SDM Case Study 3: Agri-Wallet

Understanding ag fintechs' business models

Agri-Wallet service delivery model case study

Published on

February 11, 2020

“We may have a farm but often we do not have money for farming” says Susan Gakii, a farmer who grows sorghum, beans and maize in central Kenya. As with many of the 78 million smallholder farmers in sub-Saharan Africa, irregular cash flows meant that Susan, now an Agri-wallet customer, was often unable to access the seeds, fertilizer and agro-chemicals she needed to optimize the productivity of her farm and generate the income to provide for her family.

Agri-wallet, an innovative agriculture fintech operating in Kenya, is committed to changing this. Founded in 2017 and winner of multiple awards, including the World Bank’s Disruptive Agricultural Technology Award, Agri-wallet provides supply chain finance to ensure that all actors in the value chain – including farmers, buyers and suppliers – can access the resources they need to grow and scale.  And it aims to solve this challenge in a way that is affordable for its customers and profitable for its investors – an often difficult balance to strike when it comes to smallholder and agricultural finance.

In the autumn of 2019, as Agri-wallet prepared to expand its operations, the team engaged the Mastercard Foundation Rural and Agricultural Finance Learning Lab (the Lab) and IDH The Sustainable Trade Initiative (IDH) to conduct a Service Delivery Model Analysis. The analysis evaluated Agri-wallet’s business model and identified opportunities for Agri-wallet to scale sustainably while creating positive returns for its farmer and agri-SME customers, and its investors.

This blog shares four key learnings from the Agri-wallets SDM analysis.


1. By reducing the cost and risk of financing and strengthening the value chain, Agri-wallet’s digital supply chain finance model is expected to generate positive returns for its customers and its investors.

Agri-wallet is a blockchain-enabled solution that provides affordable trade and input finance to farmers, buyers, and input providers “earmarked” for income generating agricultural activities (see Figure 1). Buyers are able to access working capital overdrafts earmarked for paying farmers for their produce on time. At the time of sale, buyers use their Agri-wallet overdraft to pay the farmer directly, repaying the value of the produce they have purchased plus interest to Agri-wallet at a later date. Farmers can sign up for an Agri-wallet account for free. When a farmer gets paid by a buyer, they can choose to get the payment in either mobile money or tokens. These tokens, effectively a down payment, are earmarked for purchasing inputs such as seeds and fertilizer, and can be redeemed at partner input suppliers. When farmers have reached a minimum balance, they can purchase inputs on overdraft and repay Agri-wallet within six months. Finally, input providers who are part of the Agri-wallet network pay a 1% fee when farmers withdraw their tokens, and in return are able to apply for an overdraft from Agri-wallet earmarked for purchasing inventory.

Figure 1: Agri-wallet’s service delivery model

Agri-wallet’s service delivery model


To date Agri-wallet’s value proposition has been well received in the market. In less than a year, Agri-wallet has reached over 25,000 farmers in Kenya and partnered with over 50 buyers and over 100 input providers. By 2024, and as the team shifts from product validation to scaling, Agri-wallet expects to reach over 800,000 farmers, 3,000 buyers, and 3,000 input providers. At this scale, Agri-wallet is expected to create up to EUR 50M in annual value for its farmer and agri-SME customers (see Figure 2).

Over 97% of this value — or the equivalent of EUR 49M annually — will be captured by farmers. In addition to smoothing their cashflows, Agri-wallet overdrafts enable farmers to purchase more and higher quality inputs, resulting in sustainable production and yield increases of up to 115%. This increase in sustainability and productivity ultimately translates into higher revenue from product sales and can increase the net income for Agri-wallet farmer customers by up to 70% compared to baseline farmers in the region.

Buyers are expected to capture up to EUR 1M annually, primarily through higher sales of agriculture produce they purchase from farmers. By paying farmers on time, buyers are able to attract and retain more farmers, increasing not only their supplier base but also the reliability of their supply chain through a decreased risk of farmer side selling. Sales are further boosted by engaging with farmers who have access to Agri-wallet overdrafts for inputs, making these farmers more productive and sustainable. Overdrafts also enable buyers to better manage their working capital and overall liquidity.

Input providers who partner with Agri-wallet see an average net income uplift of 18%, also driven primarily by higher sales. An average Agri-wallet farmer purchasing inputs on credit spends up to EUR 122 more per year than the average farmer, with many purchasing not only more inputs but also higher margin input products such as certified seeds, quality agrochemicals, and livestock medicine.

Figure 2. Agri-wallet average value creation 2019-2024

Agri-wallet average value creation 2019-2024

By taking a holistic approach and effectively tapping into latent demand for financing across the entire supply chain, Agri-wallet’s digital solution has the potential to create significant value not only for its customers but also for its investors. Agri-wallet is expected to breakeven in Kenya in 2021, and to generate positive returns without grant subsidy by 2022, with gross margins around 45% by 2024.  


2. Buyers are the key entry and leverage point to scale Agri-wallet’s business and strengthen the value chain, but need to be selected carefully to optimize financial performance.

Buyers play a key role in Agri-wallet’s supply chain finance business model. By signing up farmers they regularly procure from, buyers are a natural customer acquisition channel and help to reduce information asymmetries for Agri-wallet, which reduces the risk and cost of financing the value chain. Buyers also have a strong incentive to encourage farmers to sign up for Agri-wallet since farmers who are actively using Agri-wallet to purchase inputs are more productive and sustainable.

Buyer overdrafts are also a fundamental driver of Agri-wallet financial performance. With a net margin 6x higher than farmer overdrafts and 15x higher compared to input providers, buyer overdrafts are expected to account for almost 75% of net income over the next 5 years. Underlying this financial performance are bigger loan sizes, higher pricing, and lower defaults — factors which ultimately offset the operational complexities involved in setting up partnerships with buyers.

However, not all buyers are equal. Buyers come in all types and sizes, from large commercial buyers to smaller cooperatives or contract offtakers. Agri-wallet buyers are also engaged in different value chains and have different business models ultimately showing a wide range in product usage, repayment behavior, and farmer registrations. This diversity can help to explain why some buyers have negative customer value — and will therefore never offset their customer acquisition cost – while other show attractive customer returns on investment (see figure 3). Understanding the drivers behind buyer performance can help guide a more targeted approach to buyer acquisition, onboarding, and customer care to create a buyer mix that maximizes overall profitability. For instance, if Agri-wallet optimized its portfolio of buyers for number of farmers, size of initial overdraft, and growth and utilization rate of the overdraft, overall net income could increase by up to 60% in the next five years.   

Figure 3: Buyers customer lifetime value

Figure 3: Buyers customer lifetime value


3. Achieving financial sustainability requires Agri-wallet to continue to scale rapidly using the right capital structure to finance its operations and lending.

Agri-wallet’s customer registration and usage numbers suggest it has been able to develop an attractive and proven value proposition, with potential for commercial returns. The challenge is now to scale, and scaling presents a significant challenge. This is true for all agriculture technology startups focused on developing countries, but especially for fintechs like Agri-wallet whose ability to grow relies heavily on access to affordable capital to provide innovative supply chain finance solutions.  While incumbents — such as traditional commercial banks — can easily draw from their own balance sheets, fintechs like Agri-wallet working to serve small actors in the agricultural supply chain often have limited access to appropriately priced and structured investment capital.

In theory, partnerships with international and local debt investors or wholesale banks could enable Agri-wallet to tap into a large enough pools of capital, while debt investors could earn attractive returns from Agri-wallet’s fintech solution. In practice, financing smallholders and SMEs in agricultural supply chains is considered by most funders too risky to even be considered. This creates a large gap between demand for and supply of financing for smallholder farmers and agri-SME.  Risk mitigation tools such as credit guarantees can go a long way in unlocking agri-finance. For example, IDH Farmfit Fund de-risks investments in smallholder farming and helps drive sustainable impact by lowering risks and costs for both farmers and investors. Collaboration between Farmfit and Agri-wallet could create a new asset class that would appeal to a broad range of investors.

These new asset classes and innovative capital structures have the potential to significantly drive scale and maximize value creation for Agri-wallet, its customers, and investors. For instance, if Agri-wallet could de-risk its operational model by shifting its customer receivables to an off-balance sheet vehicle, Agri-wallet could increase its net income up to 2x and raise overall equity returns by up 2.5x. Achieving these numbers would also depend on a number of other factors, including the balance between local vs foreign currency denominated debt, debt to equity ratios, and Agri-wallet’s ability to fundraise successfully and reach its customer targets.


4. An optimal pricing strategy will need to balance increased capital costs for Agri-wallet and returns for buyers, input providers and farmers.

The last 6-7 years have seen an unmistakable rise in donor interest on tech solutions that can help develop the global market for smallholder and agri-SME finance. According to ISF Advisors, there are roughly 25 significant grant funders contributing to grant-based subsidy or concessional capital to offset the private sectors’ high real and perceived risk of smallholder and agricultural finance. A large part of this grant support has focused on subsidizing short-term innovation. This grant funding has been directed at individual financial service providers to support the development and testing of high potential models that are able to provide affordable financing to smallholder farmers and agri-SMEs and, that have the potential to become financially sustainable in the long-run.

As a highly innovative fintech solution in 2018, Agri-wallet secured grants from a variety of donors, including a USD 1M grant from Mastercard Foundation, to validate their value proposition. But as Agri-wallet shifts from market validation to scaling and the innovation grants come to an end, Agri-wallet — as many other agriculture tech players in Africa — will start to face increasing capital costs. While part of this increase in the overall cost of funds could be offset by an optimal capital structure (as discussed above), the transition to fully commercial funding is likely to create upward pricing pressure. As Agri-wallet explores the scope for price increases, the design of an optimal pricing strategy will need to take into account the returns of buyers, input providers, and farmer (see figure 4). This is particularly important for vulnerable clients, like smallholder farmers and small agri-SMEs, where sudden or brisk price increases could risk eroding their income gains to a level that renders Agri-wallet uncompetitive.

Figure 4: Expected net income uplift for the average buyer at different price points

Figure 4: Expected net income uplift for the average buyer at different price points



Two years after ideation, Agri-wallet has gone a long way. The journey started in Kenya working with large international buyers to support them in building more sustainable, fair and transparent supply chains by providing them with affordable trade finance. Since then, Agri-wallet expanded first to serving smallholders, to further strengthen the supply chain by improving smallholder access to high quality inputs and, more recently, to international input suppliers looking to finance large inventory purchases.

But Agri-wallet is far from done, and the next five years look equally exciting for the team. Agri-wallet’s new partnership with IDH Farmfit Fund, Rabobank and FMO will unlock investment for scale, helping to drive sustainable production, food security, and climate resilience in the agri-food sector. In addition to scaling in Kenya, Agri-wallet aims to expand to over a dozen countries in Africa, Asia, and Latin America — reaching over 3.3M farmers, 14K buyers, and 12K input providers — and becoming one of the leading digital platforms serving entire agri-supply chains.  

About the Author(s)

Agri-wallet logo
Learning Lab Partner

Agri-wallet is an innovative agriculture fintech operating in Kenya. Founded in 2017 and winner of multiple awards including the World Bank’s Disruptive Agricultural Technology Award, Agri-wallet provides supply chain finance to ensure that all actors in the value chain – including farmers, buyers and suppliers – can access the resources they need to grow and scale. 

Original Content

The Learning Lab works to identify and share knowledge relevant to our learning agenda and our users, but also to create new knowledge through research and facilitated learning. Original content from the Learning Lab includes news about the Lab, analyses we've conducted, knowledge products we've created, and posts we've written about other relevant initiatives.

IDH Farmfit
Learning Lab Contributor

IDH drives sustainability from niche to norm; by convening companies, civil society organizations, governments and others in public-private partnerships. Together with our partners, we design, co-fund and prototype new economically viable approaches to realize green & inclusive growth at scale. Our approaches are designed to drive sustainability in commodity sectors and sourcing areas, while delivering impact on the Sustainable Development Goals. Through Farmfit, IDH supports the development of viable business models that deliver finance and other services to smallholder farmers. IDH is supported by multiple European governments, and works together with over 500 companies, 35 civil society organizations and 40 governments, in 11 sectors and 11 landscapes, worldwide.

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