Reshaping the traditional marriage between technology and agriculture
Walking away from a failed e-commerce startup, my business partner Francis Obirikorang and I decided to try building a solution for agriculture, primarily because it was gaining a lot of investor attention at the time. In December 2015 we packed our bags and made a trip to northern Ghana. Over a period of two weeks we lived among smallholders to understand what their pain points were. It was an awesome experience that left us both awestruck and disheartened.
One noticeable issue was that the majority of the food consumed in Ghana is produced by farmers in the regions we visited, yet we could not see any positive impact their occupations had on their lives. They lived in abject poverty and had no competitive markets in which to sell their commodities or were unable to transport their produce to the local, not-so-competitive, markets. This left them at the mercy of exploitative middlemen who purchased their products at ridiculously low prices.
We immediately knew we had to provide these farmers with large volume buyers. We approached a few big companies that were into food production and discovered they also had a huge problem sourcing large volumes of commodities locally and often times had no choice but resort to imports.
The next couple of months were spent planning, brainstorming and building our solution to link the smallholders and volume buyers. By August 2016 we had completed work on the initial version of this solution. In September 2016 we opened AgroCenta, a platform that aims to improve the livelihoods of farmers through fair trade. The platform connects smallholders on one end to large clients on the other end.
It was a very new market for us that required a lot of learning and learn we did. We soon found that the logistics had to be on point to deliver optimum value to the buyer. AgroCenta therefore signed an agreement with the largest transport union in Ghana and registered all their truck drivers on our platform. We dedicated the first quarter of 2017 to on-boarding farmers and signing contracts with four very large buyers. In May 2017 we started purchasing commodities from our farmers.
Between May 2017 and November 2017 AgroCenta bought commodities worth $120,000 from 3,000 smallholder farmers at prevailing market prices or a little higher. As a result, farmers made four times more than they used to and payments are prompt: 30% up front, 70% in two weeks after purchase.
The journey has been full of constant learning on the job. One such lesson led us to introduce mobile money payments for commodities purchases. This was in response to complaints from farmers that banks and microfinance companies were unwilling to give them loans because they could not prove they had any means of carrying out financial transactions.
To help make the farmers credit-worthy, we decided to pay them using mobile money technology and not cash. Our platform now provides a financial trail for every farmer that serves as a bank statement of sorts. Partnering financial institutions can access this data to make informed decisions and then provide credit to our farmers. Many of our smallholders are now able to look better after their families and reinvest some money into their farms.
Our large-scale buyers have also saved a considerable amount of money that otherwise would have been spent on the import of commodities. They have experienced a 40% increase in production since they are able to track how long it’ll take for them to receive commodities from our farmers in real time.
We have currently been able to provide value for 3,000 of the 10,000 smallholders in AgroCenta’s network. We are working hard to also ensure purchases from the remaining 7,000 by March 2018.
Successfully completing our fundraising round by March 2018 will enable us to expand into two more regions in Ghana and bring our farmer base to 60,000 smallholders. We also plan on adding two additional clients to bring our total to six. We intend to stay focused on the Ghana market for the next two to three years while learning what works and perfecting the model until we move to a new market.
While it is impossible to get rid of the middlemen, who are deeply rooted in the agriculture value chain, our goal is to force them to eventually buy commodities at prevailing market prices or better. This is better for the farmer and better for society. Our main goal though is to help convert smallholders into commercial farmers, as this increase their incomes and enable them to reinvest more in their businesses. It is at that point we will know that we have succeeded as a company.