How Apollo Agriculture is solving small-scale farmers’ credit problem in Kenya

Around the world, most farmers have suffered different sets of challenges in scaling and growing their farms. Although lending and crowdfunding platforms have popped up over the past years, it’s still very difficult for smallholder farmers to access financing.

Some banks and other financial entities have employed unsavoury and predatory tactics that affect these agricultural businesses in the long term.

In 2015, Geneva-based policy advisory firm, Dalberg Global Development Advisors conducted some research about small-scale farming. From its findings, $450b was required to meet the needs of smallholder farmers around the world. But these farmers only got $31b, which was less than one-tenth of the supposed financing.

Coming closer to home, The World Bank reported that while agriculture made up 18% of sub-Saharan Africa’s GDP, lending to the stakeholders in the agricultural sector represented only 1%.

One of such Africans to experience the struggles of smallholder farming is Kenyan entrepreneur, Benjamin Njenga.

While growing up, Njenga worked on his family farm with his mother. She was a smallholder farmer who planted what she had access to, low-quality seeds. In addition, she had little or no fertiliser and harvested only five bags per acre each year.

Njenga says that while they both knew what needed to be done to increase production, they couldn’t afford credit to buy the necessary tools.

Living with this experience, he would go on to study agribusiness and management at the university and also work for ACRE Africa, a Nairobi-based service provider working in the agricultural insurance value chain.

Njenga had always wanted to solve the problem he faced with his mother. The right time would come when he met Eli Pollak and Earl St Sauver through a mutual friend.

Pollak also had a background in agriculture. He worked for The Climate Corporation, a US-based agritech company that used machine learning to provide optimised recommendations to help farmers increase their yields.

L-R: Eli Pollak (Co-founder & CEO), Benjamin Njenga (Co-founder & CCO), and Earl St Sauver (Co-founder). Source: Supplied

Leaving the company in 2015 after it was sold for a billion dollars, Pollak was also looking to start a company that would help African farmers increase their farm productivity.

“I got connected with my founders with the same mission. With my background and knowledge working with farmers, and their technical skills from the US, we made a perfect match to start a company to support farmers,” Njenga says to Techpoint Africa.

In late 2016, the trio founded Apollo Agriculture. The goal was to use machine learning and automated operations technology to help small-scale farmers with everything they need to maximise their profitability.

According to Njenga, this was a necessary solution in a market where most farmers are producing 10% of what US farmers are producing.

Solving small-scale farmers’ credit and operations problem

As earlier stated, the vast majority of small-scale farmers still cannot access tools like hybrid seeds, fertilisers, and insurance that can increase their yield and income.

For Njenga, this boils down to two reasons.

First, they lack access to credit and thus, cannot afford the cost of well-understood high-return investments like hybrid seeds and fertilisers. Also, smallholder farmers are very rural, remote, and difficult to reach.

Till date, approaches to smallholder financing have relied on human-driven and manual processes. The problem is these processes are costly and slow to scale.

This is where Apollo comes in, by digitising and simplifying these processes.

Apollo Agriculture builds credit profiles for its small-scale farmers using machine learning models. It does so by doing its due diligence of verifying the identity of farmers and taking satellite coordinates of their fields.

One of Apollo Agriculture’s smallholder farmers. Source: Apollo Agriculture

The data obtained is then used to build automated digital processes for each step in a farmer’s lifecycle from customer acquisition to training to collecting the payment.

These processes, from collecting data to analysing it to building credit profiles guides Apollo in making lending and credit decisions to farmers at scale. Additionally, the company helps them access increasing levels of their investment over time.

Njenga argues that there are very few commercially viable approaches to small-scale agriculture financing in sub-Saharan Africa. To get it right, a company must have a unique combination of skills like software development and data science, to mention a few, and in his opinion, Apollo brings these skills together, leveraging on expertise developed at The Climate Corporation, Tesla, and One Acre Fund.

He goes on to state that the company is collecting insights on a demographic in a way that hasn’t been done before.

“We have to do this in a very super-challenging environment where farmers have no financial records like bank statements. And also, limited knowledge on subject matters like the impact of climate change.”

According to him, the company has been able to develop tools that these farmers would otherwise not have been able to access because of the aforementioned challenges.

Growth and customer acquisition

In 2020 alone, Apollo Agriculture has been able to close 25,000 farmers. In total, it is serving more than 40,000 farmers in Kenya.

However, the team isn’t stopping there. It has plans to rapidly scale by partnering and securing more farmers and to that end, the four-year-old startup raised a $6m Series A in May 2020. The round was led by Anthemis Exponential Ventures. Also in participation were The Omidyar Group’s Flourish Ventures, Leaps by Bayer, and Sage Hill Capital, among others.

Njenga also mentions that the company is securing working capital funding to finance loans and grant funding to support research and development (R&D).

After bringing its total raise to $7.6m, the chief customer officer says Apollo is focused on growth in the year ahead.

“We have got a great product that farmers love and we want to continue to scale it.”

To drive home its mission of maximising farmers’ productivity and profitability, per Njenga, Apollo is looking to transition its customers from subsistence farming to commercial farming so that they can make more money.

“We are also exploring new ways to support our customers particularly with the challenges around food security as a result of COVID-19. We are piloting a variety of options to best support our customers through these challenging times.”

Featured image: Apollo Agriculture founders