Hello Tractor — Tractors get ‘SMART’

hellotractor

Bringing the shared economy to Nigeria with connected tractors

PROBLEM

“Most farmers lack the technology to turn their land into a highly productive asset. Without tractors, farmers under-cultivate, plant late, and lose income.”

After a 5 year stint in investment banking, Jehiel went into consulting to improve the lives of those at the base of the pyramid. “I was always interested in… providing opportunities to marginalised communities,” he explains. Little did he know that his passion would take him to Nigeria.

Jehiel conceived the early vision of Hello Tractor — a means of bringing high-cost inputs to low-income farmers — while researching value chain investing in The Philippines. “When policies protecting farmers from financial risks don’t exist, it makes it very difficult for farmers to access financing, whichmeans it’s very difficult for them to invest in value-added inputs,” he explains. “I just saw an opportunity to fill this gap by getting tractors to smallholder farmers in a way that was affordable and convenient.” Jehiel was not only thinking about smallholder farmers, he also believed that, by creating opportunities for a more reliable income, this scheme would mitigate risks associated with agriculture for banks.

Why Nigeria? “Nigeria has one of the largest inventories of uncultivated farmland on earth. More than half of the population identify as farmers, but most lack the technology to turn their land into a highly productive asset. Currently only 4% of the country’s demand for tractors is being met, leading farmers to undercultivate, plant late and lose income.”

SOLUTION

“Instead of giving someone a grant to buy one tractor, you could make a smart investment into a platform that can deliver a sizable amount of impact for a fairly small amount of money. By engaging local banks, we are further leveraging this investment to amplify impact.”

Hello Tractor created a Smart Tractor that is low-cost, versatile and designed specifically for small plots of land. Retrofitted with telematix and GPS, the tractors are alsotrackable so operators can know their exact location. The company sells the Smart Tractor to individuals who can deliver the tractors when farmers text into Hello Tractor’s virtual cloud. Hello Tractor then pings the service provider and the machine is delivered in less than two weeks. With this highly efficient scheme, Hello Tractor provides a service that is 40 times faster than manual labour and 1/3 the cost.

To make sure the tractors are community-led and community-owned, the company pairs this innovative technology with innovative financing, working with banks and investors to support farmers becoming tractor owners themselves. As such, the Smart Tractors become a means of improving livelihoods for everyone involved — the farmers and the tractor owners — changing the nature of rural opportunities.

 

IMPACT

“We’re looking to impact 22,500 farmer beneficiaries in our first year. On a household level, we want to impact 148,500 household beneficiaries in total. And we want to save those households a total of US$2.8 million.”

Though about only a year old, Hello Tractor has already convinced the market. “In our first year, we have already confirmed orders for 300 Smart Tractors,” he shares. The company has not only had thriving sales, but their predictions of community-level impact are also tremendous. “That’s going to affect 300 individual owners and increase their income by that multiple of five times the daily wage rate, after servicing the Smart Tractor loan,” he adds. “In turn, those 300 owners will impact 22,500 farmer beneficiaries who are texting to request the Smart Tractor service. On a household level,that’s 148,500 household beneficiaries in total, saving approximately US$2.8 million in land preparation costs.” Jehiel explains how the model illustrates the multiplying effect. “You can see how you can really multiply your impact by focusing on simply reducing the cost of labour for farmers, by introducing affordable tractor services.” Hello Tractor has made the transactions between the banks and farmers not only easier, but also more profitable. Jehiel believes the company has the potential to achieve five year growth numbers in under two years because of the popularity of these tractors.

BUSINESS MODEL

“The more tractors we sell and the more transactions we clear, the more profitable we are, and the faster we can grow.”

The Hello Tractor model relies on the alignment of interest among its stakeholders: Smart Tractor owners, financial institutions, and smallholder farmers. Smart Tractors are priced at $3500, and Hello Tractor helps facilitate loans, so that buyers can access different financing options. Banks love this arrangement because they can collateralise the loan with the Smart Tractor, so the farmer becomes a much less risky investment. The company also works with impact investors who see this as an opportunity to “deliver a sizable amount of impact, on a sustainable basis for a fairly small amount of money,” Jehiel explains. Most importantly, the farmers benefit from affordable tractor services that allow them to overcome the labor constraints that are limiting their production and income. “For us,” Jehiel adds, “the more tractors we sell and the more transactions we clear, the more profitable we are, and the faster we can grow. It’s just combining all those interests.” Hello Tractor’s model allows everyone to be more profitable: banks receive new loan customers, owners increase markets, and farmers reduce their production costs.

Indeed, with such a focus on incentive alignment, Hello Tractor has cultivated the following strategic partnerships to aid in this effort:

  • Public and private agriculture industry stakeholders: those with large networks of organised and vetted farmers who value and can directly benefit from Hello Tractor products (PropCom, Notore Chemical Industries Ltd., Nigerian Agricultural Cooperative Organisation, USAID MARKETS, and the Business Innovation Facility).
  • Development finance institutions and commercial banks: those who offer affordable financing packages suitable for customers at both ends of the double-sided market. Affordable financing is paramount in getting Smart Tractors into the hands of smallholder farmers. (Central Bank of Nigeria, Bank of Agriculture, Fortis Microfinance Bank, USAID DCA).
  • Development and multilateral institutions: those who provide both grant and in-kind support to accelerate product development, testing, demos and sales (USAID, IFAD).
  • Logistics companies: assisting with product distribution, spare parts proliferation and the development of a network of trained technicians (Habgito Nig Ltd.).

ON THE HORIZON

“The way we align our interests with that group is by providing them with an opportunity to buy a smart tractor, sending it to their village community, and allowing them to monitor their investment over our mobile app or our web platform.”

As Hello Tractor looks to the future, they are looking beyond Nigeria’s borders — to the continent and beyond. “I think it’s a viable,attractive enough business model to bring to sub-Saharan Africa where the challenges are even greater,” he shares. With the stakeholder alignment, the possibilities seem endless.

Indeed, the company is also thinking of engaging the Nigerian diaspora. “We’re looking to tap into that US$21 billion remittance market for Nigerians in the diaspora. These are folks who have both capital and relationships,” he says. “The way we align our interests with that group is by providing them with an opportunity to buy a smart tractor, sending it to their village community and allowing them to monitor their investment over our mobile app or our web platform.” The connection between stakeholders is what Jehiel believes will be the key to sustainability and scalability for Hello Tractor. “I think, when you do that, you position yourself well for sustainability and scalability.” When there is scalability, there is the possibility of becoming a truly transformative force. For Hello Tractor, this means addressing a market needing 750,000 additional tractors to be on par with global farm mechanisation standards.

LESSONS LEARNED

“ You can see how you can really multiply your impact by focusing on one stage or one activity. If you pick the right activity, you can deliver a significant amount of impact.”

Jehiel has a strong appreciation for technology in the agricultural sector. He sees it as a driver for business, as well as a way to incentivise young people to make business exciting and productive. “When you introduce technology, agriculture becomes more attractive to young people. These are people who want to make money and, without technology, it’s difficult,”Jehiel explains. He sees technology as a way to keep young people on the farms by making agriculture profitable and attractive. To any young entrepreneur going into the innovation side of the sector, he advises focus: “You can see how you can really multiply your impact by focusing on one stage or one activity. If you pick the right activity, you can deliver a significant amount of impact.”

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