A journey to building smallholder resilience and profitability across Africa

Question: Tell us more about your background, where were you born, family, education, employment, and future plans?

I’m Thomas Njeru, Co-Founder and Co-CEO Pula, a company that leverages on technology to develop and distribute insurance and farm advisory solutions to Small Holder farmers in Africa & Asia.

I was born and grew up in Nembure, Embu. Went to a local public primary school then proceeded to Mang’u High School. After high school, I joined the University of Nairobi where I graduated with a BSc. Actuarial Science.

As for my career, I’m an insurance professional, entrepreneur, and Actuary who is passionate about bringing different approaches to insurance solutions in emerging markets. Throughout my career, my work has revolved around providing innovative insurance products to people who have never bought insurance but need it. Prior to founding Pula, I was the Insurance Director in Deloitte East Africa where I was charged with the provision of statutory actuarial services, strategy development, operational reviews, product development, and innovations to Insurance Companies and Pension Funds within East Africa. I also served as the Chief Actuary at UAP-Old Mutual Insurance Group, East Africa. I’m a Fellow of the Institute of Actuaries (FIA), a Chartered Financial Analyst (CFA) and hold a Masters’ in Business Administration (SBS Kenya).

In terms of the future, I’d like to get to a point where every farmer in Africa has access to insurance. I hope that this happens in my lifetime. I also envision a world where African smallholders achieve yields at similar levels as developed economies while having peace of mind that they are secure should the unexpected happen.

Question: What motivates you and what motivated you to start pula?

Growing up on the slopes of Mt Kenya, as the son of a smallholder farmer, I experienced firsthand what it meant to fully rely on the climate for your livelihood. The sad reality was that the whole village was always one drought away from total destruction, one flood/disease outbreak away from absolute poverty. Because farming was our main source of livelihood. This was worsened by the fact that no one had any form of insurance or risk mitigation mechanisms from these vulgaries.

There was nothing unique about my experience. The story is the same across Africa.

Agriculture is the Economic backbone of Africa; farming is betting on the weather; no scalable risk mitigation techniques do exist with less than 1 per cent of smallholder farmers with access to some form of insurance; In the absence of any viable risk mitigation techniques, farmers result to sub-optimal investment in their farms – which means poor productivity on Africa’s largest resource – Arable land.

Beyond that, in Africa solution to risk management (communal pooling or “kuchanga”) doesn’t work for Agriculture. Think about it, if someone in the community dies or gets sick, the community contributes to assisting the family gets through the calamity. In the case of agriculture, if a drought strikes, the whole village is affected and they can’t help each other. This means that our priority in Africa, should be to increase access to agriculture insurance.

With this, it is easy to think that what you need is to sell insurance to these farmers. Try selling or talking about insurance to these farmers. Like most of us, they hope for the best but they don’t prepare for the worst; classic optimism bias. So you have a case where farmers need insurance, but they don’t want to buy directly the insurance. So you have a demand problem. Which we solve by making insurance accessible to farmers by embedding it into inputs that farmers want: seed; fertilizer, agro vet products, and credit and government subsidy programs.

On the other hand, the insurance products that exist in the market are not tailored for smallholder farmers as they’ve been lifted from the west. So in addition to embedding, we also structure and price insurance products. We have a team of Actuaries who develop and price agriculture products specifically for the smallholder segment. We also use technology (such as mobile, satellite, machine learning) to make distribution and execution of these products operationally feasible for smallholder farmers. On average a farmer can afford to pay only between (Sh300-500) $3 to $5, so we use technology to make it as affordable as possible. We’re building an MPESA for small holder farmers insurance.

So in summary, the existing insurance companies’ business models are not set up to serve the unique needs of small-holder farmers., After realizing this, I saw an opportunity to develop a new approach to insurance that could support the vulnerable smallholders who produce the majority of food on the continent. The concept of Pula was born from an attempt to create a solution for this pressing need.

Question: What are your major achievements?

We have insured over 3.4 million farmers across 11 countries in Africa and Asia, working with 26 distribution partners, 17 insurers, and 6 reinsurers. Our experience and data show that giving smallholder farmers access to embedded input insurance and agronomy advice increases their investment in their farms by up to 16 per cent and enables yield increases of up to 56 per cent. This creates more climate-resilient and profitable livelihoods, helping to lift farmers and their families out of poverty. In 2018, Pula raised $2.9M from top tier fintech and impact VCs (Omidyar Network and ACCION Venture Lab, among others). In addition to these, we have won several awards.

Question: In how many countries are you operating, how many employees do you have?

We are in 13 countries in Africa and Asia and have 49 full-time staff and over 400 part-time contract workers.

Question: Who are your partners, do you intend to do more partnerships?

We have over 50 partners across the globe which include Governments, Seed Companies, Fertilizer Companies, Insurance Companies, Reinsurance Companies, Foundations as well as Multilateral Agencies. Over the next 2-5 years, growth plans include growing our distribution of insurance through partnerships with credit providers and governments, both in our current territories of operation, as well as in new expansion markets in West Africa and Asia, particularly in South East and East Asia.

Question:. Who is funding pula?

A combination of Commercial and Impact Venture Capitalists who provide us with equity capital as well as philanthropic foundations and development institutions who provide us with grants for our research and development (R&D).

7. What are key challenges in running an organisation like yours? What have you done to deal with the challenges?

Getting farmers to buy into the concept of insurance in Africa is a challenge especially due to low trust levels. Due to optimism bias, farmers hope for the best (good rains) but we don’t always prepare for the worst (droughts, locusts). Driving behavior change towards adopting insurance is also difficult, especially in the rural and poor households where farmers are faced with many competing demands on their finances. This is why we adopted the concept of embedded insurance where we package insurance with seed, fertilizer, Government subsidy programs, Credit e.t.c. We build business cases for these companies where, based on data collected during the insurance sign-up process, they can understand their customers better and therefore sell more effectively to them. In return, the companies pay the insurance premiums, making the product free to the farmers. By introducing smallholder farmers to insurance, many for the first time ever, we are able to build their trust in insurance one insurance policy at a time, over time encouraging them to buy or invest in insurance themselves. To improve the trust levels, we also invest heavily in farmer education via digital channels like SMS, WhatsApp, and make our insurance solutions as simple as possible.

In addition, agriculture insurance is a cemetery of pilots and trials. Many have tried but failed and never scale. As a result, there is lots of skepticism around whether it is possible to build sustainable enterprises around insuring small holders. We strongly believe that embedding insurance with inputs such as seed, fertilizer and credit and working with our African Governments is a pathway to scaling insurance for farmers as there are millions of farmers who are already using these inputs in Africa.

Lastly, when we started the business, attracting great talent is a challenge for start-ups. The majority of talented people in Africa prefer to work for established corporate rather than take a career risk at a startup like ours. As we grow and show impact, we have had mission driven talent who want to be part of an impactful story and are keen to solve Africa’s problems.

Question: How do you use technology in service delivery, i.e any app or SMS platform?

We are leveraging technology to make the unit economics of serving smallholder farmers viable. The average annual insurance premium that a farmer can afford is about $5 - 10 per year, This includes the cost of product development, pricing, underwriting, claim adjustment, and of course the claim costs. We use Artificial Intelligence, mobile-based registration systems (both USSD and Mobile app), remote sensing, end to end automation tools among others to make the numbers work.        

As part of the insurance registration process, we collect farmer-specific data such that we use to provide targeted and customized agronomy advice to farmers to adopt better farming methods and consequently increase their yields. This is powered by mobile technology and data science. The traditional extension services in Africa have failed to efficiently and effectively disseminate information to smallholder farmers and it is the high time we leverage technology to improve the yields for farmers.

Question: Any mentor who motivates you in your work?

Elon Musk is one of innovators/entrepreneurs I look up to – he’s managed to transform a century old Car industry that was stuck with the combustion engine with the Tesla electric cars. I strongly believe in his mantra that “when something is important enough, you do it even if the odds are not in your favour”. Agriculture insurance is at the core of solving Africa’s food security problem and yet it has proven to be a difficult nut to crack - at Pula we know the odds are not in our favour, but we believe it is important that we protect the smallholder farmers in Africa.