SDM Case Study 2: Tulaa

Understanding ag fintechs' business models

Tulaa service delivery model case study

Published on

August 16, 2019

Entrepreneur Hillary Miller-Wise sees the opportunity to transform rural livelihoods in Africa. Having worked at the intersection of agriculture and finance for more than 15 years, Hillary knew that farmers could improve crop quality and yields with better inputs and training, but also needed to access markets where they could sell their produce at fair prices. Hillary launched Tulaa in 2017 with a vision of leveraging technology to provide farmers with an end-to-end solution that includes inputs on credit, advisory, and market access services. The company has since reached 15,000 farmers with plans to serve over 110,000 farmers by 2024.

Sustaining over 45% annual growth rate to reach this target is a challenge in itself. Ensuring that this growth is structured in a way that creates value for Tulaa and its partners, especially farmers, makes this task even harder. To help guide their efforts to scale, Tulaa engaged the Mastercard Foundation Rural and Agricultural Finance Learning Lab (the Lab) and IDH Sustainable Trade Initiative (IDH) to conduct a Service Delivery Model (SDM) analysis. The analysis evaluates Tulaa’s business model and identifies opportunities for Tulaa to scale sustainably while positively impacting its farmer clients and value chain partners.

Below are five key insights from assessing Tulaa’s SDM.


Digital solutions offer a strong opportunity to create and capture value across farmers and value chain partners

Tulaa offers a digital end-to-end solution for farmers to access inputs on credit, advisory services and markets at fair prices (Figure 1). Farmers can purchase inputs like fertilizer, seed and crop protection from their nearest retailer on credit using digital vouchers delivered to their phone. Tulaa pays the retailers directly and collects mobile payments from farmers over time as they harvest their crops. Tulaa sends farmers free SMS messages with tailored agronomic advice during the crop cycle based on their location, crop and types of inputs purchased. At harvest, Tulaa signs short-term off-take agreements with the farmers to purchase their crops, which it then sells via wholesale markets in urban areas at higher prices. During harvest time, Tulaa coordinates logistics to transport the crops to the market and pays farmers for their produce using mobile money. Each transaction is managed using mobile applications, mobile money and artificial intelligence to capture KYC data and credit score customers, send and receive payments, fulfill input orders, determine farm gate prices, and match buyers and sellers of produce.

Figure 1: Tulaa’s Service Delivery Model

Figure 1: Tulaa’s Service Delivery Model

Tulaa’s value proposition is compelling to both farmers and value chain partners. Farmers are able to improve crop quality and yields and sell their produce at higher prices, while value chain partners see efficiency gains and higher revenue streams. To date, the company has reached over 15,000 farmers and partnered with over 100 input retailers, aggregators and buyers to test its product market fit. Over the next five years, Tulaa plans to serve 110,000 farmers through partnership with more than 500 value chain partners. If Tulaa achieves these targets, they could create up to USD 79M in value annually for farmers and USD 5M for their partners (Figure 2). Tulaa knows that satisfied and loyal partners and farmers are core to its growth and success. By focusing on creating real value, Tulaa is on the right path to developing a sustainable service delivery model and projects gross margins to exceed 85% within five years.

Figure 2: Tulaa Value Creation

Figure 2: Tulaa Value Creation


Market access services are the big value driver for Tulaa, though credit remains critical to increasing customer traction and optimizing market access margins

When Tulaa launched just under two years ago, its initial offering for farmers only included inputs on credit and advisory services. This was a strategic choice since input supply is less fragmented and logistically less challenging compared to brokering open market produce sales. But Hillary’s vision had always been to offer an end-to end solution and Tulaa added market access services in late 2018 to close the loop for farmers.

Expanding into market access services also presented a big commercial opportunity. With a net margin almost nine times that of its input on credit service, Tulaa’s market access services are expected to account for over three-quarters of its cumulative profit over the next five years. New challenges and costs associated with transportation and market price volatility are offset by the high spread between farmgate and wholesale market prices and lower financing costs for operating the market access service. Revenues generated by market access services become even more attractive as the company scales and volume trades per farmer increase.

The profitability of Tulaa’s input on credit service is more challenging at the current scale due to small loan sizes, high costs of capital and high fixed overhead costs required to set up and operate its credit business processes. While inputs on credit may be less attractive to Tulaa as a standalone service, this service is a fundamental part of the company’s value proposition. By providing inputs on credit, Tulaa strengthens its position as an end-to-end solution for farmers and is a natural customer entry point that allows the company to build trust and cross sell additional services. Perhaps more importantly, access to inputs on credit also enables farmers to produce the quality and volume of produce that Tulaa needs to broker bigger and higher value sales.

From a farmer perspective, gaining access to markets at fair prices is fundamental to translating productivity gains to increased incomes that can improve livelihoods. Farmers that use all of Tulaa’s services could see their annual net incomes increase by over 165% from USD 1,044 to USD 2,803. This is roughly 50% higher than the median income for the average Kenyan household. Over fifty percent of that increase is enabled by higher farm-gate prices, lower post-harvest losses, and quality premiums (Figure 3).

Figure 3: Net income per Tulaa per farmer

Figure 3: Net income per Tulaa per farmer


Partnerships are key to Tulaa's service delivery model, but are challenging to develop and manage

As Hillary’s team set out to build their solution for smallholders, they reached a critical fork in the road: what is the right balance between horizontal vs. vertical integration on the platform? Convinced that effectively meeting farmer needs would require a holistic and tailored package of services, and that a fully vertically integrated model would be commercially challenging, the answer became clear: Tulaa’s service delivery model would have to anchor on strong business partnerships if they were to offer best-in-class, customer-centric services with commercial returns, while a small set of services would need to be owned by Tulaa – namely credit.

Tulaa has since developed partnerships with over 100 input providers, aggregators and buyers that play a vital role in implementing their service delivery model. These partners are also customer facing and help in building trust and managing the farmer relationship. While there is no magic formula, a key ingredient in setting up these successful partnerships has been alignment of incentives. Tulaa and its partners serve the same customer segment and share similar goals of selling inputs, aggregating and buying high quality produce, and cultivating a loyal customer base.

However, partnerships can also fail. Tulaa’s attempts to partner with financial institutions to finance the input loans have proved more challenging, and to date, these partnerships have not been able to take off. Banks were often slow in approving loans and many farmers did not get their inputs in time for planting. This led to high default rates and damaged Tulaa’s relationship with the farmers. Beyond the operational complexities, misaligned incentives and a mismatch on the target customer profile undermined these partnerships. “Since the interest cap came into effect in Kenya, banks and formal financial institutions have little incentive to serve the smallholder. Banks wanted – and were expecting – a fully vetted client, a customer with a data file that was in some way already financially included and to whom they could cross-sell other products. That wasn’t what Tulaa could offer them. We were serving and continue to serve a customer that is unbanked and that is perceived as riskier by banking partners”, Hillary reflects.

It may be, however, what Tulaa can offer in the future. With no formal banking partner to finance the loans, Tulaa was forced to pivot to lend off its own balance sheet, develop its own credit scoring model and bring thousands of farmers into the formal financial system.


Optimizing for customer value and operational efficiencies through ongoing analytics is fundamental to drive growth and profitability in a low margin / high-volume business

While the economics of the inputs on credit service are challenging, small tweaks to the credit package and financing costs could yield impactful results. For instance, Tulaa could increase its cumulative net income for the inputs on credit service by 50% over the next five years by making any of the following changes:

  • Increase the average loan size by 10%
  • Increase the monthly lending interest rate by +0.13%
  • Decrease the weighted average loan loss rate by -0.65%
  • Decrease the cost of debt by 1.6%

A similar story emerges for its market access service. By increasing the average brokerage margin by just 0.55%, Tulaa could increase their net income from this service by 10% over the next five years. Shifting to larger trucks could increase net income by 50% over the same period.

While these adjustments are key to optimize the profitability of Tulaa’s business model, they can also create more value that trickles down to partners and farmers (Figure 4). Understanding these dynamics through ongoing analytics is essential to ensure that Tulaa continues to optimize for both growth and impact.

Figure 4: Impact of a 70% increase in loan size

Average annual net income under 70% loan increase per farmer per season, 6 year annual average (USD)


Funders can play an active role in transforming rural agriculture by adapting capital requirements for service providers like Tulaa

Rural agriculture transformation can increase household incomes, create jobs and lift rural populations out of poverty. Service providers like Tulaa play a crucial role in enabling this transformation by providing services and facilitating access to markets for smallholders and creating new opportunities for agricultural SMEs. At the same time, many of these service providers lack access to the capital needed to scale and achieve this impact. Like many providers, Tulaa is hampered by the limited availability of appropriately priced and structured investment capital needed to operate and finance its business. This in turn limits Tulaa’s ability to lower the cost of financing for farmers and create more shared value across its service delivery model.

By borrowing in USD denominated fixed term debt, Tulaa is required to estimate its lending activity in advance and in a foreign currency. This often results in Tulaa paying for credit capacity it does not need, while exposing itself to exchange rate risk. If Tulaa could switch to a flexible line of credit, net income gains could increase by 10% a year. Going one step further, if half of this new credit line was denominated in KES instead of USD at the prevailing commercial interest rate, Tulaa could increase net income by an additional 10% annually. Another option for Tulaa is to seek concessional USD fixed-term debt, which could save up to 20% in financing costs per year. But service providers like Tulaa can’t do this on their own. Funders have an important role to play in collaborating with service providers to map out their needs and designing new forms of investment vehicles that can help optimize providers capital structure and drive meaningful change.


What's next for Tulaa?

Based on these findings, over the next five years Tulaa aims to continue to capture market share in Kenya by acquiring new customers in its current value chains and expanding to new value chains; offering a broader range of products and services to its customers; and expanding to new markets within East Africa.

Tulaa has long road ahead and knows that reaching financial sustainability will rely on scaling and achieving significant continuous growth. The bar is high, yet the opportunity is bigger – if successful, Tulaa could become Kenya’s leading marketplace, radically transforming rural ecosystems nationwide. We’re excited to see what comes next and hope to continue supporting Tulaa on this exciting journey.

About the Author(s)

Learning Lab contributor

Tulaa provides smallholder farmers with quality agricultural inputs on credit and brokers the sale of their crop at harvest time. Launched in 2017, Tulaa is a digital end-to-end solution which uses mobile technology and artificial intelligence to smartly connect farmers, input suppliers, and buyers.

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.

Would you recommend this content to a peer?