Entrepreneurship Zone: 24 August 2021 :: Ethiopia: Digital farming platform targets revenue of over $10m by 2025

Tue Aug 24 11:39:02 CAT 2021

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Entrepreneurship Zone: 24 August  2021 ::  Ethiopia: Digital farming platform targets revenue of over $10m by 2025

Abrhame Endrias’ first job was as a lecturer at the Adama University in Ethiopia after he obtained his bachelor’s degree in business management. It was during this time that he decided to start a vegetable farm, growing onions, tomatoes and cabbage.

Abrhame soon learnt farming in Ethiopia is tough. “I couldn’t get the right inputs (seeds and fertilisers) or mechanisation services and with the fluctuation in prices for the vegetables, my two-year journey in vegetable growing ended abruptly in bankruptcy in 2013.”

However, an idea had been planted: he could still be involved in agriculture without having to be the farmer. “I could be the service provider, the one-stop solution where smallholder farmers could get the inputs and support required.”

An estimated 85% of Ethiopia’s population is somehow engaged in agriculture, mostly through subsistence farming, says Abrhame. “It’s a way of life, a culture, rather than a business for these farmers.” He realised that dealing with individual farmers would not be profitable but that there was a real opportunity if their demand could be aggregated.

In the following two years after his vegetable farming enterprise failed, Abrhame found a way to make some quick cash by selling stationery and computer accessories.

At the end of 2015, he put down a 40% deposit on a tractor and a combine harvester (a machine used to harvest a variety of grain crops). He established the company Green Agro Solutions to provide mechanisation rental services to farmers in the Arsi and Bale zones of the Oromia region. He spent a lot of time talking to farmers. “It helped me to understand the type of business model required in the sector.”

This market research continued throughout 2016. All the while, he searched for the perfect location from where to put his plan in motion. In that same year, he established a farm services centre in the town of Sagure (about 190km south of Addis Ababa) and left his job at the university where he was lecturing. “It is a small town but it is well known for its production of malt barley, wheat, potato and garlic,” he adds.

The centre provided seed, fertiliser, farming equipment and training to the smallholder farmers in the surrounding area. “These services resulted in good growth and we could expand by opening a satellite shop in the Bale region.”

Going digital

Abrhame, however, soon realised this traditional way of expansion – opening different branches across the country – would result in low operational efficiency. “We would have had to rent the facilities, hire agronomists, cope with logistics challenges in bringing the inputs from Addis Ababa as well as contend with the political violence that flares up from time to time. In 2018, I started to think about going digital,” he says.

The first step was to learn from existing platforms that aggregated demand for agricultural services and inputs in other countries. After a trip to Kenya, Nigeria and India, Abrhame used what he learnt and applied it in Ethiopia.

“Our government is a dominant player in agricultural input distribution and advisory services. There are more than 64,000 government-employed development agents assigned to kebele sites (wards); and in each of these wards, you could find around 1,000 smallholder farmers,” he says.

The probability of one agent being able to service 1,000 farmers without a platform to assist, is low, according to Abrhame. In November 2019, the company approached the ministry of agriculture for a partnership to test the viability of such a digital platform through a feasibility study.

The study’s results showed the farmers needed support in three main areas: mechanisation services, farm inputs and agro-climate advisory services. With these three pillars in mind, the company began developing the Lersha digital platform and app.

The platform’s purpose is to link smallholder farmers with the input providers (such as seed companies) and tractor owners. It pools together (aggregates) the demand from these farmers to make it worthwhile for the suppliers to provide products and services. Lersha earns a 5% to 8% commission on sales. Transactions are ideally meant to be facilitated through the app, but owing to connectivity constraints, low mobile penetration and poor tech-literacy levels in rural areas, it could not be the only channel. Lersha, therefore, also has a call centre and provides communication through SMS and voice.

Recruiting local agents and partners

The app, call centre and SMS functionality were still not enough to effectively reach the target audience and facilitate the services. Many farmers could not use the platform as they did not have access to phones or data. As a result, Lersha began training agents, targeting unemployed but educated youth.

“These youths live in these communities; they already have their trust. We recruit them, give them training and they become Lersha’s agents on the ground, app in hand, travelling and assisting the farmers with access to the services. They register the farmers and facilitate the transactions. If for some reason the app is not working, the agents make a call to the call centre,” explains Abrhame. These agents receive a cut of Lersha’s transaction fees.

To simplify payment, the app is integrated with the Commercial Bank of Ethiopia and its mobile banking solution CBE Birr, as well as with the Cooperative Bank of Oromia and the Bank of Abyssinia. Every farmer signed up to the Lersha platform automatically gets access to an e-wallet service provided by one of the three banks.

Scaling up by making agriculture easier

Green Agro Solutions and its Lersha platform have 35 direct employees. To date, more than 42,000 farmers have been registered and 88 agents recruited, onboarded and trained in 11 districts. Altogether, 172 mechanisation service providers have been integrated, whether private individuals, farmer unions or co-operatives that own tractors, combine harvesters and other farming equipment available for rental. Seed comes from the Oromia Seed Enterprise and the Ethiopia Seed Enterprise.

“The company has also onboarded 1,310 government-employed development agents. Lersha gives them access to the platform, specifically the available agro-climate advisory services,” says Abrhame.

Each Lersha agent is mapped to the closest farm service centre, from where the inputs and services are then distributed.

The company has big growth plans and ambitious goals for the next four years. “By 2025, the company wants a network of 4,500 agents, serving 4.5 million smallholder farmers in nine regions of the country. We are scaling up our recruitment drive; the plan is to have one agent for every 1,000 smallholder farmers. This will mean the company can generate a revenue of around 500 million Ethiopian birr ($11 million). Our mission is to make agriculture easy for everyone,” Abrhame says.

A Lersha agent advising a smallholder farmer, supported by the mobile app.

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