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Exactly a year ago, Hello Tractor launched its Pay-As-You-Go (PAYG) financing product for tractors that is anticipated to transform the face of agriculture across the African continent. Having worked over the last 8 years to build technology that de-risks the African agricultural ecosystem for increased farm productivity and efficiency, we gathered robust data insights that allowed us to understand the best way to structure affordable & flexible financing for traditionally unbanked entrepreneurs in Africa to own agricultural equipment. With this knowledge, we went on to build the first-of-its-kind PAYG financing for tractors, partnering along the way with key organizations such as Heifer International, Moody’s, John Deere, Syngenta, WFP, AAS, Sonalika, CMC, CFAO, Olam and many more, who have all played significant roles in bringing the vision to life.

This product could not have entered the market at a more critical time when there is intense pressure on the global food supply chain due to issues like the war in Russia & Ukraine as well as climate change. It’s common knowledge that Africa has the potential to feed the world, but the reality is that when there are critical global challenges, farmers, especially those on the African continent, are often disproportionally impacted. This makes action on growing productivity and improving resiliency a non-negotiable – and this is what our PAYG financing for tractors product is addressing. By injecting more farm equipment into the African market, we are making it easier for smallholder farmers to access labour for their farms while creating economic opportunities for youth and women across the continent.

The Journey

Kicking off in Kenya

We officially launched the PAYG project in Kenya on the 15th of January, 2022 with 6 customers who previously served as booking agents (individuals who aggregate farmer demand and book them for service within our app) with Hello Tractor and were able to meet the minimum requirement of booking 500 hectares of farmland to qualify for access to the financing. 

PAYG customer, Evalyne Ouma, with her new tractor

Pilot customers and Hello Tractor team  at the launch event in Nairobi

Hello Tractor CEO, Jehiel Oliver, speaking at launch event

PAYG customers during the tractor handover event in Nairobi

We trained these individuals on the business of tractor ownership and equipped them with the implements they needed to operate profitably in the Kenyan market. Their success led to the financing of an additional 32 customers by June 2022, most of whom are booking agents that will have never had a chance to own their own tractors without access to this kind of financing. Many regions in Kenya saw an increase in mechanization in 2022 as more farmers were able to access timely tractor services which led to a boost in their productivity on the farm & income.

Expanding into Nigeria

After initial success in Kenya, we expanded the tentacles of the PAYG product to Nigeria where we started off with 13 customers in April 2021 and then financed 36 additional tractors and combines in June 2022 to bring the total number of customers in the country to 49, 35% of whom are women.

PAYG customer, Patience Munza, with her new tractor

Hello Tractor’s CEO, Jehiel Oliver, and Heifer’s Africa Senior VP, Adesuwa Ifedi, during PAYG launch in Nigeria

By bringing the PAYG product to Nigeria, we have been able to increase the income and yields of smallholder farmers in the country, engaging more women farmers than was previously possible. We have also created jobs for numerous youth and women to serve as booking agents and tractor operators, giving them an opportunity to earn decent & sustainable income while gaining the respect of smallholder farmers within their communities.

Some customers also shared that outside of the income they make from providing mechanization services to farmers, they have also been able to service their personal farmlands that have been left uncultivated for years due to the difficulty they had with accessing tractors in their area.

PAYG customer at the Nigeria launch event

Capturing Uganda

In Uganda, we financed a total of 16 tractors which were handed over to both cooperative and individual customers, 40% of whom were women, between June & September 2022. Even though customers in this region were setback a bit because they received their tractors almost at the end of the farming season, most of them were still able to surpass their minimum service threshold for the quarter.

A customer receiving her tractor during the PAYG launch event in Uganda

Tractor handover ceremony in Uganda

Customers have reported that owning the tractor is giving them an additional source of reliable income for their businesses and household as they are able to make a profit even after making their repayments for the tractor. 

Ugandan smallholder farmers on their end have been able to plan better and begin phasing out family labour. The use of tractors is becoming more feasible for them compared to relying on manual labourers. They are also able to plant on time which ensures that they are maximizing their yields.

The Impact

From the get-go, the PAYG product has been an impact-driven one. Primarily, our goal is to improve the lives of smallholder farmers across the African continent by leveraging our technology to provide them with timely access to farm inputs that they need to succeed. In meeting this goal, we are also able to unlock many other economic opportunities that positively benefit the continent.

Over the last year, some of the impact numbers we have been able to achieve include:

  • Provided timely mechanization services to over 25k smallholder farmers
  • Financed over 300 farm equipment to 104 customers across Kenya, Nigeria, and Uganda – 33% of whom are women
  • Introduced financing to enhance demand for climate-smart methods of mechanization
  • Serviced 30k+ acres of land 
  • Created jobs for 184 individuals to serve as booking agents for the financed tractors
  • Created jobs for 105 individuals to serve as tractor operators for the financed tractors

“Before now, whenever I needed a tractor to service my farm, I would have to follow the tractor operator around, farm after farm, before I could get a turn. This led to delays in planting my crops which meant that I was loosing income. But now, we have more tractors available in my community and I’m able to get service on time which makes me really happy! ” –  Nuhu Magi Biko, Smallholder Farmer

Key Learnings

Like with every new product, the launch of PAYG across the three countries came with its fair share of challenges. These experiences have been key in helping us learn as we go and introduce new initiatives to tackle them. Some of the main lessons we learned include the need for

  • Professional training of tractor operators: When tractors are not handled by trained professional operators, their lifespan is unduly shortened due to mismanagement which leads to frequent breakdowns. These breakdowns often come at a cost to the tractor owner who loses income during peak seasons when the tractor should be working. To address this, we launched an operator training program where operators learn the fundamentals of tractor management, how to provide professional services to smallholder farmers and how to book farmer demand to allow them to diversify their income and qualify for a tractor loan in the future.
  • Implement hubs to facilitate implement rentals & foster climate-smart mechanization practices among farmers: Access to the right farm implements at the right time plays a crucial role not just in the productivity of smallholder farmers but also in the success of PAYG customers. Some implements are too expensive for each individual customer to own, as such, the idea of renting them only when needed makes economical sense. We have begun creating implement hubs in Kenya to facilitate the ease of access to needed implements for smallholder farmers while increasing the utilization rates of tractors beyond the land preparation season. We’ve ensured that all implement hubs are equipped with climate-smart implements and already have over 25% of our PAYG customers engaged in this work.
  • Buy-Now-Pay-Later (BNPL) financing for fuel & tractor spare parts: Working capital is a constraint that some of our customers face which sometimes leads them to compromise on the quality of fuel or spare parts that they purchase. To address this, we have introduced BNPL financing for fuel in Kenya with over 800 already registered and vetted fuel stations. By doing this, we ensure that customers are only utilizing clean diesel for their tractors to prevent premature fuel system degradation. Additionally, we are working to include BNPL financing for spare parts in the near future to address the challenge of easy access to the right specification of spare parts when tractors break down on the field.

Looking Ahead

The next phase for the PAYG product is centered around taking all our learnings so far to better refine the offering. We intend to build additional analytical capability that includes Machine Learning within the portfolio to better identify and manage risk while scaling the product. We will also be working on raising additional capital to continue to invest within our traditionally unbanked portfolio of borrowers.

The time is now to bring yield-improving technology to our growers to better support their financial outcomes and ultimately strengthen the global food system. 

Want to join us on this journey? Partner with us today!

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