of crop budgets as well as the advantages of saving and borrowing from Opportunity Bank. This results in increased bank business as well as lower default rates on the loans provided to more than 15,000 farmers.


Tolaro Global is a cashew nut processor in Benin that sources cashews from farmer cooperatives. Tolaro provides advisory services to 2,300 members of these cooperatives, including training on tree pruning, organic composting, fertilizing, intercropping, and cashew harvesting and storage techniques. It also registers these farmers through the Fair Trade certification program. By establishing a close relationship with its suppliers, Tolaro benefits by receiving a greater quantity of high-quality product from a more loyal supplier base while farmers benefit from greater productivity and a 15 percent price premium for Fairtrade certification.


Lessons Learned

Through these partnerships, Partnering for Innovation has identified several important considerations for companies looking to embed rural advisory services. First, private sector agribusinesses must conduct a cost-benefit analysis to determine if the costs of providing extension services will be outweighed by the benefits in the form of improved quality, greater volumes, expanded markets or lower overall costs of doing business. Second, these firms must decide if it is better to provide these services in house or to contract third party partners. While a company may not have the initial internal infrastructure to offer extension, third parties can be expensive and a disincentive to firms from investing in their own capacity. Finally, providing embedded rural advisory services that complement an agribusiness’s products and services can strengthen existing relationships and attract new clients – creating a win-win for the farmer and business’s bottom line alike.

Next week, we will discuss how the Consumer Financing Model opens up a new market for financial institutions and provides smallholders with the investments they need.

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