Watch the full conversation on CNBC Africa
In a recent CNBC interview, I had the opportunity to share what we at Hello Tractor have learned firsthand: that unlocking capital for smallholder farmers in Africa requires smarter financial structuring, close credit management, and tech enablement. Thanks to the work of Aceli Africa and Dalberg, we now have rigorous data that shows how tech-enabled models like ours are high-impact and outperform legacy financial institutions in both inclusion and profits.
What the Aceli Report Tells Us
The 2024 Aceli Agricultural SME Lending Benchmark Report reviewed 32,600 loans totalling nearly $2 billion across East and Southern Africa. Among them was Hello Tractor and an analysis of our Pay-As-You-Go tractor financing portfolio, launched three and a half years ago. The assessment of Hello Tractor PAYG found that:
- 100% of our customers were first-time borrowers
- 0% expected credit losses across the portfolio and only 1.5% NPLs
- Net profitability of 7.2% vs. a sector benchmark of -6.8% for Non-Bank Financial Institutions
Our Strategy: Finance Smarter, Not Harder
At Hello Tractor, we’ve built a Pay-As-You-Go (PAYG) tractor finance model designed around the realities of African agriculture:
- Flexible weekly repayments tied to actual tractor usage delivered from our IoT devices fitted onto the tractors, delivering us data which helps us adjust for the seasonality of agriculture and ensure borrower repayments match their cashflows.
- Smart agreements to ensure tractors remain booked and working with tech-enabled monitoring of the assets to ensure performance and repayments
- Blended finance structures to keep lending costs affordable, working with commercial players like ABSA Bank and John Deere Financial and impact investors like Heifer International. This approach allows our interest rates to average 14.6%—well below the regional benchmark of 22.3%—while maintaining strong repayment rates and commercial viability.
Why Captive Finance Is the Future
Unlike banks, whose profits depend solely on interest spreads, Hello Tractor leverages captive finance, where financing is tied to core business operations like selling, servicing, and managing equipment. Embedded finance also allows us to build on over a decade of experience within the mechanisation industry and the insights our teams have gathered. Through these insights, we have developed a model that:
- Reduces the cost of capital by understanding and underwriting the asset itself and the cash flows it generates
- Monetize across multiple points in the supply chain (tractor sales commission, parts, services, software, marketplace commissions)
- Expand faster by targeting locations within our marketplace with the highest amount of pent-up demand.
When you know the asset, the customer, and the ecosystem, finance becomes a tool for scale, not just capital access.
Hedging Risk the Smarter Way
A critical enabler of cost-effective lending is Hello Tractor’s portfolio-level FX risk strategy that creates a self-hedging mechanism where counterbalancing movements often offset currency fluctuations. We are tackling FX and macro volatility with a portfolio approach:
- Our PAYG portfolio spans Kenya, Nigeria, Rwanda, Uganda, and soon Ethiopia
- We blend USD, EUR, KES, NGN, RWF, and UGX exposures, creating a self-hedging currency basket
- For residual risks, we provision selectively, cheaper and more targeted than full hedging
Rather than incurring the high cost of external hedging for the full portfolio, Hello Tractor provisions for the net FX exposure based on historical correlation analysis. This approach significantly reduces the cost of capital while maintaining a robust risk buffer. We think this intelligent design can and should be replicated across African agriculture portfolios.
A Call for Regional Coordination
One of the key points I emphasised in the interview with CNBC is the need for greater coordination across African governments, multilaterals, and DFIs. We should take the approach of what reinsurers do in global finance - diversify risk across time, space, and asset classes. That’s the kind of intelligent design that unlocks low-cost capital and amplifies investment in high-potential value chains.
Imagine a regional facility that prices capital based on how a new investment reduces risk in the overall portfolio.
Call out box: A maize loan in a country with strong export corridors and counterbalancing FX swings would cost less than a high-risk, undiversified loan elsewhere.
Technology is the Enabler
Every part of our approach is powered by technology - from GPS-enabled tractors and IoT-based loan monitoring, a digital platform connecting 5,000+ tractors to over 2 million farmers to mobile tools that let borrowers manage loans and field operations in real-time.
Our financing model is powered by real-time data from its fleet management platform, allowing for asset-based underwriting rather than traditional credit checks. Each tractor’s earnings, service history, and usage patterns are tracked through digital tools, enabling underwriting decisions based on the asset’s income-generating potential.
Automation and data integration significantly reduce servicing costs, while bespoke scoring models ensure that even borrowers with no formal financial records can access capital. This is especially important in rural markets where conventional financial institutions have limited reach or risk appetite.
Looking Ahead: $182B in Opportunity
Africa holds 65% of the world’s remaining arable land, yet mechanisation remains low. This untapped potential could transform food security, livelihoods, and economies across the continent. However, unlocking this potential requires more than just capital - it demands creativity, innovation, scalable solutions and continually highlighting solutions that work.
At Hello Tractor, we’re building a network of hubs, launching new products and innovations, and raising $60M to scale our PAYG platform into a continent-wide infrastructure for sustainable agriculture.Our technology-enabled, flexible financing and blended finance structures help reduce these risks, lower borrowing costs, and build investor trust. By aligning repayments with tractor usage and ensuring strong performance, Hello Tractor is unlocking Africa’s agricultural potential while helping to overcome the barriers that keep investment costs high.
Want to learn more about our approach? Request access to our Series A investor deck or connect directly with our team hello@hellotractor.
Written by Jehiel Oliver