Imagine yourself as a smallholder farmer in Kenya. To grow your crop, you need to buy some inputs. Since you don’t have much money to pay for them, you ask for a loan to a local bank.
Due to seasons timing, you have only 4 weeks to plant. However, the bank takes more than that only to approve your loan, which means you won’t be able to execute things in time this year.
To help smallholder farmers to overcome this and other challenges, Tulaa is providing them a solution that gathers several stakeholders in just one platform.
In our 14th episode, Hillary Miller-Wise tells us the challenges Tulaa faced to get traction as well as the elements that helped it to be part of the life of more than 15,000 farmers.
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What are the problems that Tulaa is solving today?
The problems we’re solving have to do with the fact that smallholder farmers across Africa—of which there are about 15 million households that depend on smallholder agriculture—they’re stuck in a poverty trap.
That trap really has to do with the fact that they’re producing well below capacity. And we think there are really four drivers of that poverty trap.
The first one is they can’t get quality inputs when they need them. Things like fertilizer, seed, and products like that. One of the reasons is that they don’t have the cash when they want to buy it.
Secondly, they also can’t get access to loans to purchase those goods because the banks believe that they’re too risky of a customer.
Third, they often don’t have good information and training on how to grow the crop, especially in a context of climate change, where they have to adapt their practices.
Finally, is access to the market. Typically, these farmers will wait for a broker to come to the farm and offer them a throwaway price—and the farmer really doesn’t have any other alternative.
Let’s understand now how Tulaa is providing a solution to these problems…
The way that Tulaa is tackling these problems is through a marketplace. What we call “online to the offline marketplace” for smallholder farmers to access the different goods and services that they need to overcome those challenges.
What we do is: we use technology, like mobile technology, mobile money—like M-PESA—and artificial intelligence to enable buyers and sellers to transact more easily.
Let me give you an example: farmers can place an order with us for fertilizer. At the same time, they can apply for a loan to purchase the fertilizer. If they’re approved for a loan—and we do our own loan assessment based on a number of different data sets—we send them an SMS that has an electronic voucher—a code—in it.
They bring that code to the retail shop, and the retailer uses our application to fulfill the order. We’re then paying the retailer for that stock.
So, we’re not disbursing the loan as cash to the farmer, it comes in the form of inputs. Then, of course, the farmer has to pay us back over the season.
Similarly, on the market linkage side, we’re predicting when farmers are going to harvest and how much they’re expected to harvest. Right now, what we’re doing is building chat-bot technology to be able to communicate with them automatically, to say: “we expect that you’re going to harvest next week and it looks like you’re going to get 50 bags of potatoes. How much would you like to sell on the platform?”
The farmers then give us bookings for what they want to sell and then we link them to wholesale buyers in urban markets.
There’s no cash in the system at all. So, when we think about going to new markets, we need to focus on markets where the use of mobile money is relatively high.
How has this startup started?
The idea was developed when I was CEO of a different company [Esoko]. We started to develop this idea and then the platform inside of that business. At a certain point, at the shareholder level we decided to spin it out into a separate company. So that happened in July of 2017.
Esoko is a pioneer in the use of mobile technology to reach smallholder farmers and was primarily providing market and agronomic information.
When I joined, the goal was to try to get closer to the transactions that were happening in the supply chains. That’s how we developed this concept which eventually became Tulaa.
How was Tulaa platform in the very beginning?
Well, we started with the input side first. We knew we couldn’t build everything at once. And the input side is a little bit more straightforward because it is a more structured supply chain.
There are large brands—like Syngenta, Bear, Yara—multinational companies, who are then selling to distributors, and the distributors then are supplying the retailers. It’s a bit more structured than the off-tech side.
Initially, our goal was to act as sort of an honest broker across all transactions, connecting buyers and sellers for every transaction, including the credit component.
We were partnering with banks and MFIs [Micro Finance Institutions], with the intention of bringing these qualified leads to the banks and MFIs to then finance. What we found is that that didn’t really work. And there were a few reasons for that.
One is the customers that we were targeting. We know now that 71% of our customers have never had input financing before. So, they’re really not in the financial sector, they’re financially not-included. So, part of what we’re focusing on is financial inclusion.
The other reason is that the banks and MFIs have processes a bit more set in stone, and it was taking a long time to make loan decisions. And the challenge that happens, especially with climate change, is that no one knows when the rains are going to start. So, farmers are very rational and what they do is they wait until the rain starts. Then, they all go to try and get the inputs at the same time.
LET’S DO IT OURSELVES
They [the farmers] have a three or four-week window to plant. So, by taking weeks to make a loan decision, it means that a lot of farmers were missing out.
Because we had the relationship with the customer, we had the data on them and we were seeing that some of the customers were having a bad customer experience with the banks and MFIs, we decided that we needed to do this ourselves. That’s one of the bigger shifts that happened since we started.
We then launched the market linkage—which is the last piece—in November of last year. So, we’ve been doing that for about six months now.
TRUST IS MONEY
What other challenges did you face?
One of the challenges across the board is just building trust. In these markets, transactions tend to be highly relationship based. So, a new player coming into the market doesn’t have any capital with the customers. You have to build that in different ways.
One is if you have partnerships where those partners are trusted by the farmers and those partners are then introducing us to the customers. That tends to help quite a bit.
We do that in some places by working through government, government extension workers and, some places, there may be NGOs that are working with the farmers and have built up trust over the years.
Secondly is obviously ensuring that we are following through on what we said we’re going to do. It has helped to have agents in the field that are from the communities that we’re serving.
We have a multi-level marketing model where we’ve got, essentially, sales teams—who are staff members—managing commission agents, who are people from the communities. They’re farmers, they’re respected, they speak the local language. And that’s been a really important approach for us to build that trust.
One of the challenges across the board is just building trust. In these markets, transactions tend to be highly relationship based.
On the off-tech side—the market linkage side—it’s the same. You have to build trust over time with the buyers. There’s a great example I saw the other day in one of the wholesale markets—huge open markets where big 10 ton trucks are coming to sell their goods.
There were two trucks next to each other and they were selling kale. In about an hour and a half, one guy sold everything and the other guy hadn’t sold a thing. They were the exact same quality, there was no difference between them. The only difference was: no one knew the other guy.
They were the exact same quality, there was no difference between them. The only difference was: no one knew the other guy.
What kind of marketing strategies were you able to perform?
The marketing strategies we use are typically, let’s call “below the line”. We’re not doing radio campaigns and things like that. It’s very expensive and it’s not as effective. And even if you could reach people through radio—which is a good channel—there’s still that trust element that you have to build and a radio advertisement is not going to do that.
What we’ve done is, through the partnerships that we had, having different partners introduce us to farmers, explain what we do, essentially vouch for us. That is a really important approach.
We do it with these commissioned agents in the field, as I mentioned. They are meeting with farmers every day, communicating about what we do, how we work, what the terms are, giving examples of other farmers who have benefited from this service and that’s a very local level. We have to remember that many of these farmers, they’re all extremely vulnerable.
What about the monetization strategy?
We have three revenue streams. The first is a margin that we make on the sale of the inputs. The second is the credit spread on the loans. And then the third is a margin on the trade transactions—on the off-take transaction—so, the variance between what the buyer pays us and what the farmer prices.
Did you have the funds you needed in that time?
When we started—when we spun out—we had some funds that were invested into the company from investors that were in Esoko. We then raised a seed round, it closed last year and that was about $900,000.
We also had a grant from USAID of 500,000. That was vital to us for getting off the ground in 2017. We are currently raising more equity. We have raised debt this year for the on lending and will continue to be raising debt for that purpose as well.
A piece of advice you would give to entrepreneurs that want to make a difference in the world, as you are doing through Tulaa…
To anyone who’s thinking about starting a business, it takes a combination of somewhat irrational exuberance, combined with a bit of ego. You have to have confidence in yourself that you can do it with a very thick skin.
The question for anyone thinking about doing it is: how would you score yourself on those measures? It is one of the most exciting things I’ve done in my life, but it is also more humbling than just got anything done.
You have to take rejection a lot, you have to cope with failure a lot. I think it was Steve Jobs that talked about perseverance being one of the factors that contributed most to his success.
You have to take rejection a lot, you have to cope with failure a lot.
Obviously, there were many more, but when he was saying there were other people who were working on innovative technologies around the same time, but failed or gave up and we just refuse to give up. And I think of that often when we’re in sort of what’s called the trough of despair.
That’s really what separates in many ways. Those factors can separate the successful entrepreneurs from the failed.
MORE ABOUT THE FOUNDER
Hillary Miller-Wise (LinkedIn) is the founder and CEO of Tulaa. Prior to founding the company, she was CEO of Esoko, a pioneer in the use of mobile technology to provide smallholder farmers with agronomic and market information.
She has 20 years of experience at the intersection of agriculture, financial services, and technology, and has developed solutions for rural customers with banks and mobile network operators such as Vodafone, MTN and Tigo. She holds an MBA from INSEAD, where she earned the Social Entrepreneurship Scholarship, and a Master’s degree in Economics from Johns Hopkins University.
MORE ABOUT TULAA
Tulaa (Website; Facebook; Twitter; LinkedIn; Youtube) is an online-to-offline marketplace for smallholder farmers. We provide inputs on credit at the point of sale, agronomic advice, and brokerage services at harvest time.