Fintech solution for Malawi’s smallholder farmers — Quartz Africa Member Brief — Quartz

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Agriculture drives the African economy, with 23% of the continent’s GDP from the sector and 60% of the sub-Saharan population working as smallholder farmers. In Malawi, the sector employs 64% of the population, but smallholder farmers are disproportionately marginalized or excluded from banking services compared to those living in urban areas.

Cash flow is one of the biggest problems for smallholder farmers looking to access financial services, as money comes in at the end of the growing season but is not readily available when they need to buy seeds and fertiliser. Most loans also have to be repaid in regular installments, which is incompatible with farming cycles.

Access to affordable finance is essential to enable smallholder farmers to invest in their businesses, remain resilient to shocks and prepare for their family’s future.

A growing number of start-ups working in the agritech sector in Africa want to give small-scale farmers digital access to services such as savings, payments, credit and insurance. Malawi-based Mlimi Pay is one of them.

Cheat Sheet:

💡 The possibility: Fintech solutions in the agricultural sector can help farmers invest, save and make and receive payments. Such technologies can capture the potential of a new generation of smallholders and family farmers. Africa has also seen a boom in mobile connectivity. In 2020, Malawi reached an all-time high in terms of mobile connectivity, tied at 52.3%. Fintech services can capture this increase in connectivity.

🤔 The challenge: Tech startups in Malawi usually struggle to raise funding and get government support.

🌍 The road map: Mobile technology can provide invaluable assistance to farmers. As such, there is a need for large investments in fintech startups that offer such solutions.

💰 The stakeholders: Banks, the authorities, mobile network operators and farm suppliers.

By the numbers

80%: Share of Malawi’s workforce employed as farmers

59%: Percentage of small farmers in Malawi who live below the national poverty line

25%-40%: Estimated number of small farmers who sell their produce, rather than just living off it, depending on the season

44%: Growth in the agritech sector in Africa between 2016 and 2019

85%: Estimated use of mobile and smartphone solutions among smallholder farmers in Africa by 2030

The case study

Name: Mlimi Pay

Grounded: 2021

Placement: Lilongwe, Malawi

Founders: Stanislaus Sakwiya and Orama Chautsi

Mlimi is the word for “farmer” in the Chichewa language, which is spoken in Malawi. Launched in 2021, the fintech startup developed the Mlimi Digital Wallet, a mobile solution designed for small farmers.

The wallet helps farmers in rural areas save money for subsidized seeds and fertilizers. This allows them to diversify their income and invest in inputs, which ultimately helps them increase their returns and provides their families with increased financial security.

The digital wallet also allows farmers to check balances and make transactions. In addition, the wallet informs farmers about weather and climate patterns. Using Africa’s Talking USSD and SMS technology, farmers can use the service even with a feature phone.

Stanislaus Sakwiya, co-founder and CEO of Mlimi Pay, said the idea for the startup came from understanding the difficulties farmers face in accessing mainstream financing systems. Even microfinance is sometimes a bridge too far. Most such loans must be repaid in regular instalments, and the unpredictability of farming makes it difficult to meet these payments.

“Using existing technologies, such as Airtel’s Airtel Money, which the majority of smallholder farmers are already familiar with, has helped us deliver a solution that is affordable, easily accessible and user-friendly,” Sakwiya said.

Mlimi Pay started with seed capital of just K5 million ($5,000) from an angel investor, combined with the founders’ personal money. Mlimi Pay is now looking for external investors.

Mlimi Pays claims that the prices charged for its services are very affordable for smallholder farmers. For example, when a farmer signs up for a Mlimi Digital Wallet account, the company charges K2000 ($2). Farmers pay K500 ($0.5) in monthly fees, combined with transaction fees associated with K350 ($0.35). Currently, Mlimi Pay only works with farmers in Lilongwe. So far, 370 farmers have Mlimi digital accounts.

Mlimi Pay intends to expand by also setting up a microfinance loan program for smallholder farmers and expanding its services beyond Lilongwe.

In conversion with Stanislaus Sakwiya

Image copyright: Mlimi Pay

💸 About financing:

“The biggest challenge for many tech startups in Malawi is funding. We don’t have many startup accelerators, and the few that are there don’t trust tech startups to thrive. The value is seen when tech startups start to grow and make a name for themselves.”

📱 About how the digital wallet helps farmers:

“The simplest technology farmers know is a feature phone, and most smallholder farmers in Malawi now own one. As such, it becomes very easy for them to bank and buy seeds and fertilizers without going to a trading center to stand in very long queues. Also, they are updated with weather information so they can plan properly.”

🧑🏽‍🤝‍🧑🏽 About customer engagement:

“We saw a 410.3% increase from June 2021 to June 2022 in terms of transaction volume.”

Agritech offers to 👀

The Nile, a South African agritech startup, raised $5.1 million in May 2022, in an equity funding round led by Naspers Foundry. Nile connects farmers to commercial retailers of fresh produce in South Africa and across the continent.

In April 2022, Farmerline, a Ghanaian agritech startup, announced a $6.4 million pre-Series A investment plus an additional $6.5 million in debt. Through partnerships with agricultural companies and farm associations, it offers farmers high-quality fertilizers and seeds, free education on climate-smart farming practices and access to international markets.

In August 2022, iProcure, a Kenyan agritech startup, announced a $10.2 million Series B funding round led by Investisseurs & Partenaires. The startup provides agricultural products such as fertilizers and seeds at discounted prices compared to current market prices, and rolls out credit to agribusinesses to make these purchases.

More from Quartz Africa

🦠 How technology and agriculture can help Africa’s pandemic recovery

💾 Lack of basic agricultural data is holding African countries back

🤝🏽 The future of agriculture in Africa is not agriculture, but agribusiness

This brief was produced while listening to “Proud” by Praise Umali (Malawi)

Have a productive week

—Rabson Kondowe, Lilongwe-based Quartz contributor

A 🚜 thing

In Africa, a young and dynamic population is embracing agritech through AI, drones and mobile platforms to create a more vibrant agricultural sector. With a projected value of $1 trillion by 2030, the continent is poised to become the global center for agritech solutions.