SEAG | Digital Technology in Developing Economies

hi welcome everybody to uh this uh siege webinar uh my name is sayuri sharper and i am the president of the mit social entrepreneurship alumni group today we have what i think is going to be a really interesting and exciting webinar that will be led by professor sean cole uh president professor cole is uh teaches at harvard business school um has also founded a social enterprise called precision development that uses technology to reach a lot of people who are in need of more information for better lives and he is also on the board of mit jay pal so he brings uh to us if uh perspectives from both teaching and research as well as his experience on the ground to make the conversation even more interesting we have with us uh four social entrepreneurs who are running companies um that are using technology again to reach as many people as um they they can can reach and those panelists uh will have a conversation together with professor cole as we go forward and the panelists are sonali mehta rayo from awasta christopher sheehan from world cover sebastian zapata from alpha and aloysius ada from farmer lab so you will not only hear about kind of from an academic perspective how we reach as many people as we can in the developing countries but also how is practice uh on the ground so um i am gonna be the moderator for this session and uh we will start uh with uh professor cole providing us with some background and then we'll move forward to the conversation so uh before we get started i just wanted to uh introduce who mitch is uh we are organized under mit alumni association and our mission is to bring together mit alum and like-minded people to co-create a better world through social entrepreneurship and impact investing by social entrepreneurship we need organizations that address a basic unmet need or solve a social environmental problem through a market-driven approach in terms of impact investing uh we mean investments made in companies or organizations with the intent to contribute measurable social and enviro environmental impact alongside a financial return so we need both of these groups of people to push us forward in our agenda to make a better world and everybody are encouraged to be part of our community and to join uh just go to mit.c.m with that let me welcome professor sean cole and uh we'll hear from him great it's a real pleasure to be here uh and uh greetings to mit alums and books uh other interested people so as mentioned i'm on the faculty at harvard business school where i teach a class on impact investing and i'm also the co-founder of this non-profit that i'll talk about but very briefly my background i was at mit from 2000 to 2005 where i did a course 14 uh phd with my advisors abigail and two of whom went on to win the nobel prize and this is my wife and myself in stockholm a couple years ago at the party uh this non-profit that i'm talking about today was actually co-founded the third winner of the nobel prize michael cramer who was a professor at harvard at the time i've been at harvard since 2005 i do a lot of research on financial services for the poor and impact investing i teach in the mba level basic you know fin one fintu as well as an impact investing class i have a role at the poverty action lab where i'm co-chair for research education and training uh and i also do some advisory work for black rock and tpg rise and meridium which are financial services companies i just wanted to step back briefly and talk about the pad origin story because sonali is on the line uh and also because it's you know it's important to know basically nilesh fernando was a phd student at harvard and he and i worked with abbas day which was a social enterprise in gujarat to evaluate a mobile phone advisory service that provide farmers agricultural advice simultaneously michael kramer who is another harvard professor uh and senator mullen nathan and rice fabregas were working in kenya to evaluate an sms based service and we both found very positive encouraging results and together with two other people decided to create an organization that was uh could would go on to design deliver and evaluate services and i say you know if you're an mit alum and you're watching this maybe you have some interest in tech and development you know we're always looking for uh support and help uh on product design uh tech management et cetera so if you're interested uh just drop us a line uh but let me step back i'm just gonna take about 10 or 12 minutes to talk about precision development and our approach and then i think we're going to just open it up to a much broader conversation we've got a lot of really interesting people on the line here are going to tell you about fascinating things that they're doing in other countries and contexts and you know it's not impossible too man to me to imagine that this conversation could spark a future uh collaboration so pxd uh was it was founded as precision agriculture for development but about three months ago we made a decision to explore uh interventions uh outside of agriculture so the x now stands for you know the unknown variable or you can sub in for whatever you want but i'll talk primarily about agriculture because that's where we work it's a global non-profit organization operating in 10 countries in africa asia and latin america it was co-founded in 2016 by three professors and an mba alum from harvard business school right now we have about 200 employees with a mix of technology data science agronomy researchers and program managers the mission is to provide actionable information and other scalable services to people in poverty to empower them to sustainably improve their well-being one of our founders was sort of saying he was previously in a philanthropy role and he was scouring the world for compelling uh philanthropies and he was sort of frustrated that even the best philanthropies were growing at a rate slower than the population of smallholder farmers was growing so as many checks as he wrote he felt that that they could never actually cover the entire base of smallholder farmers so he was excited to join us because our goal is really to to develop interventions that can scale to reach uh you know 100 million smallholder uh farmers most of you are probably familiar with uh smallholder farmers they're 70 of the world's poor uh global food demand continues to grow we've got important concerns about climate change soil and water constraints we've got yield gaps around the world between what what we could be getting uh say in corn rice and wheat and what we're actually getting and especially in africa you've seen yields not grow nearly as much as you might have expected based on uh growth in other countries and sort of a lot of questions about uh you know how long it will take for the green revolution to truly transform african agriculture you know there's also a view that we hold deeply that there's a tremendous opportunity uh there's information that exists but farmers may not have access to it or they may not trust it it may be out there but they may not know whether to believe it or not and you know the arrival of mobile phones in uh rural developing settings has enabled uh both uh access to information from the farmers side but also individual level customization in terms of content that we push to the farmers we build farmer profiles and then we can tailor the information to them based on their seed variety their planting date uh their soil type and so we've seen dramatic growth in access to ownership and you know now we're seeing certainly in india and less less quickly but also present in africa the arrival of access to data services as well which opens up an entirely a new set of tools that you can offer to farmers so what we do is provide quality agricultural advice we collect information from the farmers on their location their agroecological zone socio-demographics crop variety water management systems we also we combine that with agricultural data whether that's uh soil type or or soil tests if the government's providing those rainfall market prices pest disease outbreaks and then provide customized recommendations uh to the farmer with regards to input recommendations management advice uh weather uh market information uh weather-related content uh and others i think you know we we're we work in a variety of modalities so in africa we tend to focus on sms because the cost of voice is substantially higher in south asia we use a lot of voice communication which helps bridge literacy gaps we do regular push calls timed around the crop calendar to farmers there's an ivr as well as a q a hotline so basically farmers can call in record a question and they get a customized answer pushed back to them within four hours so it is a two-way delivery service or to communication service where we sort of crowd source the problems by relying on a constant flow of inbound questions uh as well as uh outbound surveys to make sure that the information is timely relevant uh and actionable uh we're making uh some progress on launching uh mobile apps uh as well i guess we have a slightly animated version of an sms service that we have in kenya that safaricom sent out to the entire nation where you you text farm to a short code and you give them your name and then you can answer some uh sort of a b questions uh give your location and it will sort of the chat bot will figure out where you are what type of crops you're growing and then start deliver delivering uh customized uh advice at you know i should say we're slightly poor fit for this setting in the sense that uh everything we're doing is free to the farmer so far and it's not that we are opposed to the idea of collecting uh revenue from farmers but in our experience it's very expensive to collect revenue from farmers and we're also very committed to reaching the very poor farmers and so as soon as you start charging for services we've seen in many other settings use of those services drops a lot so right now our primary buyers of our service are governments or bilateral multilateral aid agencies although we've done pilots with input dealers and other entities as well and i'm happy to talk more about that if we get time so our theory of change is uh uh outlined right here we want to acquire uh customers and focus a lot on user engagement which is something that's very easy to measure as an outcome so are they listening to the messages do they pick up the call do they call in and ask questions and you know every every message we send out we ask them to rate the message at the end of the message so what kind of feedback do we get from them we're focused a lot on reducing frictions and barriers making sure that the content that we deliver is easily comprehensible there are often challenges between what let's say technically trained agronomists think they would like farmers to be doing and what farmers sort of on the ground have as their opportunity set and so we work a lot to try to translate uh more complicated practices and easier actionable messages we measure we constantly measure aspirations motivations uh and capacities of our farmers we're focused a lot on uh behavior change are they adapting the recommended inputs or the recommended farming practices and we've gotten lots of evidence i'll talk i think a little bit more about how we evaluate our services later on uh that that we are successful in changing farmer behavior and with the ultimate goal of improving uh farmer and household welfare whether that's cracky old livestock production avoiding crop losses we focus a lot on benefit cost ratios and on what things will benefit uh farmers so what is different from uh other attempts and you know you know and one like you know it's interesting to hear the stories uh uh after i'm done because when when we first surveyed the space we felt like there were a lot of entities out there that were trying to develop revenue models for smallholder farmers uh on a for-profit basis and not reaching very large scale like it was difficult not to crack so we focused on getting to scale at a very low cost so low-cost communication is one thing uh human-centered design so taking a very farmer-centric approach to our service rather than sitting in an office as an agronomist and thinking what what what do the farmers need to know thinking a lot about customization and targeting uh we try to you know set up and run ourselves as like a tech firm with a lot of iteration and learning uh both a b tests uh as well as randomized controlled trials to measure impact you know use data services and free to the user would be a another key differentiator i think from a lot of other settings how do we measure yields uh so if you look at science there's a publication that provides a meta-analysis of a bunch of the evidence that we and others have generated on the impact of agricultural advisory on outcomes so we found a four percentage point average increase uh in yields uh a 22 percent increase in recommended farming practices and a ten to one benefit cost ratio uh from the service so for every five dollars the government spends on the service farmer income goes up by fifty dollars now we also found large variation in the impact estimates across studies it turns out it's actually very hard to measure the impact of agricultural interventions on farmer outcomes because yields often measured pretty imprecisely if you ask farmers what their yield is you know they might have a good sense they actually often don't have a good sense of the area of their land and so it's actually pretty noisy we've been doing a lot of work with satellites to measure yield via satellite after we've blocked their field we have a a much more precise measure of how well we're doing but there's there's sort of a i would say you know the another interesting thing is these are all sort of version 1.0 interventions i think the interventions are getting a lot better so i expect larger impacts uh going forward uh you know we've been fortunate with respect to covet 19 to be able to continue to operate because almost all of our services are delivered uh virtually we've had to slow down our research and development portfolio a bit uh when we haven't been able to do a face-to-face contact say with with focus groups we've even managed to expand into nigeria and colombia with remote programs we've switched some of our research and data collection to remote surveys rather than individual surveys and in some areas we've been collecting and distributing health information or information about market uh disruptions so to date we've reached about five million farmers uh uh 4.1 inactive programs in nine countries and sort of south asia is where our numbers uh are largest uh and we we work in a variety of models i think we have a direct service model which is actually the smallest uh share of farmers less than five percent this is kind of our sandbox or the setting where we we control everything and we can try whatever we want uh test new new ideas we do this in gujarat uh for example with uh the users and we're still using ah this day's technology uh in in gujarat most of our work is through partnerships where we co-develop we're doing a program for example the government of addition where we build operate and then transfer a service over to the government where we're reaching i think around 1.1 1.2 million

farmers there but they will eventually take over the service and then in other settings we provide a bit more of an advisory role where the government for example in ethiopia already had an established service with a million farmers but brought pat in to help them uh improve and develop the service so as mentioned earlier we're expanding our mission to address uh information uh poverty uh more broadly uh our first forays have been in education and thinking about digital education tools uh especially for example in kenya when schools were shut down uh because of the lockdown uh so i you know i i could go on forever we've got uh many many slides you know our cost per farmer is is declining a lot because we're really focused uh on scale and developing uh high quality digital uh intervention so we're down to a dollar 38 per farmer per year uh which is i think remarkably uh low uh we're funded in a comment by a combination of governments uh and donors we're not yet on a uh even a break-even model so we have some unrestricted philanthropy that helps support our core services but as we build and expand we're making we're costing everything at fully costed so that we cover administrative uh and overhead so i think you know our ambition surgery is uh in in a few years we will be a social enterprise uh as you would classically uh describe it uh although we are uh to date a non-profit uh organization so uh you know i'm i'm i i i'm super excited about what we're doing uh like i said we're always looking for people who are uh interested in in working with us so if you think you have competence or expertise that you could bring uh usefully uh to pad don't hesitate to get in touch but i think we have so many exciting people on the line that i want to make sure that we have time for a conversation so i will uh end there thank you so much um that was a great intro but we do have four panelists great panelists that can also share their experience and of course one interesting thing is their business model as to how they are also trying to make the business uh sustainable profitable so it can grow um can we ask all the panelists to uh mute uh so we can switch to uh gallery mode where we can see everybody all right um let me start with uh sadali since uh i was there was mentioned and that was a technology that uh sean's uh team started working with um so what i'd like to do is going around and for everybody to do a quick intro of their their company but focus on how technology is as part of how you deliver services and since uh sean challenged us about cost to the the farmers or folks that are receiving that services i would like to understand a little bit also about your business model and i know we are tight on time so i'm going to ask each of you to try and do that in three minutes or less so now we you go thanks sari i'm very happy to to be here and looking forward to hearing from from all the other entrepreneurs um i am the co-founder and chief growth officer at awasday we are an india-based fintech social enterprise uh now expanding access to finance for india's underbanked um but for the last decade actually and this kind of goes back to you know the origin story that shawn shared a little bit about which we share we've been developing cost-effective mobile communication tools that cut across language and literacy barriers to make sure that information can reach everyone and as professor professor cole mentioned my my co-founder dr neil patel actually collaborated in some of the early research work that became the foundation for our platform today as well as precision development currently we're we are focused on financial inclusion um we're partnered with some of the top financial institutions in india so it's a b2b enterprise model um some of our clients include access bank jivan l t financial services and a number of others today we are reaching between eight and ten million microfinance customers every month through our platform and those are primarily low-income rural women microfinance borrowers and the way it works is that we send um personalized vernacular language where we're live in about 11 different languages interactive nudges and confirmations throughout the customer life cycle so for the banks and the mfis who are our partners we drive market-proven results um on things like collections upsell and that incentivizes them to communicate directly to the borrower and our platform allows them to do that cost effectively that channel otherwise doesn't really exist in the microfinance industry in india rural finance in india really relies very heavily on in-person field staff communications and so this direct connect to the customer really empowers customers with the information that they need to make informed financial decisions it brings a lot of transparency to the industry improved customer protection as well as eventually financial access as well and prior to prior to wasde i co-founded a another social enterprise called mela artisans that company works on providing a sustainable global market for indian artisans um and i'm currently on the board still and i also served as india director at tala some of you may have heard of them they're quite big now a leading global fintech company that works in alternative credit scoring and smartphone based loans great thank you sonali and let's move to sebastian who is representing latin america in terms of our panelists uh so quickly about your company your business model and how are you using technology to reach all the people you serve so hello everyone my name is sebastian i'm the ceo and founder of eleva we are colombian-based company and we have a network of more than 12 000 women that live and interact in rural colombia rural colombia has about 13 million people so what we are trying to do is to connect these people that lives in rural columbia uh with products and services that we enjoy in our cities and we do it uh through technology so we develop an app and this woman go and sell these products uh pre-sell the products and we deliver them from the city uh to to the rural areas we provide micro credit uh of around between 100 us dollars and 500 so they can set up their business sell the products collect money and repay us so this way we are helping and contributing uh to stop the immigration from rural areas into the cities uh that's how we do it and we are recognized or we were recognized by the undp for our commitment with the sustainable development goals so we are bc2a and also uh we have funding from social business we are part of the portfolio of the choosing social business network right so now we're going to go to africa the continent of africa and uh let's start with uh elosius same question all right cool hi everyone my name is aloysius from ghana i'm the co-founder and ceo of farmer line family has been around for close to nine years now and our mission is very simple uh we want to make we want to support you know we want to build partnerships technology and finance farmers to make more money we are focused exclusively on money because we don't want farmers to just survive um in a typical example is that farmers produce cocoa in ghana and cocoa like you know it's 100 billion revenue a year sector and farmers make less than two percent of that they do most of the hard work but then they don't get a lot of money so we are similarly focused on giving them three things uh give them access to high quality fertilizer and seeds um uh help them with information and best practices using technology but it's still old-school uh you know methods of training farmers in person we still do that and then finally building partnerships around them to help them to make money from their produce or we realize from years of doing the work that when they get information when they even get access to the services and they produce and you don't have them to sell they still don't make any difference you know in terms of money in your pocket which is what most farmers care about um so that's what we focus on and uh we do this across 25 countries around the world our work in ghana we are heavily involved in giving family satellites in seats but across other countries across the world we basically license our technology as a service uh to mainly the food sector the you know the private food sector like so you know the hersheys of the world the global community sectors they are beginning to move away from um to um corporate social responsibility work to sustainability work um which means that they want to bring our work as part of their work ongoing and we see that as a very plausible path to our sustainability uh you know so we use the approach to reach as many families as possible thanks great um and our last title list thought but uh also probably involved and have lots of experience on and maybe some of the aspect of the business that uh perhaps was uh too early um is christopher uh would you like to talk to us us about your company how you ran it and and any issues that you ran into as you tried to scale the company nice uh way to forebode uh but that's exactly right so i'm i'm chris uh sheehan the ceo and co-founder of a company called world cover uh where for the last uh six years or so we brought weather insurance to smallholder farmers uh starting in west africa to east africa and actually even to southeast asia we essentially used a technology called index insurance or parametric insurance which has been around for decades really where we would use satellite imagery to measure rainfall in a certain area and pay farmers when it didn't rain enough for them to get a good yield we went through the y combinator accelerator 2016 we raised money from many venture capitalists including index ventures greylock mitsui sumitomo insurance not so many impact investors actually but i could speak to that as well lots of experience pitching to hundreds and hundreds and hundreds of investors over that time many no's some yeses um and uh yeah unfortunately really in the last year just uh determined that product market fit was not in our future and wouldn't warrant another round of venture financing so we took the decision to close the business down earlier this year um and so i'm happy to talk about that experience to anyone i'm spending a bit of time mentoring if i can uh social entrepreneurs anywhere in the us in africa wherever so if any of you are attending and have some questions you want to talk through reach me on linkedin and i'm working on a new idea related to blockchain and foreign exchange in emerging markets too so if that interests you i'm happy to speak um i studied cs at mit and finance at mit uh way back in 2006. um thanks a lot great so now i i'd like to ask each of you again and then we can just go by the the same order is why for profit and how do you think um you are making a difference different impact by going for profit rather than being an ngo supported by donor fund funding perhaps in addition to getting some uh uh payment uh in other ways so sonali you want to take that one and we'll go around sure um i will say that i do think that um in the social enterprise sector often there's a mix um so for example with elasti you know some of our early work was grant funded i will say you know we have worked a lot in agriculture before in the early days and have kind of pivoted more toward financial inclusion and a lot of the r d behind that pivot actually came you know we were only able to do that because we got a gates grant you know that allowed us to take big risks and try things out and do a lot of a b testing um and experiment so um so i will say that but i think in terms of why for profit i think for me as an entrepreneur you know it was always one thing is that you know your relationship with your investors at least from my perspective is one that's kind of more on equal footing or mutual respect as compared to um kind of going out and seeking charity that's just my personal opinion i don't know if anyone you know others would agree with that but i just feel like there's a different relationship with you know entrepreneur to investor and that's you know to me that is important and it's kind of empowering for the entrepreneur um i also um you know in terms of sustainability being able to continue the work you know it's great to get that you know original grant funding and there are organizations that are able to continue um but uh in many cases when i've spoken to other entrepreneurs who have gotten some grant funding or even non-profits you know there'll be something that works and then you know it's proven to work and then the grant funding is you know the grant funders no longer interested they're on to the next new idea which is what they should be doing i believe but then you know it's hard to it's really hard to sustain a lot of times to scale it up and to continue to constantly get more and more grant funding i also think it's a it's an interesting space to be in right you know whereabouts we have been trying to find the intersection of the interest between the financial institutions and in this case uh banks and their interests as well as their customers interests um who is you know as a social enterprise that's who i want to work with right the rural women that's who i want to empower but one of the best way the reason we've been able to reach you know 10 million women isn't you know because i you know got grant funding and you know tried to reach 10 million women on my own it's because i plugged in to a massive industry and i found a way to find kind of the intersection of value for for two distinct groups and so i think that that's um that can also be really powerful when we look at kind of systemic change it's not always possible to start from scratch you know it's it's really important to be able to work within existing systems and power structures to achieve the results and sometimes that can really fast track your your social impact and your scale okay sebastian same question okay well for me um i think it's a little bit different i come from the private world so i was an executive for professor gamble johnson and and to be honest i saw this as a business opportunity first that was creating an impact so i never even considered to be an ngo i didn't i'm learning about the ngos at this point but that that was never an option so i saw this as a business opportunity that was very aligned with my purpose and i think um i'm still learning but i see and i run my business as a private enterprise and i have to make a profit on everything and from my principal i have to create win-win-win situations everyone in my supply chain has to win in order to be sustainable and that's a principle that i have so um i'm still learning i come from the private world and and i never even considered this to be an ngo this is a business and is working well for us so sebastian how many people are you reaching right now so i have a community of 13 000 women and we impact around 150 000 people in rural communities at this point that's great um alicia's are you still with us because i don't see your uh picture okay there you are same question uh yeah that's a good question i think we actually debated it was when we became equing green fellows in 2014 we actually debated a visually before profit or not profit because we're trying to figure out how we could attract funding very quickly but we realized that when we decided to go for profit um the legal registration didn't actually matter one market was the shifting mindset that the business of food can't pay for itself and should pay for himself because a lot of people make money from it so why is that when it comes to farmers like you know you know we don't want to approach you like in a very serious uh business principles um like for instance like you know and also another thing that we also realize is that like the true form of power is allowing nations and countries to run their food system by themselves right so let's see if we have a program let's say in ghana and our program is dependent on donations from around the world because like for forever anytime a donation stops then those farmers will be left hanging when there's an opportunity to actually make money from it and keep it sustainable don't get me wrong we got grants right so in 2018 we got about almost a million dollars from mastercard foundation that helped us to actually improve our model that helped us to actually like you know invest infrastructure get field officers get them like motorbikes and all that that like we but we thought of that as an as investment and they pushed us really really hard to think of sustainability and for me as someone who grew up in the farming community we know for sure that farmers want to make money farmers don't want to be indebted to anyone they have dignity and they want sustainability and they want power so we think that when it comes not all not all interventions can be run as a business i admit but we think some food interventions can be run as a business and if we develop the discipline to do that we give true power to the people and that's why we chose our approach we you know just like how sonali said we didn't want to go forever you know we didn't want to be begging for money forever we want to get money improve the model take some risks initially and then become sustainable very quickly um you know to keep it going and you know that's why we chose our approach as farmer line great and christopher the interesting comment that you made is that it was harder to get impact investing funding uh than from uh just regular vcs but so in terms of your experience again uh um kind of quiet for profit and uh and then what are the impediments for going that direction i guess it's a good question actually something that sonali mentioned really jumped out and resonated with me and it's you know there's a there's a really a massive difference in culture i would say from ngos to impact investors to venture capitalists you know in in menlo park and as you get toward the vc side there's a consistency in motivation you know the other person on the other side of the table what they want they want a billion dollar outcome right they want to return their fund they have a heart too they care about mission and values and actually they're very excited when they meet you know someone like me working on this kind of mission you know in africa or wherever but it's it's much easier as i have hundreds of conversations about how to create a story that resonates with them whereas with ngos and impact investors there's this you know and they themselves struggle with even internally right how do we trade off and then even if they get that right how do they communicate that to the entrepreneur here's how we trade off uh between impact and if you're a woman focused uh you know and a company or focused on formerly incarcerated people or focused on indonesia you know what's the universe of people you go to has their mission changed every five years you know rockefeller all these big organizations put out their five-year plan or three-year plan does it change so it's really hard to navigate that so i think if if an entrepreneur is familiar and knows that environment very well it could be a great option but for at least for someone like me who's just kind of knows profit and dollars and cents much easier to go the vc way and i'm not sure on the statistics i'd love to hear maybe professor cole knows but the amount of money in vc just seems to be gargantuan and available and kind of begging for ideas the amount of money unfortunately in kind of the ngo and impact world feels a lot more uh capacity constrained and that's another challenge for entrepreneurs i mean i'll just jump in here i think what i we've taught often in our business at the base of the pyramid class at hbs as well as my impact investing class is you know the target customer sector has a big impact on the financial viability of the business model so you know there are a few exceptions like microfinance which have managed to you know have ipos and sort of a successful business models at the very very base of the pyramid but even those models had a you know 10 to 15 year period where they were supported by philanthropy where they figured out the business model and were able to scale and grow and i think you know things like transaction costs and customer education become very relevant when you're talking about the very base of the pyramid because you know to take i i did some studies uh christopher on weather insurance and so you might have to visit 10 households and explain weather insurance and two of them will decide to buy the product but if you're trying to run a profitable business those two who are actually giving you money have to cover the cost of educating the other eight people who decided not to buy the product and so all of these costs and and so if if you're doing customer education and selling a five thousand dollar life insurance policy to somebody in nairobi you know where the premium is five thousand dollars then you can afford that that overhead cost but if you're selling a ten dollar uh uh weather insurance policy to a very poor farmer then then there's just no margin left once you take into account the transaction costs and the overheads so i think you know i'm actually very optimistic about the value of private sector solutions in this space because i think digital is going to dramatically reduce transaction costs when we can deliver customer education through video when we can collect insurance premiums uh via and pesa and pay farmers back via pay so we can really drive down the transaction costs and then there's the scope for value creation that the private sector uh provides and i think you know there there's some beautiful things about a private sector enterprise often that is extremely focused on the customer because you get daily feedback if the customer's not buying your product you have to figure out what's wrong and why aren't you develop delivering something of value whereas it let's say the public education space the customer doesn't have a choice they're going to send their kid to your school and you know they're not you know maybe you'll lose some people to private education but there's a large segment that's just going to always consume the public school no matter how good or bad the product is and some of those feedback loops uh aren't present so i'm bullish and excited about the role of of a private sector but i think it just turns out to be quite hard to make make it work in the very poor segments yeah just a quick note on that thank you is however even with the the very um i think true unit economics challenges for some of these businesses attract you know addressing these markets at least i found it was the impact investors who were for whatever reason most uh concerned about you know the financial model is this sustainable is this finance you know what's the unit economics how are you going to reach these people it was the index ventures of the world you know sitting on a billion euros of funds saying yeah chris here's a million dollars to go try it out and let's learn you know as we go and as an entrepreneur that's what you want to hear so you can get into the field and start building right versus building more models to to kind of uh support that story this is great and i'm so sorry that we only have an hour for this discussion because i think we can go on for at least couple of hours but um here's my last question and we'll open up for questions from the audience is so it's gonna take a heck of a lot of effort right because i mean there are just so many small hotel farmers and people that need help and all of you are actually doing amazing numbers in terms of the people you serve but we've got to scale this and how maybe starting from professor cole do you think that we can do collaboration and certainly sounds like professor cole you are driving forward with technology and you have the freedom with the funding sources you have how do you bring that together into the ecosystem that the social enterprise lives and and and then the other way um in terms of making uh more of a systemic change rather than kind of a one here one there yeah i mean i think collaboration is absolutely uh essential here uh and you know in some sense we're selling to the government so it's a collaboration between our non-profit uh and and the government if you take chris's example i think one reason the insurance company was invested was interested in investing in him as they thought saw him as having a deep expertise in this segment of the world that had no access to insurance and they're looking forward where are we going to get growth in the next 10 or 20 years and it's going to come from the base of the pyramid so let's leverage you know a million dollars is very cheap for them to get deep expertise in into this market uh uh segment and so i think figuring and uh lucius mentioned you know interest and sustainability and so i think you know the certainly my impact investing class but i think in general we're seeing capital markets and businesses getting a lot more interested both in environment as well as the well-being of smallholder farmer communities and i think you know while there are a lot of a lot of very poor families they're also very poor so a little bit of money can make a big uh difference and whether that you know we have a case study about a a farm roast a coffee roasting company where you can tip the farmer you know it does a very careful tracing of the the beans to the the cup and so you can tip the farmer 50 cents if you liked your cup of coffee and that you know you may that's worth it to you because you feel good uh thanking the farmer for that great cup of coffee but for them if they're getting 50 cents a cup a day from five different customers that's like transformative uh to their life so i think uh technology and collaboration are gonna really help bring uh people uh closer together and unlock a lot of value creation both for customers in the developed world who may care about climate change or other topics as well as smallholder farmers and other people around the world so um trying to do this in just a couple of minutes but how about uh one of you and what type of collaboration would you like to see either between social entrepreneurs or with academics and people that are more being funded for research of this effort um i'm gonna say alicia's you want to take this yeah um yeah collaboration is key like from our work we realize that you know we can be everywhere so we have to work with people and i just like to like react quickly to some of the things that they said about sustainability and services we found this out very quickly in our work to that we're trying when you're selling intangible services to people things that people cannot touch is really hard to sell and also it's very hard to put a premium on it especially to farmers right so when we try and sell information services and it didn't make sense so so they were interested they would love the car but when they it's like it's like we are we are paying apple to access their call center like it doesn't make any sense right but you are you pay for the iphone um and then you get a call center support services for free right um so those are some of the things that we expect that that we that we are finding very exciting now for if you're providing a service that is intangible like maybe like things that people cannot touch like weather information uh it might be helpful to consider collaborating with um you know maybe fertilizer and seeds company or companies that buy commodities from farmers where they can offer your services for free to them but they build it into the pricing model that may be you know there's something that to explore you know that's something we are really really excited about and it could be a game changer where we can get uh you know a lot of insurance like you get a lot of performance insured and get a lot of farmers you know access to information but they get it when they get when they go and pay for the things that they normally pay for which is seeds fertilizer and then when they sell their commodities as well okay um i have to give some time for the questions that's coming in because i have a lot more questions for all of you but i have to stop myself so here is um a question so this is from juan roberto could you please share your lessons about being effective in getting the initial clients for your business um sebastian we'll go with you yeah so first of all like this is like i'm learning a lot so thank you so much for each of the panelists because this is very interesting i would say to building up a business is really expensive and really hard and i think that's where you need to have more investment uh i did a partnership with cpg companies and they co-invested in building the base of the customer the customer base and that was very important for me so for example i partnered with unilever to build the customer base and there was an investment there once that you have that customer base it becomes more efficient especially for my type of business that implies a lot of logistics and it's very expensive to serve the initial customer so basically transportation cost was really high at the beginning because i was serving a very small base of customers once that you have the opportunity to fill the trucks and you have all your technology so the fixed cost that i had at the beginning was high but once you start building your base because well well so i think when i'm linking back to part of the conversation that professor cole and christopher were having about collaboration i think if you are able to demonstrate to private companies that there is a strong benefit at the beginning and then they can benefit from it they are willing to invest so in my case that i come from tractor and gamble cpg companies i was able to demonstrate that there were millions of customers underserved and these people consume their products but if we were able to pay to build a logistical and technological base they were going to profit from it so to answer your question the initial investment is high but once that you build your customer base it starts going slow and that's where i believe you need to do a partnership with someone that's going to benefit in the long term of midterm from that customer base you're a muted uh sorry thank you christopher um the next question is from rekka pai for the panelists who are bullish on the private sector what do you think of the role of the impact funds in avoiding impact washing and how can you differentiate yourselves in terms of the kind of impact you're creating and how they evaluate you versus your competition um i'll give this one to christopher as i googled the term impact washing um uh i don't know i think maybe someone else is better here but i think one thought on impact is um you know you often do see i think a lot more involvement in terms of um the mission of your company by the impact investor either directly or or indirectly i mean even down to the term sheet um term sheets provided by some of the impact investors whose lps themselves investors themselves are you know proparco cdc diffid you know some of these um you know development financial institutions so there is kind of a a lot of pressure to you know do extra accounting and and everything for the entrepreneur so if maybe that's an aspect of impact washing but um yeah i'll take this quickly okay go ahead did we stop ass on in fact investing i mean i think you know one thing i certainly believe is that impact investing is useful tool but it's not the only tool we still need government intervention we still need charity we need still need a lot of other tools in our toolbox to tackle uh the problems that the world's facing so i think some of the impact washing language comes from concern that people are overselling uh impact i think you know we are seeing an increasing focus on credible standards of impact the the ifc has developed operating principles of impact management for example and a bunch of impact investors uh have signed on and i i think it's it's useful to think of what the counterfactual is right if the counterfactual is business as usual with no attention to emissions and we're seeing a firm at least reporting on its emissions and paying attention to its emissions i see that as progress uh in in the right direction but you know the beauty of impact investing is the investor who's allocating her own capital and can sort of decide what level of evidence or what standard of evidence they want uh when they decide to make their investments so i'm perhaps less concerned about impact invest impact washing uh than some others i can i can maybe provide some of my experience that i come from the private world and i didn't have like a methodology or knowledge of how to do and how to sell it when i got the contribution or help from united nations with the business call to action recognition they helped me to develop those goals more currently and that that really helped me a lot and gave me the structure like i knew how to do my my business and i knew i was doing impact but i didn't have the right structure or anything but working with the united nations that helped a lot so and having that recognition has helped me to have like better conversations with investors right and i'm sorry that i have to do the last question and there's just a lot more that is uh been asked but uh i'll start this question with eloyus as uh and this is from sabrine icon um as enterprises are incentivized to deliver services with as much margin as possible to maintain sustainability how do the panelists ensure that the bottom of the pyramid are not perpetually left behind you want to take it yeah um like the way we approach it it comes down to the opportunity right um and becoming a relevant player or a bigger player consistently so i'm a subscriber for spotify i use this every year you know so i'm a return customer when it comes to farmers there are very few services that are available to farmers here on year so it'll be a big program that everybody millions of farmers will benefit and following the program goes away after five years goes away so for us what is driving us at this point is like okay um can we sacrifice some margins in the short term to gain the critical mass where we can reach as many farmers but every year we don't have to spend the same dollar going out to get those money to come back how can we ensure that the service is good enough that every year those summers will come back and pay for themselves young year um so when you focus on earning farmers coming back and building services that makes them come back and then you have a strat a strategy of sacrificing some margins in the short term so for instance when it comes fertilizer insists in the short term of course the margins are going to be very low but as you reach many more and more farmers um you can become an importer or you can work with your suppliers to have bigger margins and that helps you to build a stronger business so for us i feel like in the approach in the short term is sacrifice margins to train farmers for free all from exactly effortless in seats receive free training in person and also on your phone sacrifice margins when you're buying your commodities because it's gonna pay it's gonna pay you in the long term and you know that's that's what we're focused on at this point great and i'd like to give the last word to professor cole uh your comments feedback or advice to the pedalists oh i i just want to encourage the panelists and anybody watching to to jump in and try to change the world i think that the thing that i you know at some level i was just a pointy head academic uh five years ago sitting in my office writing papers and now i'm on the board of this organization that's serving five million uh farmers and i think i'm probably a pretty good academic but i wouldn't have necessarily thought that i was a great social entrepreneur so i think you know one key to success is just giving it a try and you know i i'm a big fan of what ava's day is doing i'm super excited to hear about what lucia's doing i'm excited to hear about what christopher's next venture is uh and sebastian we're working in colombia so we may reach out to uh to connect with you uh so i'm i'm i i i wouldn't presume to give you advice i'd just say kudos great work and i look forward to to what you're gonna do in the next five years so last word for me i think we're run out of time at this point is that if you want to keep all this discussion join the c community uh you know how to do it or you can just email me if you have any questions and we should keep this going because it takes all of us to really make a difference in this world so with that i'd like to say thank you for attending and goodbyes especially thank you for all my panelists and professor carl all right thanks for putting this together thanks bye

2021-10-21 08:55

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