Staff Writer | Palladium - May 10 2019
Four Takeaways from UK Foreign Secretary's Visit to Abuja

UK's Foreign Secretary Jeremy Hunt met TOHFAN's Chairman Alhaji Danladi to discuss tractor lending to smallholder farmers. 

Palladium’s Propcom Mai-karfi program hosted British Foreign Secretary Jeremy Hunt at a technology exhibition in Abuja, Nigeria, on 30 April 2019. Secretary Hunt visited the exhibition to learn more about how technology is driving business solutions and innovation for start-ups.

Here are four things Propcom Mai-karfi showcased:

1. Technology for Smallholder Farmers

Propcom is leveraging technology to help smallholder farmers access agricultural machinery. Farmers in Nigeria often can’t afford to purchase large machinery, such as tractors, which can significantly reduce the costs of ploughing, planting, and weeding, and ultimately increase incomes.

At the same time, there are not enough affordable and accessible businesses that lend machinery to smallholders.

2. Shared Risk Business Model

Propcom has created a business model that shares the risk of investing in agricultural mechanisation among multiple stakeholders: banks, the government, the Tractor Owners and Hiring Facilities Association of Nigeria (TOHFAN), and farmers. By sharing risk, the model leads to increased investment which allows farmers greater access to ploughing services.

As part of the model, Propcom first helped TOHFAN secure loans from commercial banks, which were backed by the Nigerian government’s credit risk guarantee. TOHFAN provides tractor hiring services to farmers on a commercial basis, and with the loans it can purchase new tractors and expand ploughing services to farmers in Northern Nigeria.

Propcom had to convince the banks that the tractor hiring business was profitable. The next step was to demonstrate to NIRSAL, the credit risk guarantee arm of the Central Bank of Nigeria, how risk would be shared among stakeholders. Since 2014, over 530 such tractor loans have been facilitated by Propcom.

3. Aggregating Demand with an App

Another key component of the model was the use of technology to aggregate demand for services from farmers. This was done using a digital tractor sharing application developed by the social enterprise Hello Tractor. Because it is often not worthwhile for one farmer to hire a tractor only for his or her own plot, a network of booking agents aggregates demand for tractors among farmers.

When the total land size is big enough, the agents submit the request for a tractor to TOHFAN through the Hello Tractor application. Farmer associations can also reach out to TOHFAN directly and negotiate a deal on hiring a tractor.Tractor owners, such as TOHFAN, can then lend their tractors to the farmers.

4. Tractor Tracking System

Hello Tractor has also developed a tracking system that allows the lending banks and TOHFAN to track equipment use in the field. The banks can monitor tractor movements and ensure that if there are requests for loan restructuring due to broken down tractors – which are the banks’ assets until the loans on them are paid in full – this is substantiated by evidence of the tractors not working. Tractor owners, including TOHFAN members, can use the system to track the operations of their tractors, monitor whether the tractors are being used according to agreement, and even shut down the engines in case the tractors are stolen.

The tractor lending intervention is one example of how Propcom is using technology in different ways to help raise the incomes of poor farmers and small-scale entrepreneurs. Technology can help bring together multiple stakeholders, realign incentives, and designing new business models. Since 2012, the program has helped over 856,000 poor farmers and small-scale rural entrepreneurs increase their incomes by a total of £48.8 million.

Jeremy Hunts’ visit to Nigeria was part of a five-country trip to Africa “to make a case for new UK partnerships across the continent.”

Propcom is funded with UK aid from the British people.