Jehiel, how did you get the notion to create Hello Tractor?
It's kind of an evolution. When I decided to transition away from traditional finance, I began working in microfinance. I was interested in using my finance skills to bring more capital into the industry. I thought microfinance was a very interesting and more commercially viable approach to poverty alleviation and economic growth in underserved communities. My observation during that period – lasting about five years – was that most of the borrowers are farmers, but most of the loans, if not all of them, aren’t for agricultural activities. They are for trading purposes, for income smoothing. But if a person’s primary way of generating income is farming, then that should be where you support them. And so I started to look at agriculture and why banks weren’t lending to farmers. I came upon a project where I was working in mechanisation, and there, I saw some of the challenges: access to tractors, farmers being able to pay for tractor services. But I also saw farmers just not having tractors available to them. And that’s what made me design the Hello Tractor platform. First it was more of a hobby. But then it eventually grew legs and became something I could work on fulltime .
Why did you select Nigeria for your business operations?
I was born in the USA, so I actually do not have any direct linkages to Nigeria. I selected the country because of the size of the market. Nigeria is a challenging place, but it is such an attractive market. And being able to realise some level of success really accelerated a lot of the partnerships that could really transform my business, like working with John Deere and Mastercard – massive companies that traditionally don’t partner with small companies like Hello Tractor. They were interested in doing innovative work, but they were also interested in a huge market like Nigeria. And we’ve had the opportunity to say: “We are a Nigerian company, come and work with us.”
Did they contact you, or was it the other way round?
John Deere reached out to us after the Global Entrepreneur Summit in 2015 (Editor’s note: the Global Entrepreneur Summit is an event organised annually by the US government in partnership with foreign government hosts. It goes back to “The Presidential Summit on Entrepreneurship”, held by the Obama Administration in 2010). We got an exposure, and being on stage with Barack Obama and Kenya’s President Uhuru Kenyatta is something that helped. So we started with John Deere after that.
For Mastercard, we got selected to participate in Start Path, a programme designed to allow us the opportunity to unlock additional value for our farmers and mechanisation equipment owners by expanding their access to banking and payments infrastructure.
Looking at mechanisation in general in Africa, where are the biggest problems?
First of all, tractors are expensive, so selling this kind of asset requires a lot more than selling a small gadget. You need strong after-sales support, and you need a spare-part supply chain, for knowing that you have the service builds confidence for the buyer to buy that product. You need financing – you have to pay for the asset, so you need banks that are engaged. And oftentimes, because agriculture is risky, de-risking in the broader sector, for instance through crop insurance, helps. Most markets have been doing direct payments for decades. Farmers in Africa are probably the only truly commercial farmers on Earth.
So what was your approach?
Our starting point was to try to figure out a way to de-risk the investment, to crowd in private capital, because we didn’t see banks or donors as the first movers in that space. So we started with building a technology placing tractor owners in a position to precisely comprehend what the operators are doing with their tractors, and how much work is being completed, so that the owners themselves are not defrauded. We can geofence the tractor, and we can demobilise it – that gives these owners some comfort.
So on to the next step. Now that the person is willing to make the investment, he can secure the asset. And of course we want to make sure that the farmer can optimise output with the tractor. So the idea is: first decide to invest, and then see to it that you can make as much money as possible with that tractor by reaching as many farmers as possible. The prevailing market for services is small, which is why we started working on apps to organise and aggregate demand, and bring in more business opportunities for the tractor owners. Giving them the tool we have developed enables them to manage their own ecosystem of customers with the booking application.
The stage we are at right now is that of working with Mastercard in developing tools to more intelligently finance tractors in order to reach more farmers. We anticipate that this work will not only make mechanisation more accessible to smallholder farmers across emerging markets, but will contribute significantly to a more sustainable and secure global food system.
When people talk about Hello Tractor, the phrase “Uber for tractors” often crops up. Is that your creation?
No. The first time I saw it was in a Washington Post article. At first glance, the comparison works. When you look into it, you see it is not really what we do. It does help to conceptualise our shared economy approach to tractors, but that’s about it. Because once you scratch the surface you realise that we are a management software platform for your tractor business. So it is really less of “Uber for Tractors” and more “Sales for Customer Relationship Management for Tractors”, although nobody will write an article that says: “Meet the sales for CRM platform for tractors”. So we say, ok, go ahead with “Uber for Tractors”. We won’t deny that the press helps.
What is the main advantage for small farmers to work with Hello Tractor?
I think planting on time is going to be the first benefit for a farmer who is growing cereals. You are losing to about a point and half of yield every day you plant late, so planting schedules are very sensitive to output. Having access to a tractor removes the power gap that typically is what delays planting. So you get some yield improvement. But surprisingly, it also cheaper. I think people don’t realise that tractor services are significantly cheaper than humans – if these services are available. A tractor is able to service a piece of land for a third of the amount it would cost to use manual labour.
And what about labour displacement?
I know that there are people who think that mechanisation which is increasing labour productivity in agriculture or any other industries is a bad thing. I would encourage them to go out into the field and work in the sun, just for a day. Nobody would really choose this. Being out in the field to get a flavour of how difficult work on a farm is was one of the most painful experiences I’ve had in my life. You are bent over for hours, the sun burns, your back hurts, your muscles are sore … These farmers work about five, ten kilometres from their home, they go out in the morning, and they come back in the evening. That’s why they have these high starch diets such as cassava. They get that bowl of fuel, basically, and they sit there, and then they work through that 2,000 calorie bowl which gives them energy rather than nutrition. And afterwards they are down and exhausted. And on the next stay they start all over again. And they have to do that for 30 days straight for their one hectare plot. I would just encourage anybody who thinks that labour displacement is an issue to try that out.
There will always be labour market disruption when productivity enters into a market. On the other hand, you can’t deny or ignore the ripple effects that labour productivity improvements have on the broader economic system. In agriculture, you have yield improvement, more income and free time to do things that actually make you money. You can send your kids to school – oftentimes, farmers’ families are sending their kids to work in the fields. There are benefits on the cost side as well – you save money. And then there will probably be some secondary benefits, such as time for other income-generating activities.
Could you explain some of the features of the Hello Tractor app?
Well, there is the tractor ownership app, where you see your tractor, its location, its basic activity, the operator and which implements are associated with the tractor the guy is booking. You can also see a list view of all your tractors, which tractors are active right now and where they are going. You can see the operator assigned to the tractor and how much work was completed by it. For example the operator might say: “I didn’t move your tractor.” Then you as tractor owner say: “Yes, you did, you went from XXX to YYY.” We have also added the ability for tractor owners to utilise our satellite viewing feature.
Then there is the booking app, where you can see the details of the booking. You can declare or decline the booking from the app. The weather app gives you detailed information. Booking comes in clusters, and you can see each individual farm and its productivity level, which is a proxy for the farmer’s likelihood to pay for the service. You can see the soil profile, and you then know, ok, this is really dense clay soil, so I don’t want to send my tractor there. You get a planting window estimator – a kind of fourteen-day window showing where farmers need services to maximise yields.
Where do you get all the information from? And how is it processed?
We pull the weather data from The Weather Company API platform, which is an IBM company, and the satellite data from Landsat Sentinel. Soil data also comes in. And there is a process to do some analyticswith the help of our in-house analytics team. The satellite data comes in, analytics happens, and then we make it available to our tractor owners. We also share information with the farmers that benefits themthrough their assigned booking agents – we do that on our charge. And then, lastly, we have the banking tool that is able to analyse a contractor’s projected debt repayment on a tractor based off historical data.
Let’s get back to the “intelligent financing tool” you mentioned. How does this work?
The tractor financing app, developed in partnership with Mastercard, simply uses data to de-risk lending to tractor contractors by assessing a contractor’s projected debt repayments on a tractor loan versus projected seasonal cash flow to determine if they qualify for financing. We are doing this under a pay as you go (PAYG) model for tractor ownership that will ultimately allow contractors to expand their fleet and increase their earnings.
Post-loan disbursement is the tool allows Hello Tractor to closely track the credit, auto-deduct loan repayment and trigger a default if the contractor is not servicing their pre-identified customers in a satisfactory manner. If a default occurs, our technology immobilises the tractor and the asset is seized for resale in the secondary market with the proceeds paying down the loan. Asset value is protected as the amortisation rate of the loan is higher than the depreciation rate of the asset, ensuring that the asset value is always above the principal outstanding.
When you are a financial institution, you’re struggling with providing credit to your customers. What we’re doing is making this easier by lowering the risks through data availability. The PAYG product also serves as a great way to close the loop in the mechanisation of the ecosystem across many emerging markets.
We are currently working on piloting the product across Nigeria and Kenya. Success in our piloting activities will provide us with the requisite proof points to scale the scheme with our finance partners across emerging markets.
How many farmers are already using the platform?
We have already provided mechanisation services to over half a million smallholder farmers across the markets where we work. Our goal is to be able to reach an additional 14.5 million farmers over the next two years through the scaling of our PAYG product across sub-Saharan Africa and South-East Asia.
Is your service unique?
We are seeing similar models coming in, and we are encouraged by that. It is a massive untapped market. Even if we grow in the fastest way possible, we are still just scratching the surface of the need. Most new entrances are slightly different from what we do. There are business models with alliances, transaction fees, but we really focus on the tractor owners, building a software for them and making it easier and less risky to deliver services to the farmer. The software supports these interactions. And the data is shared to bring more capital into the ecosystem, whereas most of the other companies are more focused on service delivery and making transactions. We are really more of a support platform for those companies rather than being their competitors. What we are competing against is dysfunctional markets.
So service delivery is not your focus?
One thing that we always try to do and that we can do is to bring in more resources. I don’t think that the company ever gets credit for that, but we are very intentional about making sure we can crowd in new technology to support tractor owners. We bring in new technologies to support their business, to make them more productive, because we think that’s how we can grow the ecosystem. We don’t make any money with all the tools we design and build for our farmers. We charge our tractor owners because we are very clear about the value we bring on the fleet management side. The pricing is the same as with a car fleet management solution, where you plug in and you have your car tracked. Most of the grant money that we use is to mobilise more booking agents in order to get more entrepreneurs involved and support these young entrepreneurs with opportunities to make money.
Do you think the young people in Africa have the right skills to become agripreneurs?
I am super impressed by the entrepreneurs that we come across in the market. I think they have the right skills, but they are different. My training is very specific in microfinance. And I also benefit from some level of privilege because I have access to decision-makers. I can partner with Mastercard, and Mastercard says: “Great, Jehiel, let’s partner with you and Hello Tractor.” The average entrepreneur on the continent doesn’t have that.
But when I went to Nigeria I didn’t have the cultural context. I struggled, and I still struggle and think: “Why don’t people behave this way? What they are doing is crazy.” But the local entrepreneur has the talent, has the drive, and he knows the cultural context and how to navigate the local environment. Our best engineer at Hello Tractor is self-taught. He’s brilliant, he is smart. He built the app which earned us the Progress 2018 App Innovation Award. He didn’t go to Stanford; he graduated in civil engineering from a Nigerian university.
Generally speaking, do you think digitisation can be a game changer for rural Africa?
I think it presents a leapfrog opportunity. I think people are more receptive to doing innovative things because there is no memory or legacy prescribing ways of doing things. So when you talk to people about tractor services, they don’t have that romanticism about owning a tractor because nobody around owns tractors anyway. In the West, there is a heritage in owning a tractor, even if buying one is not the most economical decision. People do it because they have a love affair with their tractor. That’s why farmers often have way too much horsepower for their field, even though their tractor is sitting 50 per cent of the time away in the garage which is literally money wasting. A farmer in Africa will say: “Look, I have direct payments from the government in crop insurance and that stuff. I’m going to get exactly what I need to maximise my output and my revenue, I am minimising my cost.” I think digitisation is a facilitator of that way of optimising your business. And I think farmers are more receptive to this because they don’t have this legacy issue I explained above.
What would you do differently if you started your business once again?
I would say definitely listen to the customer. Forget research, forget academics, forget people doing studies. It’s good, it’s better than nothing. But never place a higher premium on that opinion than on somebody who is in the market, staring at you and saying: “I don’t want this, I want that.” What I did is embarrassing. I’m still kind of ashamed of myself for listening to the experts instead of to my actual customers. And once I humbled myself to listen to the people who actually know what they are talking about I actually saw progress and traction of the business, and that’s a valuable lesson. It does seem painfully obvious, though.
We sometimes look at the researchers who say “do the single axle tractor”, or “it should be SMS booking”. No, I am not booking tractor services via SMS. It’s like buying a house over SMS. The farmer’s entire cost for his field is maybe 300 dollars if he’s fully funding his hectare. So a third of everything that he will spend in his business is going to happen over an SMS message? No, these people want to know the person they are dealing with, they want to know: “Ok, this agent represents my interest. He might be ordering over an app, but I have to know this person, I have to see this person, there must be a personal contact.” We are leveraging relationship capital that already existed in the community. So you have to find people who already have this relationship. And then you are giving them the app, and you say: “Ok, if you need to order tractor services for your friends and neighbours, here is the app to do it.” They don’t trust Hello Tractor. Who is Hello Tractor? That will be my advice to other folks.
What is next for Hello Tractor?
We are really excited about the future of the company! We’ve learnt so much over the last six years since we launched in the market, that has brought us to where we are today. We are currently the largest and fastest-growing tractor contracting network in the emerging market, and our technologies are adding considerable value in the marketplace by addressing the critical needs of farmers searching for tractor service as well as tractor owners looking to increase their revenue and better manage their fleet. We’re incredibly proud of our impact so far – but we can’t stop here. To achieve our goal of improving livelihoods and food security for smallholders, we know we need to keep working.
We will continue to leverage our partnership with key players in the agricultural sector to scale our products, with the goal of financing 1,250 tractors for markets across sub-Saharan Africa and providing mechanisation access to 15 million farmers by 2022, all while ensuring the sustainability of our model.
Jehiel Oliver was interviewed by Silvia Richter.