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Small farmers often have a hard time getting financing. An app in Nigeria wants to change that: Vetsark fintech has been up and running for five months. A conversation with its founder Blessing Mene about what his app offers - and about the opportunities and limitations of agricultural financing.
How important is agriculture for Nigeria?
The Nigerian economy is dependent on agriculture.
Agriculture is “it” for Africa. In terms of income generation at the grassroot-level, the most likely option still remains farming.
And how did you come up with the idea?
I grew up in a farming family and my dad is a farmer; even nowadays. My mom's also farming, and they have done that next to their own fulltime jobs since I was a child. Initially, my parents started working on the fields, because for livestock more than 80% of the costs will go to feed. So that’s how my interest in agriculture began to grow. I also have a background in chemistry and took some courses in veterinary medicine. But I am mainly passionate about solving problems from a systems change point of view. I did some work on mango seeds, water hyacinths and the black soldier fly – with Ashoka and USAID Nigeria support respectively. After that, I moved on to animal health: How can we digitize animal health? It is a major issue that livestock farmers face and leads them to lose their income. I did some work on that and eventually, our digital operation got adopted by the government. Having done that, I asked myself, okay, what's the next big thing? Financing farms is super important. That’s how I wound up in agri-financing.
Why is there a need to have farms fundraise money in Nigeria and why is it difficult to access finance in agriculture?
It is a problem that has been present for decades. One of the reasons why it's difficult to access loans is the question raised by banks and lenders “can I make enough profit from this and possibly fast?”. They want to invest in profitable ventures. Part of the economy is driven by petroleum. Hence, they would rather invest in, for example, crude oil, because the turnaround time is fast, with a big profit. Real estate is another money-spinning industry right now in this part of the world – so they feel like agriculture doesn't make a lot of business sense for them. The second reason would be that they've gotten their fingers burned. They've lost money invested in agriculture. Additionally, I think that there is a cultural issue here. The people feel that getting a loan or getting some form of financing from the government is part of eating the national cake. For them, this is more like grants or donations.
So there is a lack of convincing success stories for possible investors?
Even though a lot of resources have gone into financing agriculture from the World Bank to even the Central Bank of Nigeria, there's still a lot of darkness and opportunity within the sector.
And what are the barriers for farmers to access your app?
You have to be able to read and you have to have some form of digital access to use an app like ours. Thirdly, you need to be within the banking system or at least have some documentation that allows you to be registered in the system. And then number four would be awareness. By that I mean knowledge about the application and how they can benefit from it.
Is it easy for a smallholder farmer to get a bank account in Nigeria?
Getting a bank account might not be too hard, but operating it, that might be the challenge. A lot of the transactions are still cash based, hence, a lot of behaviour change is required. But adoption of technology has really improved over the last decade due to improved customer preferences, increased internet penetration and cheaper costs of smartphones.
And what does the app offer them?
Firstly, it offers them a bank account. Thereby it gives them digital identity, which means that they now are within the financial sector and that they're able to run their transactions. And number two would be that they can apply for a bank loan within the app or get access to the type of resources or inputs needed to get to operate their firm.
But the most important benefit would be being able to access the resources you need for your farm ten times faster than a bank would offer you.
Typically, if you want to get a loan from the bank directly, you have to fill out some forms, submit a business plan… just a lot of documentation. Also, you must probably have operated your bank account for like six months. One of our new customers told us it took him four years to access a loan from the Bank of Agriculture. I think the loan was about 5000 USD. We don't want that to happen. If you're within our system, you should be able to get it as soon as possible.
Right now, our goal is to get a loan within three, four weeks. Our top-level customers, they should be able to get it within 24 hours. We don't want them going through the struggle of trying to get money for their business.
Is the app already running?
We just got in a collaboration with one of the major Nigerian banks to integrate our backend with their own banking infrastructure three months ago. They've given us access to their backend so that we can issue their bank accounts to our customers. That integration was completed by late April.
Do farmers already take loans via the app?So far, we have been putting in place the processes and setting everything up offline, to check what works and what doesn't. We have a separate app called Cleva farm management available via cleva.org. We've been able to help over a number of farms and agribusinesses secure an average of $1500 per customer so far. We're looking to hopefully grow our numbers at over 50% month on month. So far, we've gotten 100% repayments of our money and of the resources we've provided to the farms. That's what we're looking to scale up with our app.
Do you get kind of a provision or a member fee?
We make a commission, in form of a flat fee, of the deals. If we get you, for example, a loan with the volume of 1000 or 2000 USD, we typically would make a commission of 5%.
What else do you offer apart from giving the farmer loans?
We think of it from four different angles.
They need to get the right inputs, the right species, the right quality so that the money doesn't go to waste due to wrong seeds.
The second part would be in terms of the production itself, like providing training, technical support to make sure that they're doing the right things for their farms and bridging the knowledge gap. Then the third would be around sales by access to markets and to make sure that once there is a harvest, the yields don't go to waste due to inability to sell or distribute.
And does that go hand in hand? So if you get a loan and are registered in the app, you also can access the other parts?
The application allows you to access the inputs. So typically, that will be within our own ecosystem: Our farmer is picking up inputs from our wholesaler partner, within the same community. And then selling it through the same community.
What is the situation like for women in agriculture? Do they have it even harder when it comes to accessing money?
It’s much worse for women. It's hard for them to even get into the business.
Then when you now talk about access to financing, it's worse because they need to go through a lot of obstacles. This week I had a meeting with the farm cooperatives. And among the leaders, there's only one woman – I had a meeting with seven people. I had an extensive conversation with her trying to understand the hardships her business is facing. And I think it's the same across the country.
Women don't show up, because they are being overshadowed by the men.
And can your app address this?
It's one of the pivotal areas we are trying to address.
And one of the ways we're addressing it specifically is to be very sensitive on the gender side, and intentionally providing a quota to the women.
For example, in an upcoming project of ours, only women are participating.
I know that encouraging women in agriculture would have an immense impact in the industry.
So that's one way we we're trying to address the problem of unequal gender representation in agriculture and believe that from there we can scale up to reaching more women over the next five years - at least up to 150,000 women.
What potential do you see for the app?
By 2030 we're looking to do about 1 billion USD in lending. And by 2035, about 15 billion USD. We want to be able to address between 5 to 10% of the demand in the continent. And we're looking to target 500,000 to a million farms, just enabling them access to money and being their key partner. But beyond the numbers, the biggest impact we see is solving the struggle of fundraising, as that affects small scale farms and producers over the whole continent.
What will agriculture in Nigeria look like in 30 years?
I think it's going to be better. I see more medium scale farms: A lot of the young people are going to agriculture.
Also, we're now having more literate farmers like GenZs, who are coming into the sector and are much more open to the use of technology. Therefore, I see more financing going into the sector.