Welcome to our Innovators Creating Prosperity series, spotlighting organizations across the globe that are positively impacting economic development.
In the age of artificial intelligence, fintech, and autonomous vehicles, agriculture may not seem like a sector that’s brimming with innovation. But Babban Gona, which means Great Farm, is beginning to change that in Africa’s most populous country.
Nigeria is currently home to roughly 200 million people, most of whom are young. Given that youth unemployment is around 40%, the country’s future hinges on drastically reducing that rate. That’s where Babban Gona comes into the picture.
Agriculture is crucial to Nigeria’s economy, employing nearly 40% of the entire labor force. But the vast majority of these farmers—approximately 88%—are small family farmers. And among those, more than 70% live in poverty. One of the main challenges for smallholders is that they suffer from low economies of scale, which inhibit profitability due to high cost of production, low yields, and low prices. If small-scale farming becomes more profitable, however, market forces will draw millions of unemployed, young people into the sector, while lifting a significant portion of Nigeria’s population out of poverty in the process. At least that’s the thinking behind Babban Gona.
Babban Gona’s Agricultural Franchise Model helps smallholder farms reach their potential by building mini farmer cooperatives. To increase productivity and profitability, the social enterprise offers training, distributes loans, provides a holistic range of services, and markets their products to buyers across the country in order to increase the price farmers get for their products. In just nine years, Babban Gona’s services have helped farmers double their productivity.
By creating a new market for agriculture inputs such as seeds, fertilizer, and credit, Babban Gona stands to significantly impact the economic trajectory of Nigeria. But how is it overcoming many of the challenges inherent to innovating in emerging markets, and innovation in general? We spoke with Babban Gona’s founder and managing director Kola Masha to learn more about the social enterprise’s journey.
1. Where did you get your idea? How did you know there was opportunity?
Babban Gona was born from the inspiring life of my grandfather who was a poor smallholder farmer in South Dakota and leveraged farmer cooperatives to attain economies of scale enough to increase his profitability. In a quest to better understand how successful farmer cooperatives were built, I leveraged my Eisenhower Fellowship which allowed me access to visit approximately two dozen farmer cooperatives in the United States. The lessons from this exercise are what formed the foundation of Babban Gona.
Theory Insight: One of the best ways for innovators to identify opportunity is not to directly copy and paste what others have done, but rather to observe and develop circumstance-specific activities that fit the context.
2. What was your initial target market?
Our target market has remained smallholders, especially youth, who are typically low-income earners engaged in subsistence farming.
3. What did your target market do/use before your innovation was available?
The market to serve smallholder farmers is extremely fragmented so most farmers didn’t have access to a predictable supply of agricultural inputs such as seeds, fertilizer, and credit. This fragmentation had negative implications on the farmers’ ability to grow, harvest, and sell their crops, thus severely impacting their livelihoods. In some cases, because farmers had always farmed a certain way, they didn’t know a better way to improve their yields. That’s where Babban Gona adds a lot of value.
Theory Insight: The smallholder farmers who didn’t have access to agricultural inputs are what we call nonconsumers, who are characterized by their inability to consume products and services that would be beneficial to them due to cost, access, time, and skill. If entrepreneurs are able to develop an innovative business model that targets this set of nonconsumers, they’ll not only reap handsome returns, but also set in motion a domino effect of development.
4. How have you raised funding, and what advice would you give others regarding fundraising?
We have been very fortunate to have partnered with a number of strategic partners who have believed in Babban Gona’s vision from inception. Through some of these partnerships, we have been able to raise a combination of equity, debt, and grant funding from key development institutions and international foundations to scale our business model and help us achieve our target of reaching one million smallholder farmers by 2025. We would advise others interested in raising capital to seek partners that share their strategic vision.
5. Innovators often feel that the lack of an enabling environment in emerging markets—poor infrastructure, inadequate institutions, and little government support—is insurmountable. How are you overcoming these challenges?
In recent years there has been an improved policy environment that is targeting growth in the Nigerian agricultural sector, however the challenges of an emerging market still exist. Babban Gona has had a relentless focus on creating efficiencies in our model, which has led to us attaining a positive EBITDA margin for the first time in our third season, in FY 2015, and a positive net income in FY 2016.
6. What are some major barriers to your company’s growth?
One of the major challenges we have faced over the years has been accessing affordable financing in Nigeria, where lending rates to businesses range from an average of 20% to as high as 40% per annum. To remedy this issue we access concessionary funding targeting the agricultural sector and partner with investors aligned with our strategic impact goals. Another challenge we’ve faced has been training and upskilling employees in preparation for scale, which we’ve addressed by proactively putting into place two training programs aimed at enhancing the skills of our employees across all levels of the organization.
Theory Insight: In less mature and under-developed markets, investing in operations that aren’t seen as core competencies of an organization’s business is absolutely necessary when creating new markets. In this case, although education isn’t core to a typical agriculture-focused company, it’s important for Babban Gona to invest in because the organization won’t be able to scale its operations without upskilling its employees.
7. What can other innovators take away from your experience? Is there anything you’d do differently?
The charge to other innovators in their respective fields will be for them to stay focused on proving their business model works and getting results. As a business that has been operational for nine years, we spent six of those years focused on our maize credit program, and now having mastered that extremely well, we are planning on expanding our operations to cover other commodities in a bid to diversify the business.
Theory Insight: At the onset of most successful market-creating businesses, entrepreneurs develop an emergent strategy that’s flexible. This helps them concentrate on learning when mistakes aren’t as costly. As they grow, they’re able to develop a deliberate (and relatively fixed) strategy to scale their business.