Tata Consultancy Services (TCS) and Stanbic Bank IBTC are large, well-established international companies in India and Nigeria respectively. One is a technology provider and the other a bank – and yet both are aiming to transform agricultural value chains. But how, you may ask. And more importantly, why?
These questions are explored in two new case studies which reveal the ambition – you could even say the audacity – of the inclusive businesses on which they have both embarked.
In Nigeria, Stanbic Bank’s smallholder finance scheme seeks to catalyse a whole new approach to smallholder farming and rural banking. The bank is not only providing credit to smallholders to improve yields, but setting up relationships with providers of seed and fertilisers, service providers of mechanised land preparation and harvesting, and processors and retailers of final products. For Stanbic, this initiative is designed to generate a reasonable profit and more strategically develop a whole new client segment over time: the unbanked rural poor.
It is a complex model, but driven by two simple principles, outlined in a newly published case study, ‘Collaborating for smallholder finance: How is Stanbic closing the loop?’ The first principle is that agricultural credit can unlock productivity increases of such a scale that returns are sufficient for farmers, input-providers, harvesters, and the bank. The second is a design principle: learning from pilots and past experience, the bank has built in multiple risk mitigation measures that seek to ‘close the loop’ and avoid sales or earnings dissipating.
In India, TCS has a totally different product but an equally ambitious model with a similar premise: appropriate use of technology can unlock improved yields and margins for farmers. The newly published case study, ‘Evolution of mKRISHI®: A technology platform for Indian farmers’ explains the product, which has evolved from a mobile phone for farmers to access advice to an end-to-end a technology solution for farmer producer organisations, which facilitates efficient production and trade.
The original model provided farmers with personalised agronomic information. Feedback from farmers interviewed in the case study shows what a difference simple information can make. Farmer Madhavan used to spray pesticides on his okra six times, as recommended by local shopkeepers. But based on the advice of an mKRISHI® expert, he switched to a different brand and composition of pesticide that costs 50 per cent less and requires only four sprays. Following this advice, Madhavan saw a 15 per cent increase in his yield.
But despite these benefits, TCS found that information services alone were not sufficient for a scalable model, because farmers need better access to markets, both to sell their produce and secure inputs. So the technology is evolving to do exactly that. Once established, farmers should be able to bypass middlemen and to plan their inputs with knowledge of market demand. Beyond that, we surmise that agricultural businesses will be prompted to invest more in products and applications for rural consumers, once the mKRISHI® platform provides a way to reach them easily. The catalytic affects can ripple out.
Both businesses have a way to go. Stanbic is concluding a pilot in Jos, northern Nigeria, now, with expected turnover at around $130,000 this year, increasing to $425,000 in three years from now. It is working with under 2,000 farmers at present but aims to eventually scale to 5 million. mKRISHI® has a number of pilots in operation and expects to start making a profit in 2016, reaching an annual turnover of between $100,000 and $150,000 by 2023, when it could be reaching as many as 2.5 million farmers. Both case studies identify lessons learned and key factors for future scale, and three stand out as common in both: a patient long-term view; multiple partnerships with other organisations, and innovative ways to ensure yield increases can drive successful agricultural transformation.
These case studies are part of a series of ‘deep dives’ that seek to understand inclusive business in practice. The series explores seven businesses, all of which have been supported by the Business Innovation Facility. Find out more and download all these case studies on the Practitioner Hub for Inclusive Business.