Improving access to productive assets in Tanzania

29 Oct 2019

Xynteo’s Leadership Vanguard programme, led by Nick Moss, brought business leaders to Dar es Salaam, Tanzania, to explore partnerships to improve financial inclusion with the local impact enterprise Simusolar.

On our first field trip to Tanzania earlier this year, we explored how financial inclusion could enable and stimulate broader economic development.

Our group made up of business leaders from Shell, Unilever, EDP, BHGE and ICRC, met with experts, practitioners and social enterprises from around Tanzania. These local stakeholders were all working on financial inclusion in several areas, including agriculture and energy.

Financing and energy supply were key barriers

Quickly, it become clear to us that limited access to banking, credit, loans and savings accounts severely hinders individual, community and business growth in rural Tanzania. A striking example of this was smallholder farmers, whose lack of access to loans and credit hampers their ability to invest in their farms and equipment.  

Two common barriers we witnessed during the first trip were: first, financing productive assets, and second, providing energy to power those assets. Productive assets are equipment that can increase productivity or income, for example water pumps or grain grinding tools.

In areas with limited access to power, productive assets can be hard to obtain and expensive to run. However, with the growth in development off-grid energy sources in East Africa over the last decade, there are increasingly new technologies, business models and financing options that can provide farmers with more affordable access to productive assets.

For our second field trip to Tanzania, we aimed to explore such new promising business models, and examine how we could help them scale.   

Partnership with Simusolar 

During our second field trip, we worked with Simusolar, a social enterprise that aims to improve access to productive assets in rural Tanzania, by providing them affordably and expanding farmers’ and fishermen’s access to credit.Simusolar

Simusolar provides equipment such as solar powered irrigation and solar fishing light. The enterprise uses a pay-as you-go platform, and a payment solution that improves customers’ ability to afford the equipment. After successfully rolling out its products across Tanzania, Simusolar is now planning to expand into Uganda.

Seeking ways to scale for impact

Through a series of workshops and meetings, the Vanguard leaders explored how to best support Simusolar’s scaling ambitions in Tanzania and across the region. The trip gave us many insights, of which a few stood out:

Last-mile distribution requires trusted partnerships:
In remote rural areas, securing a customer base to sell and distribute useful productive assets, such as solar water pumps, is expensive. Demand from the famers is low, because they often don’t know of the benefits of new technology. Furthermore, the devices must be customised to the farm’s conditions, in order to be effective. Selling such equipment therefore requires time and engagement with farmers that doesn’t always turn into a sale. However, Simusolar have been able to identify partners trusted by specific groups of farmers, often small and local. These partners are skilled at building the farmers’ awareness, understanding and willingness to purchase Simusolar’s products. In order to scale, larger agribusinesses and corporate consumer goods companies can work with such partners to increase awareness and distribution of their products.

  • Think beyond value chain partnerships, to entire ecosystems:
    In rural settings, where products and resources are scarce, it’s often not enough to simply scale the customer base of distribution. Often, to create a market for each new product, other dependent and complementary products and services must be in place. For example, solar pumps require boreholes to be drilled; the financial platform requires mobile networks: having enough farms to sell more solar pumps to, depends on the farmers having access to inputs (e.g. fertilisers and seeds). So, identifying and partnering with complimentary products and service providers, is an essential starting point for any imitative aiming to scale and provide broad economic benefits in rural areas. 
  • “Financial inclusion” means different things to different customer groups:
    Providing key assets that can provide broader economic benefits often require upfront capital. In Tanzania, financial inclusion is increasing, as access to mobile money accounts expands. The big questions now become usage of those financial platforms and the masses’ ability to access other financial products, such as credit and loans. Banks still view famers as high-risk borrowers and therefore hesitate to lend them. So, Simusolar has developed its own underwriting service that provides credit to farmers who have never borrowed money to buy equipment before. Based on a detailed assessment of each farmer and insight into their situation, the underwriting service generates a customised repayment schedule based on the individual farmer’s income level. By truly understanding their customers and giving them highly personalised financing programs, Simusolar can support local development, while also distributing important and useful products. 

Last-mile distribution is difficult. It requires the right partners, business model and financing to get it right. But when those elements come together, it can provide huge benefits to those communities and open a new and potentially fruitful customer base for business.

As we approach the end of the Vanguard year, I am looking forward to seeing how the partnership between the leaders and Simusolar develops. A welcome result would be partnerships that benefit both the companies of the Vanguard leaders and Simusolar, while improving access to productive assets for small-scale farmers and fishermen.

This blog is authored by Nick Moss, former theme lead of the Leadership Vanguard Financial Inclusion team.

Read more stories from the Leadership Vanguard here.

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About the Leadership Vanguard

  • Xynteo's 12-month acceleration and leadership development experience brings together leaders from Unilever, Tata, Shell, Mastercard, ICRC, HSBC, Energias de Portugal, Baker Hughes, a GE Company, and BASF.
  • Under CEO sponsorship, participants collaborate intensively and combine capabilities, networks and knowledge to accelerate impact enterprises and develop new markets.
  • Participating 'Catalysts' are divided into three themes, each focusing on a global challenge. In 2019, these challenges are:
    • Financial Inclusion, supported by Mastercard
    • Low Carbon Cities, supported by Shell
    • Revaluing Plastics, supported by Unilever