AgTech is on the rise and investor interest globally in agriculture is at its peak, but can Pakistan leverage technology to help the industry leapfrog?

Hello friends, colleagues and co-conspirators!

If you were to ask me about one of the most significant trends worldwide, and in Pakistan, over the last couple of years I’d point to is an increased interest in the agriculture industry and the resulting technology-driven shifts in the space. Arguably, these changes come not a minute too soon as the global population keeps growing exponentially. Simultaneously, climate change, increased urban migration, decreases in land-holdings & farmers, and inefficiencies in the supply chain make the threat of food scarcity and insecurity ever more dire. According to the McKinsey Global Institute’s digitization index, agriculture is one of the least digitized sectors. By virtue of still being a developing market, Pakistan is lagging even further behind on this front (Not to mention that I’m still recovering from the shock of not having access to my favourite fruits and vegetables all year-round; just seasonally!).

Agriculture currently constitutes the largest sector in Pakistan’s economy, contributing about 24% to the country’s GDP and nearly half of the employed labor force of the country comes from this sector, according to data by the Pakistan Bureau of Statistics. Despite these numbers, Pakistan’s agriculture space is in a state of decline due to issues around financial services and availability of credit, the involvement of arthis (informal middlemen who provide poor inputs at high interest rates to farmers who have no access to formal banking or loans and buy back these crops at extremely discounted rates from the market), natural disasters like floods and droughts and a lack of innovation in farming practices and across the supply chain. Globally, the solutions to some of these problems have been come from advancements in agriculture technology, or AgTech, and the increased involvement of startups within the space, for e.g., AI, precision agriculture, IoT, drone and satellite technology and new online distribution channels (such as marketplaces). However, startup participation within the AgTech space has been limited and scattered in Pakistan.

Many startups working within the space are developing IoT solutions for smart irrigation, such as solar-powered tube wells, or for animal data, such as local star Cowlar – a solar-powered fitbit for cows. Cowlar has arguably been one of the most visible startups to come out of the Pakistani ecosystem and went on to be incubated at YCombinator (they even received investment by Ashton Kutcher!). Another startup of note in the space is Ricult, which is possibly the first (& currently only) end-to-end closed loop AgTech company working in Pakistan. Translation: Ricult is working on everything from providing inputs, extending credit, providing data-driven insights, analytics and information to the farmers and helping them sell their produce via a marketplace. Ricult was one of the winners of Karandaaz Pakistan’s Fintech Disrupt Challenge 2016, which highlights an important trend for the future. FinTech and financial inclusion, especially in the developing world, will increasingly overlap with advancements in the agriculture space. Part of this stems from the fact that according to World Bank data, about 75% of the world’s poor are farmers, and hence responsible for most of the food we consume. In Pakistan, a majority of these farmers still remain unbanked and cannot access formal banks for loans (due to issues with digitization, challenges in obtaining title deeds for their land which is needed as collateral against bank loans & the unwillingness to offer as collateral what is often their only asset). Currently in its 5th crop cycle, Ricult is using its credit scoring model to help farmers buy inputs for their farms and has been able to achieve a 100% repayment rate on its credit. According to World Bank data from 2015 (the latest available), Pakistan’s unmet agriculture credit need stands at approximately $4.5 billion. This is after all institutions such as government, microfinance banks, donor agencies etc. have come together and put money into the ecosystem. While Ricult has limited operations currently, and is still in its early stages, there is no denying the need and potential for impact if they are able to scale operations well. The initial results look promising.

Some startups have also started experimenting with more cutting-edge innovations such as zero-soil production, for e.g. Fruges which is currently growing produce on coal without soil. Globally, vertical farming has been experiencing setbacks, however, it represents a huge opportunity for “urban-food-system transformation” – which is of increasing importance when we put it into context by considering the rising urban migration trends and land degradation.

According to Acumen Research, LED-powered vertical farms are expected to generate over $6 billion by 2023 and the World Economic Forum also predicts that they will become a significant piece of the puzzle by 2025.

While it’s encouraging to see startups emerging in the space, they are currently too scattered and small-scale to be able to fully address Pakistan’s agriculture related problems.

The answer for the Pakistan agriculture industry will perhaps also lie in the government taking special interest in not only incorporating technology to help the sector leapfrog but also to help disseminate information and best practices, as well as drive progress via helping with mechanisation and updating irrigation systems. The Punjab Agriculture Department has been making efforts in this regard, especially with recent partnerships with PITB to digitise records, register farmers (and linking all assets and land via NADRA CNIC’s) as well as initiating a program that will provide 125,000 mobile phones to farmers (about 35% of these have been disbursed currently according to PITB), extending e-credit to smallholder farmers (although the amounts of these loans are against a maximum of 5 acres – holdings of 12.5 acres or lower are considered smallholding) and also disseminating information about best practices, weather updates etc. via mobile applications and sms alerts.

Another driver of innovation in the space is the corporate sector, such as Telenor Pakistan. Telenor has also teamed up with PITB and the Govt. of Punjab’s Agriculture Dept. under a project called Connected Agriculture Punjab Platform (CAPP) to provide a digital ecosystem and empowerment of the farming community. Using a menu of apps that help provide services identified above, Telenor Pakistan has launched a platform to help farmers get access to information, analytics and advisory that help them with natural disaster prevention/risk mitigation and increasing yields. Currently, Telenor Pakistan claims that its platform Khushal Zamindar reaches out to about 4.8 million unique farmers on a monthly basis and about 1 million recurring farmers on a daily basis. The total number of farmers in the country is estimated to be between 15 to 20 million. From an official report published by GSMA on Khushaal Zamindar’s Impact Assessment, a survey showed that 53% of power users reported increased income. This platform is currently free for all Telenor Pakistan users and will be open to users on other networks in the near future, subject to interconnecting charges. Telenor Pakistan is also working on other digital services that include credit scoring via digitizing farmers’ payments and analyzing the production patterns, provision of loans without prior insurance, efficient management of supply chain, and demand aggregation. In farming, the timing and access to real-time information can be crucial to ensure competitiveness and optimal yields. While Telenor Pakistan’s current approach is more information focused & marketplace app heavy, it will pave way for other innovative apps like Trringo, the Uber for tractors app that disrupted the Indian market by allowing farmers to rent farm equipment more efficiently & at lower costs.

As a researcher, I’m impressed with Telenor Pakistan’s Research & Design Thinking focused approach to creating it’s m-agri services. However, there is a huge market that remains untapped and the real-test will lie in the corporate’s ability to take this initiative nationwide thereby bringing the maximum farmers to its fold.

Nestle is another corporation that has been investing significantly in the agriculture sector in Pakistan, although as far as I’ve been able to discover their interventions have mostly been in dairy and livestock. An interesting global case study of Nestle’s role within the space would be their model coffee farms in Vietnam, which are helping farmers identify best practices and educating them with new trends and technology. This can be and has been working as a great tool in Pakistan as well. One prominent example is that of Zacky Farms, which is a progressive modern farm that operates as a model and is being used to educate other farmers in the locality about best and innovative practices. In Pakistan, where adoption of technology for the country’s illiterate farmers will be a slow process, having physical, fully automated model farms can make a huge difference (PITB has plans to set-up more of such facilities in Punjab). So what can we predict about the future of AgTech in Pakistan?

1.  While activity has been sparse so far, the global trends of increased investment activity and the rise of global AgTech companies are a positive sign for the future of the industry. However, unless there are more progressive farmers that are willing to set-up model farms the growth may remain scattered.
2. Corporates will play a huge role within the AgTech space, more so than startups over the next couple of years. We’ve already seen that happening in Pakistan and globally. Increasingly, private sector corporations abroad (particularly those involved within the food industry or its value chain) have become more involved in forming partnerships with Accelerator programs to help identify, nurture and grow AgTech startups. They’ve also been making significant progress within the space by investing in innovative practices world-wide. The key determining factor for Pakistan is if the government is able to build similar strong public-private partnerships (There also needs to be attention devoted to do this nationally, and not only Punjab which is the low-hanging fruit currently).
3. The recent opening up of satellite data will create unique opportunities for startups and researchers to create products and services that help with scanning land (Ricult is already doing this), using GIS and exploring AI based products.

We currently may be far away from setting up large-scale vertical farms, growing food in labs and getting involved in the gene edited food market, but there are plenty of opportunities for innovation in the Pakistani AgTech space, specifically when it comes to engaging in activities that will help with predictive analytics.

Read on for more on AgTech & investment trends within the space. Also I would like to acknowledge the support, time and information shared with us by Usman Javaid, CEO & Founder Ricult; Habib Saqib, Co-founder m-agriculture Telenor Pakistan and Uzair Shahid, Senior Program Manager PITB. This issue couldn’t have been completed without their valuable insights. Have more to say on the topic? Or just share some interesting research/articles with us? Give us a shout!

Cheers, 
Anusheh Naveed Ashraf
Head of Insights, Invest2Innovate

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Research Spotlight

CB Insights did a research briefing on the AgTech space identifying around a 100+ startups that were attempting to disrupt the sector, trends within AgTech and the investment activity. According to their data, investment within the space saw an uptake in 2014 after The Climate Corporation got acquired by Monsanto. The briefing also takes a look at 5 trends that will shape the future of agriculture globally. You can download the pdf and/or watch the recording of the webinar here.

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Talking Data

70% – the amount of the world’s water agriculture uses. The remaining 30% is used for everything from drinking, cooking and to industry. Rs. 704.5 billion – agriculture credit extended by lending banks tasked with extending it for the fiscal year of 2016-17, according to State Bank of Pakistan. This is reportedly 17.8% higher than the previous years disbursement. The credit reach has also increased to reach 3.27 million farmers by June 2017. 453 – the number of AgTech global equity investment deals since 2013 according to data collected by CB Insights. These were collectively worth $1.5 billion. 57% – of the 869 respondents of First Round Capital’s annual State of Startups Survey believe that AgTech is the most underhyped Tech trend.