Written by William Billeaud
Kenya is a poor but rapidly growing nation with a population of 42 million and a per capita GDP of less than one thousand dollars. In the last decade, however, six of the ten fastest-growing economies in the world were in Africa. A lot of this has to do with the fact that Africa was starting at such a low level of development, but “you gotta start somewhere”. In this piece, we look at examples of technology, business and human innovation which are generating exponential gains for those at the bottom of the pyramid.
Small-scale agriculture is the beating heart of Kenya’s economy, sustaining more than half its people. We’re talking about one and two acre farms. More than ever, these farmers have moved from strictly subsistence to being able to trade surplus from their farms. The excess income they generate is enough to send a lot of these farmers’ children and grandchildren to school, thereby potentially changing the dynamics of Kenya’s economy. A woman entrepreneur by the name of Rose Goslinga has made it possible for farmers to plant new cash crops and make all this possible.
Rose determined that farmers were holding back on planting costly seeds and cultivating all their acreage because a flood or drought could easily wipe them out. They needed insurance, but Kenya cannot afford the subsidies that developed countries pay to support their farmers and these farms are too small for traditional insurance schemes to work. For example, it would cost $50 just to visit a typical farm and another $50 if a claim was filed. That’s before any payouts to cover losses. The premium is about $5 to the insurance company.
With little doubt that insurance could make life better in Kenya, Rose turned to the technology of weather stations and wireless communication to make it affordable. A program called Ushahidi, a crowd-sourcing technology that was originally used to track violence in the Kenyan postelection crisis of 2007, is the basis of Rose’s insurance scheme. A second technology called M-Pesa would create a cashless, almost cost-free system for the financial transactions, including premium payments and claims payouts.
Kenyan banks weren’t willing to help but Rose convinced a multinational seed company, Syngenta, to back her through its foundation by making insurance available through seed sales. SeedCo of Zambia did the same. These agreements transformed the small dealers who supplied farmers with their essential supplies into drought and flood insurance salespeople.
Trust was essential to the first insurance policy sales. At first, farmers didn’t believe they’d actually get paid on claims. The fear was put to rest when most of the insured farmers were paid after drought conditions in that very first year. As word of the insurance program spread, more seed dealers became salespeople, and thousands of farmers agreed to pay premiums to participate. Enrollment was expected to reach twelve thousand people in 2013.
The technology used by salespeople has evolved to the point where farmers can step up to the sales counter at a seed shop, report the locale of the weather station nearest to their property, identify the crop they want to raise, and receive an immediate quote on the cost of insurance. This is all accomplished with cell phones that read codes kept in a book at the shop and fill an electronic “shopping cart” as a farmer decides what to do.
The repeat business has made the service self-sustaining – a profitable enterprise. The value is most evident with the farmers who can now send their children to school, where they can prepare for work in different sectors of the economy, in addition to farming.
In addition to the insurance, a program called the One Acre Fund is building a self-sustaining program to educate farmers and finance expanded production. The farmer receives access to loans, advanced seeds, and fertilizer acquired in bulk by One Acre. At harvest, they get assistance in locating markets for their crops or for storage if prices are down. The farmer simply has to attend classes on modern, sustainable farming techniques held by One Acre.
Initially, the program cost $300 per family, which is a large investment for a family here. But after the program showed success by increasing output at the participating farms by 400 percent, One Acre Fund was able to receive additional funding which allowed the fund to reduce costs to just $80 per family. Today nearly one hundred thousand families are involved and the fund supervises more than eight hundred employees, many of whom could rise to leadership positions. The One Acre Method is working so well that 80 percent of its expenses are paid by the fees and interest on loans paid by participating farmers.
These are the kinds of human, business and technology innovation that are needed to rapidly modernize Kenya’s fastest growing population in the world, as well as the over 1.5 billion people around the world who subsist on less than $2 a day.
Can you think of other global examples of innovation in technology and business that have this potential for disruption? What about here in the U.S. where many of our core urban areas and remote rural regions continue to fall behind economically and socially? We’d like to hear about them.