I want to divide this blog into two parts. The first will be on our progress and the second on a topic we are discussing all the time – the economics of people AND profits.
The Farming Input Package
The progress here in Siaya has been tremendous. As I mentioned in my last blog we finished our survey last week. This week we started coding the surveys and inputting the data in SPSS. It is a long process but we believe we will have the first results ready by Wednesday. The final report will be typed up and ready for distribution at our launch party on November 5.
Analyzing the survey has been a small portion of the work we have done this week. Most of it has been the farming input package. On Monday we had a great meeting with Equity bank, where we were challenged with the scenario of how we will help the poor farmers in between planting and harvesting, which is a particularly difficult time period with little food. It is usually when most people have to go to bed hungry. One person suggested we look into dairy cows or goats. They have the benefit of producing milk on a daily basis, which can be sold every day, meaning the farmers will have an added income they can use for food. We agreed the idea was great but didn’t know how to proceed, so we left it to simmer in the back of our minds.
Tuesday we went to Great Lakes University to get some expert advice on our farming input package. We especially wanted to know about maize, sorghum, irrigation, fertilizer and soil analysis. All of those questions were answered and we decided that we would offer a package consisting of inputs for 0.5 acres of maize and 0.5 acres of sorghum. Soil analysis is not needed as there are general analyses done for every area in Kenya and those are usually sufficient to produce a productive crop – and in our area maize and sorghum generally do great. Irrigation is a costly affair and therefore not recommended, however the professors said that later on we could look into a partnership with the Government of Kenya whose Vision 2030 includes a goal of farmers being less reliant on rain-fed agriculture. Lastly, we asked about the use of fertilizer which we know is bad for the land. We were told that it was the best option available for little money. There are more expensive organic options as well as new options still being researched, but for our target group of poor farmers, fertilizer was our best bet. So, with this information we were ready to create our farming input package. But then, we started talking about entrepreneurship and agri-business. Basically, how do we help these farmers develop from seeing their land as purely subsistence to seeing it as a way of making money? We had to keep in mind that our project is also about food security, so our question became, how do we help make the farmers food secure while opening their minds to business while at the same time enabling them to pay back our loan? This question lingered in our heads while we met with the Kenya Seed Company and UAP insurance.
At the end of the day we had a plan: We wanted to offer our farmers an input package, which could provide them with food security (from maize), give them a lump sum for start-up capital (sorghum sold to the East African Breweries) and give them extra income on a daily basis to help pay for necessities (milk from a dairy goat).
Since Tuesday, this package has been our focus. We have met with crop and livestock specialists in the area who could help us finalize the amounts and yields for the package as well as the price. The livestock specialist also clarified the issue of cow vs. goat for us. A cow is very labor, skill and resource intensive. It requires special feeds and needs medication. A goat on the other hand is rarely sick and eats everything. Furthermore, goat’s milk is a high priced commodity here and there is a ready market so he suggested we focus on goats. Goats also cost less.
Now that we had all the information we needed, we had to think about our timeline. We knew we wanted to offer crop farming skills training and business skills training at the same time, but we also knew it would be too much for our farmers to comprehend livestock while also learning about crops so we devised the following: Starting November 25 we will have sessions on group dynamics. Then in December we will start on the farming skills training and business skills training. We will also add a section on health. Then the first group to meet certain requirements will receive a loan to pay for a goat for each member and also receive the training on goat rearing. Given our capacity this was the only way we could secure that at least a few of our farmers would be able to benefit from the milk of the goats. To be able to achieve this, we need to work with 2 people from each household – one youth and one farmer. Young people in the area are not keen on working on the farms because they have seen how hard their families have worked with few rewards. But we want to show the youth that they can make a good living from the farms, and with the help of the family’s primary caretaker of the land, everybody can benefit.
This is where we are now. We will have our first information session with potential Momentum farmers on Wednesday. Will let you know how it goes!
Economics of People and Profits
Now to the second part of this blog – economics. The goal of any business is to make money. Without money, the business cannot be sustained. However much the traditional, capitalist way has achieved exactly that, it has done very little for the poor. It has been a major factor of keeping the poor in the terrible poverty trap where they pay more for services and their fees are higher on a percentage of income basis. Charging these high percentages has been the only way for companies to see a possibility of offering their services and products to the poor given that the price would have to lowered and distribution is difficult, which makes the costs higher. This approach is done with the perspective of making money in the short-term and from few people. However, to successfully work with the poor in a profit-making way, it seems more logical to reverse that thinking.
Professor Prahalad was the first to talk about the numbers of the poor and how a company should focus on the numbers rather than the profits from individuals. There are 2 billion poor people in this world (this number varies depending on whose data you look at) and if a company can cater to 10 million of them and charge everybody $10 a year for their services, that company can make $ 100 million from just servicing the poor!
To do this, companies must be patient. If a company expects to make this money within the normal timeframe of 3-5 years, they will be disappointed. Once they are done with their calculations they will have discovered that the costs are too high, making the project unfeasible. However, if the company looked at the costs over a period of 10 years with exponential growth, they will see the benefits outweighing the costs substantially.
A company working in poorer markets should start slow, but as soon as the structures are in place, should focus on exponential growth. Words travel faster than the speed of light here and if a company is doing something good and affordable (!), then people will want to be part of it.
So, people and profit is not a matter of the traditional choice – people or profit. It is a matter of creativity, relying on large numbers, thinking long-term and offering prices the masses can afford. If companies do this, I truly believe they will benefit and so will the poor!
What do you think?