Africa’s Role in Global Food System Resilience
Summary
In 2022, Hello Tractor committed to investing $16.5M dollars to scale their Pay-As-You-Go (PAYG) program to provide mechanization, climate smart ripping, and conservation agricultural services to approximately 250,000 small holder farmers, across Kenya, Nigeria, and Uganda. Along with a consortium of partners Hello Tractor will offer farmers in the PAYG program access to complimentary services that include fertilizer, insurance, wheat and oil seeds, and irrigation, to boost productivity and put the Africa region on track to be the world’s 6th breadbasket.
Approach
Hello Tractor will commit $16.5M to scale our Pay-As-You-Go (PAYG) program to finance tractors providing mechanization, climate smart ripping, and conservation agricultural services to approximately 250,000 small farmers, across Kenya, Nigeria, and Uganda.
Along with a consortium of partners Hello Tractor will provide access to mechanization and additional complimentary services that include fertilizer, insurance, wheat and oil seeds, and irrigation, to boost productivity and put the Africa region on track to be the world’s 6th breadbasket.
This program will prioritize the unbanked, rural women entrepreneurs, and youth through an unconventional credit underwriting tool that looks outside credit history. Hello Tractor’s strategy in targeting more youth involves extending above market wages, access to training and education.
The eligibility of potential borrowers to use PAYG is determined based on pre-booked demand of at least 500 hectares within the Hello Tractor booking application as well as the serviceability and cash-flows of farmers. To ensure successful repayments, borrowers are placed in cohorts with loans that are cross-collateralized. This enables borrowers to be responsible for not just their tractors but also the tractors of their fellow cohort members. Transactions between farmers and tractor owners are monitored to ensure that with each payment a small loan amount is automatically recouped to repay the loan.
The new PAYG fund will not only provide capital for more equipment but also enable pathways to sell through our agent distribution channel to ensure farmers are fully supported and their productivity and incomes are increasing.
Action Plan
(Q3 – 2022) – Set up a special purpose vehicle to domicile the fund
(Q3 – 2022) – Finalize partnership agreements with Sanargy, Pula and other potential partners
(Q3 -2022) – Train and recruit tractor owners and agents for PAYG work and complementary services
(Q3 – 2022) – Begin the financing of at least 120 tractors before end of year in Kenya, Nigeria and Uganda
(Q4 -2022) – Technology improvements e.g digital wallet for PAYG borrowers
(Q4 – 2022) – Begin selling other inputs e.g. fertilizer through well crafted distribution channels
(Q4 – 2022) – Roll out marketing campaigns to boost PAYG and complementary services
(Q2 – 2023) – Monitoring and evaluation of field operations
Background
Lack of equipment access is the biggest contributor to African farmers’ low productivity and income. Smallholder farmers, majority of whom are women, are faced with structural barriers like lack of access to finance, making tractors too expensive to own. Over half of the population in Kenya, Nigeria and Uganda identifies as farmers but most lack the technology to turn their land into a highly productive asset. Nigeria, for example, has 34 million hectares of arable land, though only 40% is cultivated. In these geographies, women farmers continue to rely on manual farming methods, which often results in late planting, under-cultivation of their land, and loss of income. This, in turn, leads to low yields, which negatively impacts communities through food scarcity, consequently trapping them in an entrenched cycle of poverty.
Hello Tractor, is an agricultural technology company based in Nairobi, Kenya and operating in Nigeria, Uganda and 10 other African countries. The company sells an inexpensive IoT fleet management software solution and location-based booking application that allows farm equipment owners to manage their equipment fleet and connect directly with farmers seeking tractor services.
Progress Update
Hello Tractor has rolled out its Pay as you go (PAYG) tractor financing product, with an aim to revolutionize mechanization in Africa while focusing on gender inclusion and adoption of climate smart agriculture methods.
To date, Hello Tractor has committed $5M to rollout this facility and another $5M is on track to be rolled out by Q3 2023. 105 entrepreneurs (300 farm equipment) have been recipients of this financing product, 34% of whom are women from rural communities. The portfolio has serviced 25k farmers, cultivating and mechanizing 35k acres.
The team continues to explore partnerships and pilot projects with complementary service providers such as Sanergy for fertilizers and Pula for insurance.
Partnership Opportunities
Hello Tractor is seeking financial resources to improve our offering to the market which includes building a strong human infrastructure across the mechanization value chain, improving our technology and financing new tractors. We are also keen on both supply and demand side interventions through Development Finance Institutions, NGOs, and other social sector actors in order to strengthen this offering.,Hello Tractor is offering our IOT technology to fleet management organizations which begins with a GPS telematics device that is installed on every tractor, giving a tractor owner visibility on tractor location, work that has been performed, fuel usage, scheduled maintenance, etc.
In addition, Hello Tractor had partnered with social sector actors to train and finance young entrepreneurs for tractor ownership. Hello Tractor has extended training to key players such as technicians and operators for excellent tractor maintenance.