August 7th, 2024

This blog is contextualised around observations and reflections of a two-day field visit to Kisumu, Bondo and Rongo with Myfugo Innovations Ltd. MyFugo is a tech-driven agri-enterprise seeking to innovatively deliver financial solutions to address smallholder dairy farmers challenges in accessing inputs and services.

Myfugo supports smallholder dairy farmers to improve their production, productivity, and profitability by, enabling access to finance for purposes of purchasing quality and high milk yielding cows, deployment of record keeping tracking farm activities, procurement of “in time of need” services such as artificial insemination, treatment, and purchase of feed. Myfugo also de-risks dairy ventures by aggregating farmers for livestock insurance against mortality and enhancing use of smart cow collar for better data insights on health and reproductive information. Myfugo has over 6,500 customers, of whom 60% are women, with a loan portfolio of up to Kes. 35,500,000 for over 250 dairy cows. Farmers who work with Myfugo have a chance to access facilities, training, extension etc in areas whether these services are poorly organised, and hard to reach.

In a previous strategy, FSD Kenya partnered with Myfugo to trial psychometric based credit scoring where lessons on what does and/or doesn’t work were learnt. The current partnership has dual intents. One, to bolster Myfugo’s growth trajectory stimulating and catalysing access to mainstream financial solutions to support its innovations, and two, to in turn, enhance and unlock farmers’ productivity capacity to reap optimal profitability from increased access to productive assets in their dairy and related ventures. Target credit products include dairy cows, chaff cutters, biodigesters, poultry incubators, milking machines, cargo tuk-tuks for transport of agricultural-produce, construction of cow sheds, poultry houses, irrigation equipment and climate smart technologies such as solar irrigation equipment.

Financing the underserved: Are we getting it right?

Amidst FSD Kenya’s intent to push the frontier of delivering value (derived/perceived) adding financial solutions to underserved, a desire to attain proof of innovative concepts, identify price points affordable to smallholders and, a hope to scale for financial services and other real economy innovators and actors, a raft of dilemmas and intrigues arise. Retrospectively, this blog delves into these nuances:

Where does a market facilitator draw a line in application of support extended to a partner?

While support is usually defined around a specific objective at the onset, working with smallholder farmers poses a different challenge.  Available data[1] shows smallholder households in rural areas, and more so those reliant on informal livelihoods, take a portfolio approach as opposed to an exclusive livelihood for their economies. In the face of climatic shocks, the ability to diversify livelihoods is fronted as a feasible adaptation mechanism. Cases of a partner initially taking a mutualised approach in a specific livelihood may need to quickly change course for its own survival in the face of existential shocks. In such occurrences, open communication across the key partnership stakeholders and agility in process to approve the change if mutually in line with strategic objectives is necessary. This speaks to the need for flexibility of a market facilitator and that of being aptly armed with holistic evidence base for prevailing market contexts where operations exist.

While being agile, how can value be delivered across different stakeholders?

Value definition across varied stakeholders differ, though should not be at cross-purpose, and seeking to streamline delivery of value across board is critical.  Targeted smallholder farmers are themselves heterogeneous; economically, by enterprise, socially, culturally, in skills etc, and therefore, an investment, in this case for a dairy cow, while it could be viewed solely as the primary source of productive engagement, it could also be an asset to ensure that the family is able to meet their day to day nutrition requirements, taking the daughter to school or even a livelihood diversification strategy for one who would be having a poultry enterprise,  and so differing from one farmer to another and is of course different from one who solely relies on the dairy cow, for instance as his/her source of income.

In the same vein, MyFugo’ s value definition is different and is a composite of its social performance, the commercial viability of the finance solution, and its ability to sustain and grow operations. At times, operating viably may demand trade-offs in reaching the most vulnerable for such a partner.

As a facilitator, supporting successful innovations through partners such as MyFugo requires a range of high-level market facilitation capabilities.

1. Systemic thinking and analysis to observe, analyse and take strategic win-win actions in catalysing growth and change. This helps in identification of opportunities to leverage in a web of a complex system, assessing of performance needs and challenges to changing status quo and business as usual operation of beneficiary groups and varied actors.
2. Experimentation ability to help in designing, modelling, piloting and iterating new ways of doing things, in this case of delivering value adding financial solutions. Embracing possibility of failure, building into organisational processes and operations should be inbuilt into an organisational culture and processes.
3. Coaching enables growth through proper identification and uncovering of obvious inherent and hidden needs or capacities, sharing ideas and guiding engagement and action.
4. Communicating effectively to varied stakeholders with tailored messages from varied sources, and ensuring information is understood. This allows others to understand different perspectives and helps refine assumptions and improve action.
5. Relationship building supported by ability to build and maintain trust demonstrating; integrity, credibility, competence, transparency, reliability, and interest in the well-being of the varied stakeholders helping all to see the value of mutual engagement is beneficial in the long-term.

How do you identify and build a good partner fit?

 Alignment in purpose is a fundamental first step but not all. The crux of the matter is in defining and agreeing on problem being solved, roles and responsibilities from the point of ideation, investment form, implementation activities and exit points. This includes a clear understanding a partners’ vision and bandwidth to take on the partnership, setting boundaries and agreeing on deal breakers. Milestones that are agreed on need to be integrated in partnership management agreements to ensure that conversations are simultaneous to seamless implementation and to course correct, if necessary. Suffice to say, this takes more effort and time than has been intimated here.

While no simple solution and straight answers exist to the complex dynamics, the process should gradually yield positive traction.

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[1] Kenya_Financial_Diaries_Overview_Report_FINAL.pdf (bfaglobal.com), and  Full article: Who are those people we call farmers? Rural Kenyan aspirations and realities (tandfonline.com)

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