Social enterprise Farm Shop is building a franchise network of agro dealers located in rural, underserved areas of Kenya. Farm Shop says its retail shops are clean, modern, and professionally managed. The business wants to increase the earnings and productivity of Kenyan farmers by providing them with high quality products, services and information. Madison Ayer and Farouk Jiwa, founders of Farm Shop, told How we made it in Africa’s Dinfin Mulupi about how they want to transform smallholder farming in Kenya.[hidepost=9][/hidepost]
Describe your business model.
Ayer: At the core of Farm Shop is a supply chain. We have a franchise model. The benefit is that we can apply standard methodologies but leverage the local community knowledge. We currently have six Farm Shops and we plan to have 25 by the end of the year.
Jiwa: There are amazing entrepreneurs in Kenya. We go to a location and look for a person who has been running an agro shop for a while and has a background in animal health. We want them to be trained in animal health because that is a skill I cannot teach; it takes 18 months to become an animal health assistant. Along with refresher and additional technical training on a regular basis, we take them through an intensive programme on how to run a business, keep records, do marketing and the basics of good customer service. We then fix the shops so that they are no longer kiosks doing business through a window but rather inviting and well-planned open spaces where farmers can touch the products and ask questions before buying. We also provide the franchisees credit to stock their shops with a wide range of carefully selected products.
What was the motivation behind starting Farm Shop?
Jiwa: No matter which part of Africa you go to, agriculture is still the mainstay of the economy – the majority of people earn an income from farming or running a related business. Smallholder farmers have never had the entire range of support they require. They have been relying on government to provide extension services, most of which is outdated because the trainers have not been exposed to new ideas and new practices.
There are also inefficiencies when you look at the ratio of existing extension workers to farmers. Farmers don’t have easy access to technical agronomic information.
The biggest challenge for smallholder farmers is access to inputs – agro chemicals, seeds, fertilisers, veterinary medicine and animal feeds – which are the basics that you need for more productive farming, let alone technologies like water pumps, drip irrigation, improved farming tools or solar products. The distribution system has not been established and this vacuum has essentially been filled by informal agro dealers.
There are about 10,000 agro dealer shops across Kenya. Most are run like kiosks on the side of the street and there is no difference between someone selling sugar and the person selling seeds, and yet the products are fundamentally different. The agro dealers need to have the knowledge, understanding and skills to be able to advise a farmer on what seed variety to plant and which chemical to use.
Smallholder farmers are stuck in a situation where the extension services officer doesn’t offer the right kind of advice and the person selling the farm inputs doesn’t know the products either. Farmers are therefore relying on rumours and half-truths to make decisions about the seed variety and agro chemicals they should use. That is not how agriculture should work in the 21st century. We need to do better – much, much better.
Tell us about the challenges you face in running this business.
Jiwa: One of the most important things about building a business like this is that you will make mistakes. We are in that mode where we completely understand that mistakes should be made; we want to make as many mistakes as early as possible and make sure we don’t repeat those mistakes. We have actually had to close one of the shops. This is a partnership and it has to be a win-win for all parties. We are working with people who don’t have an MBA. We need to understand how to deal with that, we need to be more forgiving and agree on where to draw the line and let go sometimes. I don’t think every shop will be successful 100% of the time. After we have the 25 shops we will look at the data and analyse whether or not we are having the impact we anticipated as well as assess the bottom line. This will determine how best we can scale the model.
The hurdles farmers face extend beyond inputs. There are infrastructural, access to markets and pricing challenges. What are they to do after a good harvest?
Jiwa: While we have started with the inputs and related support services, we have a very clear plan to focus on output markets too. For example, why do we have farmers in Baringo (an agricultural area in Kenya) producing mangos and they don’t know where to sell it? The tragedy in Africa today is that 40% of produce is lost post-harvest. Within a year and a half, we are going to have Farm Shop buying centres next to the existing input supply shops. Farmers can come into the buying centres with their produce where we will help them find a buyer. It needs to be a 360 degree cycle; if you buy improved inputs, you must also have guaranteed output markets.
There are also challenges with access to finance. Microfinance institutions in this country need to do better; how many actually provide agricultural loans in a country where 70% of the population is involved in agriculture? What do their agricultural loan portfolios look like? We intend to build a more effective platform where tailored financial services can be made available to farmers. Our ultimate goal is to provide multiple products and services to smallholder farmers through a rural network of well-managed one-stop shops.