This NYTimes article discusses how a great technological break-through in breeding inputs can potentially harm the dairy industry during these times of recession. While global milk prices have tumbled during the last year or so, due to the global economic recession, more and more cows and hence milk is being produced as a result of the use of “sexed semen,” which allows for the birth of more female (i.e., milk-producing) calves.
However, in sharp contrast to global trends, in Pakistan, during the last four months, we have seen milk prices rise by at least 10%, generating a buzz in the industry with investors lining up to set up dairy farms. This is primarily because there exists a huge gap between demand and supply for processed milk in Pakistan. While the annual increase in the demand for processed milk is over 20%, the annual increase in supply is only 5%, thus driving up milk prices. This increase in milk prices in Pakistan is also incrementally altering the way the poor farmers view their livestock. Historically, livestock has been viewed as a mode of savings and a store of wealth for the poor. However, this perception is changing rapidly with farmers beginning to view their cattle holding as an increasingly viable revenue generator and a net contributor to the household income. This is leading them to take increasing interest in the well-being and efficient management of their cattle to maximize the income from milk sales. So, while the fortunes of dairy farmers globally are going through a rough patch, the poor dairy farmers in Pakistan seem to be eyeing a new ray of hope in their cattle.
Jassar Farms, Acumen’s first investment in livestock, has been one of the early adopters in the use of sexed semen in Pakistan. We have seen a success rate of over 85% with its use — with the first generation of calves projected to come into milk production during the 2nd half of FY10. This will be a key milestone in the country’s dairy industry and one of the first successful experiments with the use of sexed semen in the private sector.
Acumen Fund just issued a press release announcing new investments in Pakistan: Jassar Farms and AMC.
We’ve talked previously about Jassar Farms in the context of our new Agriculture Portfolio. Jassar Farms is focused on producing high quality, affordable inputs to help poor farmers improve breeding of livestock and increase milk productivity.
Our latest investment in housing is Ansar Management Company (AMC), a housing development company that builds off our past work with Saiban in Pakistan to create much-needed housing for low-income consumers. As much as houses and infrastructure, AMC is focused on building community — the company is making sure residents are invested in living there, creating ownership in the truest sense of the word.
AMC represents the evolution of a rising leader as well. The entrepreneur behind the investment is Jawad Aslam, a former Acumen Fund Fellow, who has taken his learning and commitment (he is building a home in the community for his own family) to start AMC. By investing capital (and giving him access to additional Fellows to support his work), Acumen Fund is betting on his ability to succeed.
Arvind Gopal is a Columbia Business School student working with the East Africa Agriculture Portfolio Team this summer. At Columbia, he has focused on international development. He is currently VP of Investments for Microlumbia, a student-run fund focused on making debt investments in microfinance organizations. Additionally, he provided consulting advice to Broad Cove Partners, a Boston-based social venture fund, on a potential investment opportunity in a Liberian mortgage finance business. Prior to business school, Arvind held various positions in the U.S. and Singapore. He worked in New York in investment banking at Bear Stearns, before moving to Lightyear Capital, a private equity firm focused on the financial services sector. In Singapore he worked at Argus Software, a real estate software provider, guiding their business development in Asia.
I have spent the past few weeks researching the agriculture market in Kenya with the objective of identifying sustainable business models that could help the country’s ~6 million smallholder farmers and their families (~30m people), most of whom live in extreme or near extreme poverty. One of the largest bottlenecks in the agriculture supply chain is access to credit. A survey conducted in 2007 by the Tegemeo Research Institute of Agriculture Policy and Development revealed that only 30% of the country’s smallholder farmers have access to any kind of credit. After several visits to farmers across the country, I began to understand this reality. Formal financial institutions are between 30 km and 50 km away from the farms and in many cases, will not lend to the farmers I interviewed. As a result, the majority of these farmers receive credit through either input providers (fertilizer and seed companies) or informal groups. The credit available through these channels is usually small and short term and limits farmers’ investments in the essential ingredients needed to increase their productivity. Based on this information, I decided to take a deeper look on why microfinance institutions have had such a limited impact in the agriculture sector. I found some interesting data points, both from a global and East Africa perspective.
Microfinance has received a lot of attention over the past few years and rightfully so. Since Muhammad Yunus started the Grameen Bank in 1976, microfinance has helped millions of people access credit across the developing world. In 2006 alone, over 100 million micro-borrowers accessed about US$25 billion in loans (Deutsche Bank Microfinance Report, December 2007). The industry has even shown surprising resilience to the global financial crisis, which has brought down some the world’s largest financial institutions.
While the success of microfinance is undisputable, a huge funding gap remains and the market is still substantially underserved (market demand is estimated at over 1 billion borrowers world wide). A part of this gap will be filled with the growth of the current microfinance model, but we will also need new innovative approaches in order to provide access to rest of the BoP. The dominant microfinance models of today depend on small, short-term and high interest rate loans to assure strong repayments and cover operating costs. Some key success factors for this model include higher population densities and portfolio diversification. In contrast, much of today’s poor lives in rural areas and relies mostly on agriculture to generate income. These borrowers typically need larger loans with longer durations that coincide with crop cycles. Additionally, the returns generated by farmers are lower than that of micro-enterprises, and high interest rates of 2% to 4% per month erode farmers’ incomes, causing them to become trapped in poverty. These loans are inherently riskier to microfinance institutions because they are longer in duration, sensitive to weather conditions and international food prices, and limit loan diversification. Considerable agriculture expertise is needed to due-diligence loan applicants, monitor existing loans and train farmers on best practices including negotiating input prices and finding markets for their products.
In Kenya, the microfinance model has been very successful in urban areas – enough so that commercial banks are now reentering the high-end of the microfinance market as they recognize the income-generating potential and stability of this group. However, only 0.8% of smallholder farmers have access to credit through microfinance institutions — surprisingly, more farmers access credit through commercial banks (about 1%) than microfinance institutions. Equity Bank, a Kenyan commercial bank focused on the lower-income population, has made some inroads in rural areas through innovative approaches like mobile banking that have reduced the costs of conducting business in sparsely populated areas and allowed it to disburse longer-term loans at 1% monthly interest rates. However, most of their loans target rural enterprises and not farmers. Almost all the farmers, research analysts and MFI consultants I spoke with agreed that a better system has to be developed in order to reach the majority of small farmers.
Microfinance organizations, commercial banks, government organizations and NGOs in Kenya have all spent considerable time trying to develop a model that effectively targets the agriculture sector. As a result, a few innovative approaches that have focused on asset leasing and microfinance linkages with other parts of the agriculture value chain such as input providers and distributors of agriculture products have emerged in recent years. While these strategies are still in their early stages, the models are likely to address the limitations of today’s microfinance institutions and could provide future investment opportunities for Acumen Fund and others in this space.
Global Easy Water Products (GEWP), an Acumen Fund investee in our Agriculture Portfolio in India, is currently recruiting a qualified Corporate Strategy Intern to help the company build a new 5-year business plan and financial model. This is an exciting opportunity to work directly with the Managing Director and Board of Directors of the company to shape its future direction.
GEWP is the exclusive distibutor for KB Drip, a line of micro-irrigation products that drastically increase yields and incomes for small farmers, as well as reduce water and energy consumption by 30-70%. The company currently distributes through over 600 dealers in seven states in India, as well as exports across Asia, Africa and Latin America. GEWP has witnesses remarkable growth over the past two years and has proven that enterprises can operate profitably, while having a tremendous impact on poverty. The company is, therefore, revising its 5-year business plan and financial model to account for new growth opportunities.
The intern would be based in Aurangabad and/or Hyderabad for a period of eight weeks. To apply: Check out this position description, and send a cover letter and CV to khill@acumenfund.org, with “Application for GEWP Corporate Strategy Intern” in the subject line.
Deepna Nandiga is currently a Business Development intern in Acumen Fund’s office in Hyderabad. She recently finished a masters degree in Anthropology from Columbia University, with a concentration in International Development. Previously, she worked with Accenture as a Business Consultant and also worked with Relief International, a humanitarian aid and development organization where her work was focused mainly on planning programs in public health, women’s education and microcredit in Darfur, Sri Lanka and Afghanistan. Prior to joining Acumen Fund, she worked for six months with Bhumi, a growing social enterprise with initiatives that target underprivileged communities in Hyderabad.
Rather recently, I found myself as guest in the home of Srinivas Yadav, a small holding sweet-orange farmer living in the Nalgonda District of Andhra Pradesh, an area located on the outskirts of Hyderabad. We ate rice and chicken curry off banana leafs on the floor of his home at lunchtime, which was truly royal treatment. Serving meat as part of a meal is quite an expensive undertaking for farmers like Srinivas, despite owning a substantial portion of land and receiving crop yields of up to ten tons per acre in good months.
I was flanked on either side by a senior professor from the Hyderabad Agriculture University, two government officials who work on subsidy schemes for farmers and a director of Safal, an organization that tries to provide a direct link between fruit and vegetable growers and consumers set up jointly by the Indian government and Mother Dairy Ltd. The purpose of the visit was for Acumen Fund to better understand the problems Indian farmers face and to look for opportunities for innovation in the highly inefficient producer-to-consumer agricultural supply chain. At one point in conversation with the professor from the Agriculture University, he mentioned the recently proposed government Right to Food Act. On further inquiry, he said, “Yes, in your country you have rights like the right to free speech and the right to bear arms and in our country we have the right to food for every person.” His words made a strong impact on me. The thought of having to guarantee something so basic to human survival and something I take for granted on a daily basis shifted my paradigms of freedom and human rights. Like many other experiences during my time here in India, it was quite the reality check.
Unlike the Constitution of the United States that protects mainly the infringement of civil rights, since its conception in 1950, the Indian Constitution ensures socio-economic freedoms as well. This is for good reason; the 2006 National Family Health Survey showed that the child under-nutrition rate in India is 46%, almost double that of sub-Saharan Africa, which is economically poorer than India (Source: India Development Blog) The Right to Food Act, which is currently under debate in the Indian Congress is the latest iteration of the government’s legislative attempt to end hunger.
In a letter to Prime Minister Manmohan Singh, Congress Party President Sonia Gandhi has made a strong pitch for providing the 35 kg of cereals at Rs.3 a kg that has been proposed under the new Act each month to the poor. The Food Security Act has also received a thumbs-up from Nobel Laureate and economist Amartya Sen, famous for his human-development centered approach to solving problems of poverty. The current debate focuses on the terms of the Act and on defining the threshold of the below poverty line (BPL) population. By one committee estimation, 77% of the Indian population or 836 million people are not able to spend more than Rs. 20 a day, which will not buy more than two square meals per day. (Source: Deccan Chronicle). Ironically, often those facing hunger are the farmers themselves. Lately, every news report I watch mentions the dire state of farmers due to the unusually dry weather of the last few months over the Indian plains. I’ve learned however, that weather is not the only limiting factor in farmers’ inability to provide for themselves. An estimated 200,000 farmers have committed suicide in Andhra Pradesh over the last 15 years.
India’s hunger problem more than anything else, lies in inefficient distribution. In fact, India is the third largest agriculture producer in the world, following China and the United States. As I witnessed at Srinivas Yadav’s farm, lack of access to markets, transport inability, a lack of cold storage options and a number of other reasons relating to supply chain inefficiencies are to blame.
In spite of these bleak statistics, the day’s conversations on the farm left me feeling optimistic. It was an example of the times I get most excited about my work here. Acumen Fund is finding innovative market solutions in places where government policy and humanitarian aid falter. I was reminded of Acumen Fund’s unique place in not only encouraging creative new business models, but also in impacting legislative and human rights imperatives in meaningful ways. My belief in the need for Acumen Fund’s work (and for smart solutions in sectors like agriculture and nutrition) in countries like India was re-affirmed. It’s heartening to be a part of an organization like this that is working to fill this vital gap.
Kyle is a summer associate in the Pakistan office for Acumen Fund. He is also a Master of International Affairs candidate at Columbia University’s School of International and Public Affairs. Prior to graduate school, Kyle worked as a management consultant at The Lucas Group in Boston and as a research assistant at MIT’s Security Studies Program. He holds a BA in Middle East Studies and Politics from The Gallatin School of Individualized Study at New York University.
Shahzad Iqbal gazed across Jassar Farm’s sprouting field of maize deep in rural Punjab where a new sprinkler system sputtered around in endless circles. Without warning, he kicked off his sandals, rolled up his pressed chinos, and bounded through the muddy field toward the device, narrowly missing the rotating blast of water. The rest of the management team, myself, and a pack of local villagers watched from a safe distance as the CEO of the Farms wrestled the beast into a position he found more agreeable. After instructing his staff member on how to properly set up the system, he returned grinning, feet encased in rich mud. “Look how beautifully it works. See the quality of those plants? Never before in these fields.”
Ensuring proper plant quality to use as cattle feed is part of any Pakistani dairy farmer’s job, but then Shahzad Iqbal is not your average Pakistani farmer. After graduating with an MBA from Pakistan’s elite Lahore University of Management Science (LUMS) at just 22 years of age, he began a 16-year career international climb through the operations of Coca-Cola, PepsiCo, and British American Tobacco. Before the age of 38, he sat at Union Bank where he successfully managed a team of over 2,500 responsible for 40% of all profit. He was at the top of his game—highly educated, well paid, and well connected.
Then in 2007, Iqbal unexpectedly quit his job at the bank. In a crisis of conscience, he realized that the corporate executive lifestyle was not compensating for his growing sense of personal mission to help his largely impoverished homeland of Pakistan. The idea of Jassar Farms was born soon after, commencing months of intense research and a feverish search for financing until Acumen signed on.
As Batool Hassan eloquently described in a previous post, it is common for rural Pakistanis to own a few cows but the milk productivity of these animals is often up to a fifth lower than their cousins in more developed economies. The disparity emerges from the highly advanced selective breeding techniques that Western farmers have developed and implemented. With financing from Acumen Fund, however, Jassar Farms is playing catch-up by importing high-grade cow semen and embryos to breed a more productive dairy herd. At the same time, it will sell quality semen produced on the farm to local farmers at affordable prices. Within a few years, the Farm expects to multiply the amount of milk a poor Pakistani farmer can produce by several times.
From an American perspective, Iqbal fits a familiar archetype: Banker becomes disillusioned, quits his or her job, and joins the ministry or becomes a writer (or starts a little non-profit call Acumen Fund).
But Pakistan is different. As a Summer Associate without any prior experience in Pakistan, I did not fully understand Iqbal’s story until I found out that my own two-week project on the farm was longer than most urban Pakistanis will spend outside major cities in their entire lives. By simple observation, it becomes clear that Pakistan’s disparity in wealth positively correlates with the urban and rural divide.
In many ways, Iqbal has become an outlier, spending most of the last three years out in the cow pens and hay fields of Jassar Farms with the goal of improving lives of Pakistan’s poor dairy farmers. “I’m completely mad. You have to be in order to do this,” Iqbal disclosed with some measure of pride as he sat in the 120-degree heat at the farm.
Acumen Fund’s model of patient capital assumes that there are talented and passionate entrepreneurs who want to roll up their chinos to lift their countries up. In the case of Pakistan and its divided culture, finding this type of leader is often one of Acumen Fund’s greatest challenges. As Iqbal began washing his feet in a nearby irrigation canal, however, he proved that with a little bit of “madness” nothing is impossible.
Geetika Agrawal is pursuing her MBA at the Stern School of Business at New York University, specializing in Finance and Social Impact & Innovation. She is currently a Summer Associate at the Acumen Fund India office, where her focus is on building out the Agriculture portfolio and consuming as many mangoes as possible. She holds a BS in Computer Science from Stanford University.
The agriculture industry employs 60 percent of the Indian labor force, according to the CIA World Factbook. The backbone of this sector is the small holder farmer, those living off less than five acres and earning on average about 160 INR per person per day (approx $3 USD). While the Green Revolution increased the productivity of the farming sector and helped alleviate some hunger issues in the country, it did little to increase the livelihoods of the farmers.
In fact, within the fruit and vegetable sector today, there is a post-harvest wastage of 20-40% due to many factors: a lack of storage facilities, poor transportation logistics, a complicated web of middlemen, a dearth of quality controls and other critical supply chain inefficiencies. This means farmers are often unable to fully realize the value of their crops. These issues in the agriculture sector are further thrown into relief by the fact that while India is the second most productive country in the world when it comes to produce variety, quality, and quantity, its total fruit production represents 8% of the world market share and its vegetable production equals only 15%. Illustrating where the inefficiencies hurt India, the Netherlands imports mangoes from Chile, at half the price, despite the fact that Chile is twice as far away.
On the bright side, supply chain inefficiencies and a demand for innovation regarding sourcing are a cries for help - and for creative business models. With these motivations, the Acumen Fund India team has started to build out a strategy and pipeline for investments in the agriculture industry. As a Summer Associate, my first task is to build a detailed case for Acumen’s involvement in the fruit and vegetable market. After a week of office ramp-up (i.e., numerous hours of quality time with the computer), it was time to get on the ground and understand how the kilos of mangoes I’d be consuming since I arrived in India actually got from the small market to my plate.
I jumped into an autorickshaw and headed to Rythu Bazaar in Hyderabad, a government supported market that allows farmers to sell directly to the customer. These bazaars are still relatively new, created to cut through the complicated set of middle men who would eat away profits through commission and price gouging.
My trip to Rythu was a unique opportunity to converse with the farmers and understand better their daily activities. They were open and eager to share their different methods of getting their produce to market. I was also incredibly humbled to see how hard each of them works. One farmer, selling a variety of greens, described how he starts his day at 4 AM, first harvesting and then bundling the 500 bunches of greens he brings into market. He then carries the large sacks of greens on the back of his motorcycle two to three hours to bring them from his farm to the mundi.
Other farmers bring their produce by local bus, or they rent autos. On a good day, the “greens” farmer – like many others – will have leftovers which either go to hotels or wholesalers at mass discounts or simply get dumped, due to lack of cold storage. The fact that this food often just goes to waste is tragic considering the high rate of malnutrition in India - especially in many of the surrounding villages. Storage is limited to cheap tarps and large leaves, leaving a day or less before produce spoils in the heat and humidity of monsoon-season Hyderabad.
When pressed on whether they would prefer cold storage however, many of the farmers shook their heads and simply said “No, madam, who wants to sell old vegetables? That’s not how it’s done.” After reading report after report on how important cold storage was and then hearing their stories, this was a good reminder of the difference between understanding needs and wants.
After a little while in the mundi, I had accumulated a little entourage of young farmers who would take me from one friend’s stand to another. I was handed samples of mangoes, posed for pictures and they answered my questions before I even asked, since they had memorized them. Then the tables turned and I was grilled on my life in Hyderabad, what I thought of being here, and most importantly, more details on my iPhone, which I was using to take pictures. I left feeling re-energized and committed to helping these entrepreneurial, energetic people find a way to reap more of the fruits of their labor.
The field trip was also an important reminder of how important it is to reconnect with the client, and how much knowledge can be lost if you just spend time behind the desk. It is also clear to me that we have a long road ahead of us as we seek to make an impact in this space - but it is one that won’t be without its rewards.
The next series of blog posts will cover innovations from the field. Recently, I conducted some in-depth farmer interviews around Hyderbad and learned about some pretty interesting innovations that are happening on the ground. Keep in mind that these are not college-educated individuals; most have not even finished high school. What I saw was human ingenuity in its purest sense. At the end of the day, I found myself leaving inspired by their innovativeness and creativity.
Zulfiqar Ali, a four-acre farmer in the small village of Dabri, Pakistan, doesn’t travel to his nearest bank branch when he needs some cash. All he has to do is open the door to a room where he stores his wheat crop and travel to the market. Unlike most farmers in Pakistan, Zulfiqar does not sell his wheat crop upon harvest. He realized that harvest season was the worst time to sell his crops due to a glut in supply. Zulfiqar stores his wheat crop and sells it one bag at a time, based upon when he needs cash. With each passing week, the value of his remaining wheat increases. A wheat ATM… that is innovation.
The next series of blog posts will cover innovations from the field. Recently, I conducted some in-depth farmer interviews around Hyderbad and learned about some pretty interesting innovations that are happening on the ground. Keep in mind that these are not college-educated individuals; most have not even finished high school. What I saw was human ingenuity in its purest sense. At the end of the day, I found myself leaving inspired by their innovativeness and creativity.
Agriculture is extremely risky. There are so many things that can go wrong: bad seed, no water, pest attack, fake fertilizer, bad weather, no transportation to market, etc. Price fluctuations are also quite common. This means that a farmer may spend Rs. 25,000 (USD $315) or more on inputs (seed, fertilizer, pesticide, etc.) and land preparation (tractor rental, laborer wages, etc.) just to find out at the end of the season that the price of his crop is so low that he will make a loss. He borrowed money at the beginning of the season from an arti (money lender) at a rate of 120% annual interest and now is even farther in debt.
In Pakistan, most farmers grow two crops: cotton (summer) and wheat (winter). We always wondered why both crops were so prevalent and finally realized upon completing our interviews. Firstly, most farmers grow cotton and wheat because the prices are stable. It takes a lot of the guess work (and risk) from other types of crops that have more volatile prices. Secondly, farmers grow cotton and wheat because they don’t spoil. If you grow vegetables, then you must transport them to the market quickly before they rot. Cotton and wheat, on the other hand, can be stored for a long time and won’t go bad. Probably the most interesting reason for the traditional cotton-wheat rotation is that wheat is a natural life insurance policy. Farmers grow wheat and keep 50-100 munds (1 mund = 40kg) back to ensure that their families have food to eat during the coming year. Usually an average family needs around 50 munds per year, but they keep extra for festivals, weddings, and unforeseen circumstances. No matter what happens in
“This looks just like South Jersey!” In true Acumen fashion, I had an “Aha” moment driving through rural Punjab on the way to see Acumen Pakistan’s newest investment, Jassar Farms. Located two and a half hours outside Lahore in Narowal, the region is surrounded on three sides by India and is only three kilometers from the border. So why did it look like South Jersey? Punjab is the breadbasket of Pakistan with a beautiful sea of green fields on both sides. As we drove deeper into the heart of Punjab, we passed fields of rice and wheat and sugar cane, all sporadically peppered with brick kilns. Even at the farm itself, spread across 250 acres of land, there were fields of sorghum, alfalfa, and corn, all being grown to process into livestock feed at the farm. At the farm, I met up with Shehzad Iqbal, social entrepreneur and CEO of Jassar Farms who had a thing or two to share about dairy farming in Pakistan and the social impact of this new line of business. Jassar Farms is a corporate dairy farming business focused on dairy and breed improvement of poor livestock farmers aiming to increase milk productivity. Here are a few interesting facts about dairy farming in Pakistan:
Pakistan is the 5th largest producer of milk worldwide, yet one cow has the productivity level of only 1/5th of a Western cow.
On average, the milk production of one cow is approximately 1,800 liters of milk per year.
As a comparison, one western cow has a milk yield in the range of 8000 – 10000 liters per year.
In the normal 9-10 year lifespan of a cow, she can give birth 9 times in her lifecycle and is lactating 270 - 305 days per year.
The milk producing livestock in Pakistan is divided almost equally between buffalo and cow. Pakistan is among the top producers of buffalo milk globally but herds most commonly suffer from poor farm care, poor quality feed and lack breed improvement. While buffalo breed improvement could reap great benefits, breed enhancement through artificial insemination has been less studied in buffalos as compared to cows, worldwide.
Through experiments in artificial insemination and other methods of livestock breed enhancement, there is strong potential to improve the gene pool of cattle offspring.
If a cow is on average producing 1,800 liters of milk per year and it is artificially inseminated with a bull who’s mother and grandmother averaged, were producing for example, 10,000 liters of milk per year, then the cow’s female offspring will have the genetic potential to produce the average of the two (10,000 + 1,800)/2 = 5,900) and thereby slowly improve the milk production capability generationally.
This is where Shahzad really explained the social impact of the business idea. In the Pakistan agriculture sector, over 75% of livestock owners are poor farmers owning less than four cows.
The cost of importing high quality bull semen doses costs between $75-$100 and is essentially unaffordable to rural, dairy farmers who own 2-5 cows per household. Shahzad gave the example of a local farmer, Mohammad Butta, who owns two cows and has a family of five. Mohammad milks the cows in the morning and then sets off to work his fields. With a family of five and a household income of $75 per month, he cannot afford the high cost of imported semen dosages. So by producing semen doses locally and making it affordable to the rural livestock farmer, Jassar Farms has the potential to increase incomes of farmers from increased milk yields.
This is the first Acumen Fund investment in agriculture and specifically in the livestock and diary space and it will be interesting to see the value and impact this new business innovation may yield.
Generally, when I do the road trip from Nairobi into Western Kenya, I stay up late the night before so I can snooze during the journey. I sleep because I’ve taken the trip too many times to count – besides, it’s often a bumpy and dusty ride.
However, my most recent trip from Nairobi to Kitale gave me a whole new perspective. Instead of making my regular trip home, I was bringing the eyes of Acumen Fund from the office in Nairobi to the ground in Kitale. In Kenya, it’s easy to find stories of famine, poverty and political unrest in the newspaper or on television, but these issues become very real along this eight hour road trip.
In Kitale, I met many smallholder farmers. I took the photograph above at one of these very farms. My perception of the smallholder farmer has always been that of a person who not only has a small piece of land, but who also cuts costs by using the cheapest seeds and the cheapest fertilizer (if any at all). Essentially, he or she is a person concerned with growing just enough to feed the family.
But listening to smallholder farmers, whom I met down dusty roads deep in some of the most remote parts of Western Kenya, brought to light how wrong my perception of this farmer was. The farmers I met know exactly the type of seeds they plant, the variety appropriate for different types of altitudes and soil, the right season to plant particular varieties, and the way to get optimal yields from inputs. This farmer typically plants maize intercropped with beans, and some napier grass for his cow and for soil erosion control. You can hear the excitement in the farmers’ voices as they talk about the different hybrid seeds they are using and how this has improved their lives as a result of increased yields.
Farmers in this part of Kenya are well informed, and are willing to adopt any changes that maximize their yields, even if it involves spending up to $60 US dollars on inputs.
My trip made me think of Acumen’s target market and how we need to know their needs. Poor, under educated and underestimated they may be, but we are dealing with savvy customers who are aware of the benefits of improved inputs. They are willing to invest in resources that increase their income. I feel that the more complex question is not whether a seed variety is new or traditional, but whether this new variety is accepted or rejected by a farmer. When new varieties offer an increased yield to farmers they will be accepted, just as new varieties that do not will be rejected.
The farmer calls the shots, based on what he sees on the ground. He is informed and has a variety of choices, and with this comes dignity. He is not in the position of begging for handouts, but has a place at the bargaining table to listen to cases presented, alongside proof and make decisions. There is a need for us to connect such farmers to the right entrepreneur who can provide an appropriate product or service to fill this need. But first, Acumen must work to engage with this customer – by spending time understanding his immediate needs and behavior. Only through our own investment of time and energy will Acumen be able to invest in the best approaches to help smallholder farmers lift themselves out of poverty, one seed at a time.
Starting a business is hard enough, but starting a business that has a social focus is even harder.For Micro Drip, we are still very much working to refine our business model so that we can successfully sell to the Base of the Pyramid (BOP) here in Pakistan, those who live on less than $4/day.For Micro Drip, one of the most difficult challenges is that we can have the greatest low cost, high quality drip irrigation system in the world, but ultimately success for a farmer depends on much more than our system: microfinancing, stable water source, good seed, fertilizer, storage, know-how, distribution to markets, etc.As a result, we cannot simply sell our system off the shelf; we have to think about ways to directly and indirectly (through partnerships) address the problems that come before and after our product.
A second difficulty that we face is the seasonality of our product.There are two growing seasons in Pakistan each year with most farmers growing cotton during the summer season and wheat during the fall season.Unfortunately, drip irrigation cannot be used with wheat given the density of the plants/acre.Vegetables can be grown during both seasons and offer much higher prices, but the lack of storage and access to markets forces many farmers into cotton and wheat, which are more stable with much less risk of going bad.
A third difficulty that we are tackling is how to motivate local sales reps in the communities that we serve.CEMEX, a Mexican cement company, has successfully mobilized a large network of local promoters in its program Patrimonio Hoy, which helps clients who make between $5-$15/day to save money for do-it-yourself home improvements.While there are some successful models out there, many social businesses are struggling with this issue, as it is often difficult for local sales people to make sufficient income selling a single product.Where sales channels to the BOP already exist, it is much easier for existing sales people to add additional products to their offerings.Unfortunately, we are not aware of any other sales channels that reach our target market that would be willing to add our systems to their existing portfolio.
In spite of the challenges, we are committed to bringing irrigation solutions to the poor farmers of Pakistan.Drip irrigation increases crop yields by 30-100% all the while decreasing water usage by 50-70%.This translates into more money for poor farmers and ultimately has the potential to free farmers who are imprisoned in debt and a subsistence life.
This NYTimes article discusses how a great technological break-through in breeding inputs can potentially harm the dairy industry during these times of recession. While global milk prices have tumbled during the last year or so, due to the global economic recession, more and more cows and hence milk is being produced as a result of the use of “sexed semen,” which allows for the birth of more female (i.e., milk-producing) calves.
