Emata, a burgeoning agro-financing startup based in Uganda, is pioneering innovative methods to provide collateral-free loans to smallholder farmers in the country. Founded two years ago with a specific focus on supporting small-scale farmers, Emata recognizes the significant role these farmers play in contributing to Uganda’s export earnings, accounting for 35% of the country’s total.
Despite their crucial role, there exists a financial gap that hampers the productivity and profitability of these farmers, a gap estimated to be around $240 billion across Africa, with Uganda facing an annual deficit ranging from $1.5 billion to $2 billion, as reported by the World Bank.
Lillian Nassanga, Dave Agaba, and Bram van den Bosch, the founders of Emata, conducted a comprehensive study in rural Uganda to grasp the working conditions of farmers. Their findings revealed a substantial financial void that, if addressed, could significantly enhance farmers’ productivity. Emata aims to fill this gap by providing tailored financial support. According to Nassanga, the absence of loans from traditional banks hinders the potential of farmers to contribute more significantly to global food production.
Emata initially focused on lending to dairy farmers before expanding its scope to include coffee and oil seed farmers. The startup relies on data sourced from cooperatives and farmer-based organizations to inform its loan decisions. By examining digital records of farmers’ performance over time, combined with living expenses and weather data, Emata determines the potential for each farmer in upcoming seasons. Credit limits are then assigned based on this assessment, with a focus on rewarding loyalty over one-time transactions.
How Emata disburses loans
A key aspect of Emata’s approach involves leveraging the established cooperative networks among smallholder farmers in Uganda. These cooperatives, such as Kiruhura Dairy Cooperative, Rushere Dairy Farmers’ Cooperative Society, Kigezi Highland Tea Cooperative, and Nyabyeya Coffee Cooperative, enable farmers to pool resources and gain access to better prices for inputs and higher crop prices. Emata seamlessly integrates into this cooperative structure to facilitate easy loan disbursal.
The loan application process involves farmers applying through a cooperative agent, who, in turn, utilizes Emata’s WhatsApp chatbot to request loans on behalf of the farmers. The loans are then disbursed directly to the farmers’ mobile money wallets, typically MoMo wallets, which are popular among unbanked farmers. The entire process takes between 5 to 10 minutes, ensuring a quick and efficient turnaround.
Despite challenges posed by low digital literacy in some rural areas, Emata has overcome these hurdles by providing training to staff for data input. While there is no specific loan cap, Emata maintains a minimum loan size of approximately $25. Maren Hald Bjørgum, the Chief Communications Officer, emphasizes that Emata’s interest rates are competitive, varying between partners and value chains based on associated risks. Loan tenures range from two weeks to nine months, aligning with the harvest cycles, and farmers can access larger loan amounts based on their previous performance.
Emata’s app & WhatsApp lending platform
Emata has already disbursed loans totaling $1 million to farmers, and with a recent seed round raising $2.4 million, the startup aims to deepen its impact in Uganda and expand into Tanzania. Currently dominating the market in Uganda with 56 partners and 40,000 farmers on board, Emata envisions replicating its successful model in other markets. The startup is actively exploring partnerships with farmer-based organizations in Tanzania and Ethiopia, signaling its commitment to making a positive impact on smallholder farmers across multiple regions.