Despite accounting for 65 percent of the labor force and making up 32 percent of its gross domestic product, Africa’s agricultural sector gets less than one percent of commercial bank loans.
That lack of capital hinders the ability of farmers to improve their production and maximize the potential of the industry to tackle food security issues and address poverty reduction goals.
Devex Impact spoke with Sara Menker, a former commodities trader who less than two years ago founded Gro Ventures, a data analytics and advisory business focused on African commodities that has designed special lending products and made a commitment to work with banks to lend $25 million to the continent’s agricultural sector by the end of 2015. She believes the key to improving access to capital in the sector is data.
Here are a few excerpts of our conversation with Menke:
Tell us, why did you decide to start Gro Ventures?
I did it because I care about the problem and I wanted to see a change. At the same time I intend on building a real big business. It’s something that can have an impact, no doubt. Making capital at cheap costs accessible to farmers only happens if you have banks with big balance sheets that have access to cheap funding that make it available. The minute you do that it just unleashes a whole wave of other cascading events because services can become so much easier to provide to farmers because farmers can afford to pay for services because they have access to capital.
How do you go about collecting your data, especially in an environment where there are so many smallholder farmers? What are the challenges?
It’s a combination of partnerships that give us access to data that’s not really accessible to most people today as well as just doing the hard work of cleaning up the stuff that’s out there. There are a lot of organizations today that do interesting work in agriculture in Africa they just don’t speak to one another. We believe in a partnership model because there’s no way you tackle this problem on your own. It doesn’t make sense to go out and recreate a lot of this data.
There is a lot of data that people haven’t touched or used because it is very difficult to clean. It’s in different layers or stores differently. People have different interests so not all organizations collect the same parameters so there is a lot of hole filling that we need to do. There is actually quite a lot of data out there that on its own is not valuable. On its own it doesn’t tell you the full story. We focus on completing the puzzle telling, the full story and deconstructing it in such a matter that it is relevant to the world.
Are banks showing more interest in lending in the agriculture sector in Africa?
I think banks are open to it; it’s just an unknown right now. It’s only as we roll out products that we can tell how well some of these products work. Banks are definitely open to it because banks want to make money. If you can show banks how to make more money, they’re easy.
What are the most interesting or surprising things you’ve learned as you’ve gathered and analyzed all of this data?
The complexity of the system can be a little overwhelming at times and shocking. For example in Kenya by the time a farmer produces wheat and gets it to a domestic market the price that the consumer pays for that wheat is higher than the price the consumer pays for wheat that came from Russia or Ukraine. Those sorts of market inefficiencies exist in very few places in the world. Those are the things we identify the more time we spend analyzing the data. Many of those things are actually very policy driven and are not things that can be solved by the private sector. The private sector can only do so much but what we hope is that some of the things we bring to light can actually help policy makers make more dynamic decisions around policy in agriculture.
What do you see as the role of data in development, especially in the agriculture sector?
Development historically has not been data-driven; development has been very research-driven. The difference is real academic research takes years so by the time each project is completed there’s been a whole lifecycle of crops that have evolved, changed, policies that have changed. The question is how do we make that more real time? I think we have to. I think if development is going to work and a lot of initiatives are going to work, they have to use data. I don’t think there’s a way around it. What we do enhances the development field. It allows development agencies to work in a more scientific manner. They don’t have to rely on enumerators on the ground sending data when there are live feeds of data that can be used.
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