We Are Creating Economies of Scale for Smallholder Farmers by Franchising – Babban Gona

Babban Gona Helps Subsistence Farmers in Nigeria | by B The Change | B The  Change

Tell us about Babban Gona and the mission behind your establishments?

Babban Gona (“Great Farm” in Hausa) is an award-winning, high-impact, financially sustainable, and highly scalable agri-tech social enterprise part-owned by the farmers we serve. By developing and deploying advanced technology coupled with operational excellence we transform agriculture into a job creation engine with a goal to create 1 million jobs for African youth by 2025. Through our Babban Gona technology platform, we provide training, financial credit, agricultural inputs, harvesting and marketing services to tens of thousands of our member smallholder farmers dramatically increasing their productivity and profitability. Due to the highly scalable nature of our technology platform, despite the challenges of COVID, Babban Gona more than doubled in size in 2020 serving 37,000 farmers to farm 80,000 acres of maize, an area equivalent to 5 Manhattans, providing enough food to feed every man, woman and child in Nigeria for nearly 1 week.

With an ambitious vision of having about 1 million smallholder farmers in Nigeria, do you think that is feasible?

Eight years ago, Babban Gona began a journey to create 1 million jobs by 2025. During this time, we have passed through many milestones. Our cumulative smallholder members accounts have grown to over 110,000, enabling these smallholders to increase their yields and net incomes consistently to 2 times and 2.5 times the national average respectively. Babban Gona uses its expertise in technology to create real value for its smallholder members. Throughout the season, we rely on technology to automate our processes and optimize the growing activities on our members’ farms. We developed applications which leveraged on Artificial Intelligence (AI) and machine learning to improve our field monitoring operations. These apps enabled the analysis of optimal plant populations and rates of germination on fields and while testing for plant nutrient deficiencies simultaneously. Despite the immense challenges posed by the COVID pandemic, due to the tremendous efforts of our truly inspiring team, we have doubled in size in 2020, from being Nigeria’s single largest maize producing entity, to now one of the largest maize producers on the African continent. Today we are farming over 80,000 acres of maize. Through collaboration with our great partners, we would dramatically scale the impact of our work by unlocking the power of youth entrepreneurship and technology to innovate on our current Babban Gona Direct model and scale our Trust Group Entrepreneur model from our current pilot. This intervention will enable 7.5 million, majority rural youth and rural females, access dignified and fulfilling employment by 2030. Through our innovative Trust Group Entrepreneur model, we are simply replicating the successful strategy adopted in our Babban Gona Direct model.

What are the strategies that you have deployed to achieve these milestones?

Our Babban Gona Direct model strategy relied on our ability to train, develop and finance grass-root level leaders to run mini farmer groups called “Trust Groups” comprised of 3 to 5 smallholder members. Our Trust Group Entrepreneur strategy, relies on us replicating our successful strategy one level up, by training, developing and financing grass-root level youth entrepreneurs to run a business managing a network of 15 Trust Groups, comprised of approximately 45 smallholder members. To achieve these results, and rapidly scale the impact of our work to reach not just 1 million people by 2025 but also 7.5 million people by 2030, we will need to simultaneously improve our value proposition to increase demand from smallholders and overcome key supply constraints hampering our ability to rapidly scale to meet this burgeoning demand from smallholders. With the support and collaboration of our great partners, we will continue to innovate and co-create solutions to drive rapid scale and impact hence enabling us to achieve our goal.

Food security is one place that the nation is battling, with lots of imports of staples such as flour etc. what have you done to deepen the value chain?

Within Nigeria’s agriculture sector, two value chains will likely be the largest opportunities. There is burgeoning demand for higher-value food products as incomes rise, and specifically for rice and poultry (which uses maize as feed). The demand for Babban Gona’s products, which are exclusively focused on the maize and rice value chains and are specifically designed to meet the needs of rice millers and poultry operators, are expected to similarly swell soon. To highlight this, we see early data outlining the willingness for customers to use our products exclusively and pay a premium for them. Babban Gona offers a compelling value proposition to its members, assisting them in raising their net incomes through increasing their crop production. 96% of our members are attaining yields above the national average, with the average member attaining yields more than twice the national average at 3.8MT/Ha. This higher level of production is one of the primary causes of increased Babban Gona member income. During our 2019 season, our farmer members produced over 28,000 MT of maize making us Nigeria’s single largest maize producing entity. We also estimate our production capacity to increase by more than 50% in the coming years. Babban Gona has established itself as a leading supplier of high-quality grains in the industry, enabling us to not only improve food security in the country.

Babban Gona offers a compelling value proposition to its members, assisting them in raising their net incomes through increasing their crop production. 96% of our members are attaining yields above the national average, with the average member attaining yields more than twice the national average at 3.8MT/Ha. This higher level of production is one of the primary causes of increased Babban Gona member income.

Diversification has been on the lips of the government for some time now, do you think that agro allied space can be a major foreign exchange revenue earner for the country?

The Nigerian agricultural sector expects very high growth rates in the coming years. Nigeria’s agricultural sector meets many of the same criteria held by Brazil as it began to transition into an agricultural powerhouse: significant amounts of available land and water, an expanding pool of low-cost labor, and an ever-increasing domestic market demand for its products. Between 1996 and 2018, the value of the crops annually produced in Brazil rose 191%, from $40 billion to $118 billion. Today, Brazil is the largest agricultural and food exporter (USD 79.3 billion in 2017) in South America leading Brazil to become one of the world’s agricultural leaders. Early investors to this decade-long transformation of the Brazilian agricultural sector generated very high returns, and even now, twenty years on, the Financial Times and The Economist suggest average annual returns–between 12-15%. This success has left many investors looking for the next great agricultural investment opportunity and we believe the Nigerian agriculture sector is an excellent candidate. We believe that by scaling up investment with an improved policy environment which ensures civil stability and prevents government crowding out of the agricultural sector, Nigeria has a great potential to expand its agriculture and the sector could be a major foreign exchange revenue earner for the country. Babban Gona will capitalize on this situation, offering a proven, low-risk, competitive investment in a burgeoning field.

Nigeria small holder farmers are saddled with a lot of structural problems such as value chain, access to credit, access to tools and modern method of farming. What are the interventions that you have made in these areas?

The majority of Nigerian agriculture production, estimated at 80%, is performed by smallholder farmers. Yet despite being the backbone of the agricultural sector, majority of smallholder farmers remain impoverished, earning less than $2/day due to exceptionally low economies of scale. Babban Gona provides the four key services required for smallholder farmers to be successful such as; Financial Services – Utilizing an innovative approach to de-risk members of the farmer groups, Babban Gona raises cost effective capital to finance its members. Agricultural Input Services – Babban Gona provides the appropriate balance of agricultural inputs, at the right time, applied in the right way, at highly competitive prices. This ensures its members attain optimal levels of productivity and product quality, while minimizing negative environmental impact. Training and Development – Babban Gona provides the required training and professional development opportunities to establish strong democratic farmer groups. And finally, marketing Services – Members get access to Babban Gona market services that assure good warehousing practices, access to markets, and increased profits. Babban Gona creates economies of scale for smallholder farmers by franchising a network of mini grassroots level farmer cooperatives called Trust Groups. The economies of scale provided by membership in Babban Gona enable smallholder farmers to dramatically increase their profitability.

Livestock, is another area, what are your strides in the space?

Asides from our maize and rice program, a key success factor in scaling the number of smallholders we can serve through the TGE model is to expand the different product offerings to appeal to the largest population of smallholders. Examples of new product offerings would be expanding from our maize and rice credit program to new categories such as livestock, and alternative business models such as rural retail, craft production etc. We began piloting in 2018 our Women Economic Development Initiative (WEDI) focused on empowering women in rural areas.

Over 50,000 farmers have profited from your credit facilities. How many are able to pay back and do we have bad debts, if yes, what are the causes?

Babban Gona continues to demonstrate a proven track record in 2019 our 8th season, of enabling financial sustainability at a relatively low scale, coupled with high impact and scalability. Since inception, Babban Gona has delivered credit to over 110,000 smallholders with a repayment rate of 99%. Our experience over the last couple of years has shown that non-repayment increases as a farmer’s proximity to our operational hubs increases. This led to our decision to increase the number of our operational hubs from 4 to 9 starting from the 2019 season, to ensure better monitoring and accessibility to our framers.

Are you in partnership with oversea agencies to ensure that we deepen our food security?

Babban Gona has partnered with public and private sector organizations, DFIs, and donors both local and foreign to develop and scale the Model and has unlocked tens of millions of dollars in debt capital, enabling tens of thousands of smallholders to increase their net incomes to 2.5x the national average, while maintaining a 99% repayment rate.

What are the things that you have done lately to ensure that young ones engage in agriculture?

Babban Gona recently launched a campaign to incentivize young farmer’s decisions to invest more in their farming activities so as to enable the transition from a subsistence mindset to a commercial mindset. Through this program, we piloted and adopted a 4-step problem led approach to generate deep buy in and commitment of rural farmers who are mainly youths to becoming our members. Our strong brand and enhanced public relations campaign have translated into us receiving applications from thousands of individuals who are majorly youths seeking employment with Babban Gona on a monthly basis. We have successfully recruited over 1000 contract support staff in Babban Gona of which most of them end up becoming Babban Gona members. We have also kickstarted our Farm University Training program where we look to train almost 30,000 apprentice Trust Group Entrepreneurs (60% – 70% of which we estimate will be youth) on the skills they will need to set up their own Trust Group Entrepreneur enterprise.

Land use laws and cultural practices are few impediments to agriculture, how have these things affected food production in the country?

Given Nigeria’s growing population and finite borders, with the available amount of arable land reducing over time due to erosion, salinization, urbanization and desertification, and even land inheritance laws practiced by various cultures, the amount of arable land per rural inhabitant will continue to drop from 2.1Ha per rural inhabitant in 1960 to an estimated 0.5 Ha per rural inhabitant by 2030. The subdivision and fragmentation of existing farmland has resulted in small sizes of farm holdings which has discouraged agricultural commercialization. In rural areas lands are severally fragmented during the acquisition and sharing of either family or community lands, and this went a long way in discouraging adoption of laudable innovation like mechanized farming as a result of reduced farm size of land. Also farmers are not at liberty to sell a portion of land acquired through communal ownership and thus majority of them cannot acquire extensive land for considerable agricultural productivity.In particular, in northern Nigeria, where the Babban Gona Agricultural Franchise has focused since inception, farmers face extreme poverty. The region has the highest poverty rate in Nigeria: 77.7% of the population lives on less than $2 per day. Smallholder farmers typically own small plots, averaging between 0.5-0.7 hectares of land dispersed over non-contiguous fields. As a result of this fragmentation, smallholder farmers suffer from low economies of scale. These low economies of scale inhibit farmers from attaining high yield thus affecting food production.

Apart from the farmers, are you looking at other organizations in agricultural product value chain such as those in food processing business?

We are focused on production for now but always open to exploring new sectors. We have secured partnerships with various food processors in the country, as we look forward to co-create solutions to drive rapid scale and impact, enabling us to meet and exceed our goal.

Babban Gona creates economies of scale for smallholder farmers by franchising a network of mini grassroots level farmer cooperatives called Trust Groups. The economies of scale provided by membership in Babban Gona enable smallholder farmers to dramatically increase their profitability.

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