FarmDrive Raises Funding to Help Africa’s Smallholder Farmers Get Finance with Credit Scoring Algorithm

FarmDrive, a Kenyan data analytics startup helping smallholder farmers in Africa access credit from local banks, has raised funding from the venture arm of Safaricom, the biggest communication company in East and Central Africa, Safaricom Spark Venture Fund.

FarmDrive was founded in 2014 by Rita Kimani and Peris Bosire who both grew up in smallholder farming communities and met at Nairobi University where they both did computer science degrees.

From a young age, they had witnessed the inability of smallholder farming families to make protective investments on their farms, such as purchasing certified seeds and fertilizers. Instead, these farmers were forced to use less effective seed from their harvests and often take on the jobs on the side to bring in enough money.

Kimani and Bosire believed that the general lack of productivity on the farms in their communities stemmed from a lack of capital. But in speaking to farmers, they realized the main problem was that these smallholders didn’t qualify for loans because the banks were using criteria that didn’t work for smallholders.

When banks consider someone for a loan, they want to see a credit history and some collateral. Smallholders farmers have neither as they don’t have enough wealth to own assets and rarely have business records as they tend to mix their home incomes and expenses with those from the farm, Mary Joseph, director of partnerships at FarmDrive, told AgFunderNews. They may also be illiterate, she added.

FarmDrive is solving this issue by generating credit scores for farmers for banks to use to loan to them. It does so by using data input by farmers into its smartphone and SMS mobile app — an app that helps farmers to track their revenues and expenses — as well as satellite, agronomic and local economic data. By analyzing these datasets, FarmDrive’s algorithm is able to generate credit scores for farmers.

FarmDrive is also developing decision-making tools for financial institutions to use to create financial products suitable for the economic and agronomic needs of smallholder farmers, such as tailoring the payback timeline to match with harvests.

So far, 3,000 farmers have registered with FarmDrive, borrowing over $130k in loans. That’s a tiny portion of what’s needed across Africa where 65% of the workforce is involved in agriculture, but less than 1% of bank loans go to the industry. And globally there’s a $450 billion funding gap in agriculture, according to FarmDrive.

It’s good timing for FarmDrive too as governments realize the need to increase farmer access to financing. In September, the President of Kenya Uhuru Kenyatta pledged $200 million in government funding to the industry particularly to benefit young farmers and entrepreneurs and help them access markets, adopt mechanization, and improve agriculture value addition and agro-processing in the country. The Kenya Commercial Bank also announced it had set aside $300 million to fund agricultural activities in Kenya at the event, and Uhuru called on other African leaders to prioritize the industry.

In 2016, Umuru signed legislation imposing a limit on bank lending and deposit rates. Some banks were charging over 18% for bank loans, but now loans rates are capped at four points above the central bank rate, which is 10% today. The law also requires deposit rates to be at least 70% of the benchmark rate to encourage savers; until now they’ve often been below 5%.

FarmDrive is not the only fintech startup hoping to help farmers across Africa; myAgro is a mobile savings system enabling farmers to pay for crucial inputs like seed and fertilizer in pre-paid installments. And SunCulture, initially a solar-powered irrigation kit company, is now offering asset finance to farmers to purchase new tech.

Image: Alice Lee Photography/FarmDrive