Thomas Njeru: On Growing Up on a Village Farm, Connecting 15 Million Smallholder Farmers to Insurance and Raising Sh 2.6 Billion for Pula.

Ambitious yet coy, Thomas Njeru was once a Director at Deloitte East Africa who left a high-flying career in the C-suite and plunged into the unswimmingly dark waters of agri-tech. Starting as a servant before becoming a savant, juggling data to help connect smallholder farmers to insurance.

With Rose Goslinga as Co-founder and a dream team, Pula was born. Pula now operates in 22 countries, serving more than 16 million farmers with affordable insurance against natural calamities.  

Njeru is not an easy man. When he talks, one detects a testiness in his voice. He carefully considers his words. If Goslinga is the marauder, he is the metronome—the ticking heart and pumping lungs of Pula. When he talks, you can hear his brain whirr, balanced by a streetwise brawn: he can silk his way into getting you to partner with him  or find his way into ensuring he gets it done. 

Little wonder, then, that he has just raised $20 million (KES 2,680,000,000). Now, on Pula's tipping point, he tells us what is next. 

What does a typical day for you look like? 

I wake up at 5 am and go for a run, usually between 8 and 10 kilometres. I do a bit of gym work, meditate, get ready, have breakfast, and then go to the office. Sometimes I start with a breakfast meeting. I spend a third, of my work day checking-in with my executive and senior management team to discuss how they're doing, any issues to be addressed and any problems to be solved. The other third is spent talking and meeting clients and partners, either physical or virtual depending on which part of the world I am in. The last third is a combination of team development, strategy  and recruitment. 

How would you define yourself—are you in agri-tech or Insurtech? 

It depends on what lenses you're looking through. I spent the first 18 years of my life on the village farm. My holidays or Saturdays would be spent working on the farm. I went to school to study actuarial science which is the mathematics of insurance. After joining the insurance industry, it was clear that the traditional industry is not able to serve the agriculture sector, especially smallholder farmers in emerging markets. And this is for many reasons, such as inappropriate products, operating models and/or distribution models, etc. Smallholder farmers pose a challenge due to the unit economics involved: It is like in the past when banks insisted on brick and mortar establishments to offer service or that one had to have a minimum of Sh. 20,000 to open a bank account. The emergence of solutions like MPESA and other microfinance institutions ended that domination. And so, with technology, we can solve these problems that farmers have due to efficiencies brought in by technology. 

I started my life as a farmer, and I'm one at heart. Intellectually, I am an insurance man.

Every revolution promises a change. You say that you spotted a gap. What exactly was that gap that you spotted, and what is it that you saw you could do differently than other players in the same field? 

It would be unfair for me to solely take credit for the idea and the business. It was a series of unplanned events and nudgings from different people and my interests that led me to where we are today. First, being intimate with farming for the first 18 years of my life in the village helped me witness first-hand that farmers are just one shock away from poverty. Then, I went to school and learned what Actuarial Science and Insurance are all about.  You understand that, from an intellectual perspective, insurance exists in terms of protecting investments, encouraging investment, and being the catalyst of development because investors are looking for stability. However, when I joined the insurance industry for my first job, I realized local insurers were not doing much for agriculture. Then in 2009, I met my Co-Founder, Rose Goglinga who was working for Syngenta Foundation who were working on an Agriculture Insurance project. My employer and her employer partnered in the project and the rest, they say, is history.

So it is all serendipity - if you listen keenly to the universe, it has a way to lead you to your path, your destiny, your reason for being.

The insurance industry did not have a product that could reach smallholder farmers. Why? If you think about the traditional insurance product, it’s an indemnity against a risk. Which means to make good of your losses. However, in Agriculture the problem is that it will work only if unit economics allow it. Imagine a farmer in Bungoma; you have to send someone there to evaluate the property/farm before the season starts, and then someone after the loss at the end of the season, further requiring a claim form. Now, think through that with a smallholder farmer in mind. Number one, the trip to Bungoma will cost you up to Sh. 2000. Hiring this assessor or valuer will cost another Sh 2,000. If you think about it, these farmers probably expect about Sh 100,000 in harvest.  With a premium rate of five percent you have Sh 5,000 in premiums. So, you have already spent that premium just doing the assessment and evaluation. The unit economics of smallholder farmers for those kinds of products do not work. No  to mention the distribution costs?. Selling through agents also does not work. There are so many aspects of the traditional insurance business model that wouldn't work. That's why we work with an 'index', which basically creates a proxy to track the performance of the farmer or group of farmers. And the question is, what index will you use? Some index solutions work better than others, that is where Pula has won - bringing the best of both worlds: ability to deliver and a product that works!

Our primary product is an index-based insurance, called a 'yield guarantee,' for which we measure the yield of group farmers in small agro-ecological zones or yield potential zones, like in Kenya, say a sub-ward. 

But these boundaries are not political. We created them based on machine learning based on historical rainfall data, soil types, yield levels and such to create small zones. The insurance contract lists up to 200 agroecological zones. Within each of those, at the end of the season, we randomly sample, , say, 50 farmers in that location to estimate the yield in that area.. You pay the difference if a farmer harvests ten bags against a guarantee of 20. That is a high-level summary of the product subject to some adjustments.

It must be a lot of work….

Indeed, when we started most said it would be impossible to execute our Yield Guarantee product at scale in emerging markets. Some companies prefer simpler index products that do not provide comprehensive coverage to the farmer because you do not need to have field operations at farmer level. But for us it is important the product works for the farmer. We live for that, and we will do whatever it takes to make sure the farmer gets the best there is in the world.

We have thousands of field agents, in the countries we work in, who go to the field and measure the yields and the impact of climate. Whether it was because of floods, diseases, or pests. The advantage of our product is that it's comprehensive, meaning that it covers all the systemic variables likely to affect the yields. Secondly, we are not trying to predict; we actually measure the reality on the ground. Thirdly, we collect a lot of data on productivity, what farmers are getting, and why, which is used to make better decisions around agriculture. 

In turn, farmers know that whatever they do, if they follow the right practices, everything is right, and they get what they expect. But, without insurance, farming is like gambling. We work with institutions that are interested in ensuring the farmers' outcomes, such as financial institutions or governments. For instance, here in Kenya, the government just launched a fertilizer subsidy scheme. That's billions of shillings that they are investing in farmers, but do they have their own rain? No. Then it is prudent to protect that investment. We have done this with over 300 institutions including banks, off takers, Governments (e.g. Zambia, Ethiopia Kenya, Nigeria, Ghana, Zimbabwe and many others. ). With that model working with governments, financial institutions, and cooperatives, we're able to reach about over 16 million farmers across 22 countries. 

The gap here is that the insurance industry did not have the right solutions that guarantee farmers in terms of their produce. And if we don't have the right products, then we have very little investment going to one of our larger sectors. No country in the world has ever developed without fixing its agriculture. 

I saw your numbers went from 1,000 to 10,000 in Kitui. How do you get that local farmer? 

First, it's how you distribute it. Our distribution model is through an embedded approach, where we work with organizations who already have trust with farmers, say cooperatives, contractors, farming groups, and governments. We also do a lot of awareness campaigns through SMSs, mainstream media, and working with opinion leaders in the villages. So, it could be that we meet farmers, it could be government extension workers, just the different infrastructure that exists to make farmers aware of the product, to understand and appreciate it. 

We also offer digital extension services. Remember, we collect a lot of data. You will know farmers in this area didn't get good produce because of a-b-c-d.  We use that know-how in partnership with the right authorities. Then we send information through SMSs, WhatsApp, IVR, Radio shows to educate and enlighten them on how to become better farmers. That's how we build trust. It does help when there is a payout so that they start believing that actually, this insurance works. For instance, in Kitui, the reason for the increased adoption is because there was a payout. When there is a payout, people trust and adopt insurance."

Just for general knowledge, cognizant of the data that you have shared or are privy to, which crop yield had the most payout in Kitui? 

The politics of food are largely associated with maize. We are a maize-eating country. If you go to West Africa, it's mostly rice. It changes depending on the country, but the thing is, we do insure over 20 value chains. The interesting thing about agriculture insurance is that the products are different for each value chain. Because of the physiology of a crop, each crop is different in terms of how the risks affect it. So, you must design a different product for each of the crops. That is the complexity of Agriculture insurance. I always joke with my Actuary friends that I had never done more in-depth technical work in my career than I had to do when I went into Agriculture insurance full time.

Have you had an occurrence where there was a spike in payouts in certain areas?

Remember, it's a group insurance, it's not individual or farm-based. It's based on a cluster of farmers in the sub-ward. For say, a thousand farmers, their fate is tied. We will randomly select 50 farmers to visit towards the end of the season to measure their yields and the sample average would represent the area' average yield. If all those 50 farmers had a bad outcome, we make a statistical inference that all the farmers in that area have had a bad outcome, then we pay all the farmers. Our product is developed on the back of proprietary actuarial technology. We call it the Pula Insurance Engine - think of it as a Robot Actuary!

How does that work?

We get data on the crop locations and the value to be insured, which is fed into the system. The system has a lot of data. From historical yield data, weather data, humidity maps, so there's a lot of risk analysis and outcomes for each product. Before building the system, an actuary had to do all those calculations in Excel, just all those simulations. It's thousands of lines of code and a back end of a lot of data from different sources around the world that tells you what should be the price for any given cover with given benefits. 

For instance, the yield guarantee for a maize in this area should be 100 bags because that must be determined and to guarantee 100 bags in this location, you need to charge this much. 

How does a typical farmer sign up for you on your product? 

It depends on different models. Like a bank loan that needs security or, say, medical insurance that is mostly embedded in employment, when you're selling loans to farmers, you want to include agriculture insurance. As the farmer signs up for the loan, s/he also signs up for insurance. It's part of it. 

In other countries, we have fertilizer subsidy schemes that come with insurance. As they educate farmers about fertilizers, they also attach insurance to them, like the Kenyan example from above. The way fertilizer subsidy schemes work is that the chiefs must first register a farmer. Then, they will get an SMS prompt to pay for the fertilizer. They automatically enrol for the insurance scheme when they pay for the fertilizer. In addition to the fertilizer messages, they start getting parallel insurance messages.  

So, is it a clause, not an appendage?

It comes with the product. 

Therefore, the farmer cannot say "NO?" 

In some cases, we have that option, but we avoid it for a couple of reasons, such as operational complexity when you have options. Like insurance, it is those things we need but do not want. And why? Because humans have an optimism bias. We hope for the best and rarely prepare for the worst.

The data says that only 1% of African farmers were under insurance. What is the disconnect? 

We have an optimism bias, which is natural. But we were able to move from 0 to now 16 million farmers in 7 years. We still have a long way to go. We want to get to 100 million farmers by 2029. Now, are we making progress? Could it be faster? Yes. What are some of the challenges? We need to get more decision-makers and policymakers on the table. It's just a journey of adoption. A typical innovation curve; there's a period of disappointment. I feel like we're just at a turning point. Five years ago, if someone told you that there would be one institution insuring 16 million farmers in Africa, they would have told you it was crazy and impossible, especially doing an area index. In fact, we had been told that the area index could not be scaled to more than 10,000 farmers when we started. If you had been told that this institution one day will range from a combination of financial investors and VCs, raising over $20 million to scale outside of Africa, you would have probably thought that someone needs to go to a mental institution. I think we have been able to break a lot of barriers. We still have more to break. We have a lot of minds to change. I probably work twice or thrice as hard as I used to work at Deloitte. Why? Because it's tough. It's very fulfilling at the same time. It would be faster if I had the talent pool I needed. In fact, one of our biggest limitation is talent. Not for lack of talent in Africa or in Kenya, for that matter, but because maybe the super talented would prefer something easier, a soft less risky life.

 

Define talent in this context.

We have a high bias for doers versus talkers; we prefer Builders versus runners of systems; we chose missionaries more than mercenaries; executors versus strategists; those who seek results and not too sucked into the process; those who believe the impossible versus the critics.

Specifically, some of the roles we are actively seeking are smart and motivated salespeople (or evangelists) with a deep passion for the mission. We're dealing with a very technical problem.  The salespeople we are seeking should gravitate toward the corridors of decision-making and get them to change their minds and see the importance of this. Also, they have to be willing to work for a company that is not one of the top five brands in Africa today but the one that is most likely to be tomorrow - and that is a risk as most want a sure thing. People like working for big brands. I always keep looking for this kind of talent because I can only be in so many places. Today, if you ask me what I do, I will say I'm an insurance salesman. 

Because it's one thing to have a greater idea; it's another thing to be able to get that idea out there and execute it, right?  People who changed the world for the better were the best salespeople.

The data says that 90% of startups eventually die. How has Pula survived?

I find it very difficult to answer that question because we have done many other things that have not worked. There are multiple variables that have made Pula to be where it is. There is luck. There is trial and error. The difference between startups that fail and startups that succeed is that those who succeed fail more times. They just never give up. Failing is part of the game. I don't think the problem is failing - it is making sure you always have another bullet. In entrepreneurship, you always make sure you have another shot. Don't shoot all your bullets in one go. Always have another shot. The variables that can work in your favor or against are hard to predict in one single shot. The world has billions of variables that interact; it is one thing to have an idea on slides/analysis and in a nice sounding consulting language; it is another thing to make it work in the real world.

The typical Pula DNA person will fail 20 times and will keep going. You keep going at it until you succeed. 

Sticking to fundamentals does help a great deal but do not guarantee success; Is the problem important enough to the world, and do you have people who care enough about the problem? As a founder, what gives you the right to think you are the person who should solve this problem? (the founder-problem fit). For me, it's because I'm passionate about agriculture. Then, I joined insurance. This is an intersection of my passion and my training. Also give at least five years at the very minimum - allows you to give it the multiple shots required. Have iterations.

Also, Capitalism and enterprise have their own immutable rules. Learn them. It starts with revenue. You must find a customer willing to pay for the solution you come up with at a higher price than you can deliver it. The game is always to increase revenue and reduce costs to make a profit. An entrepreneur thinks about sales. I was not born a salesperson. But I realised if I want to be an entrepreneur, I have to be a good salesperson. 

And that persistence has led to $20 million (Sh 2.7 billion). I read somewhere that only 95.1 million dollars were raised by startups, especially in the agriculture industry. Congratulations, first of all, on that funding. What's your plan with this money?

Thanks! We are looking to expand to new markets. We just launched several Asian Market and we want to increase our investments there. We are also expanding our product offerings and double down on our existing markets.  We also want to improve the speed of payouts - our vision is to pay within 48 hours post finalization of field data collection from the current 1 month. This will require investment in end-to-end technology integration with our partners.

What's the average now? 

It varies from 30 days to 45 days. That's too long because we rely on the insurers and the reinsurers. So, before all that happens, it takes some time. I'm not proud of 30-45 days. When we started, it used to be even up to six months. So, we've reduced it. 

What would you consider your biggest win at Pula? 

I think showing that you can scale the agriculture insurance to small holder farmers, and you can build a business around it. 

What's the hardest part about being CEO?

You're the chief blame officer. You get blamed for everything, and you have to be accountable for everything. It is heavy; you always ask yourself what is that I do not know that went wrong, going wrong or about to go wrong; because at the end of the day it is your problem irrespective.

And you're also the chief therapist. How you feel does not matter; usually. It is always about the interest of the mission.

If you are the chief therapist, who is the therapist to the therapist? Who do you turn to? 

I have mentors, a coach, family and friends whom I turn to. More importantly, my Co-Founder has been a great pillar of support. It can be very difficult (or even impossible) to do it alone or without the right Co-Founder.

What have you learned from the seven years running Pula and the more than ten years being a farmer yourself?

Farmers are informed and clever folks. They try their best, and they just have a lot of variables working against them. They are hardworking people. They optimize a lot of things. Some things they do we don't understand, but after some time, we learn it is information that has been passed down through generations. They're smart; they're risk managers. They invest that which they can afford. That's risk management 101; they do understand risk-return trade-off. 

What I've learned about myself. I've learned my good, my bad, and my ugly. The organization ends up being a mirror of its leaders in so many ways. So, you can see yourself in the face, where you are failing and when you are doing well.

What's the one question you keep asking yourself?

How will this movie end? I just wish I had a crystal ball. Because just when I think I have figured it out, something unexpected happens, and that indicates that there is more to learn. 

How would you like it to end? 

First have every other farmer insured; farmers to have the peace of mind to optimize their investments in the farm without fear of losing. Secondly, having farmers access credit just like any other businesses to increase their productivity. Thirdly, getting farmers access information they need to be better farmers; like farmers know when they should plant, what to plant and why. More importantly, I think there are also other players in the sector, such as Insure-techs. We want to win and be the seed that accelerates an ecosystem of partners and competitors. I hope to retire and do other things. I want to hand over the business to someone better than me. Whenever I interview, I prefer hiring people who are much better than me; that will accelerate my retirement. Haha.

They say success is not success without a successor. What is your biggest fear/ insecurity now? 

At work, not being able to meet our customer promises sometimes keeps me awake at night. So, we have this product, which is the best in the world for small business owners, but it's not perfect. It's got its challenges, right? We must keep on improving it. When there are no payouts, whether for the right reasons or for the wrong reasons, it's always a problem.

Personally, I would say my fear is chasing things that don't matter in the long run. You want to spend time on things that you will be proud of during your sunset years. Things that moved the needle.

Are you smart or lucky? 

Well, I think both. But mostly luck, because I was lucky to be smart; I did not choose or work hard for it.  

Final question. What will the boy you once were tell the man you now are? 

Relax. You have come from far.

By Eddy Ashioya. 

 

𝐴𝑟𝑒 𝑦𝑜𝑢 𝑎 𝑣𝑖𝑠𝑖𝑜𝑛𝑎𝑟𝑦 𝐶𝐸𝑂 𝑙𝑒𝑎𝑑𝑖𝑛𝑔 𝑎 𝑔𝑟𝑜𝑢𝑛𝑑𝑏𝑟𝑒𝑎𝑘𝑖𝑛𝑔 𝑓𝑖𝑛𝑡𝑒𝑐ℎ 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑖𝑛 𝐾𝑒𝑛𝑦𝑎? 𝑊𝑒 𝑤𝑎𝑛𝑡 𝑡𝑜 ℎ𝑒𝑎𝑟 𝑦𝑜𝑢𝑟 𝑠𝑡𝑜𝑟𝑦!
𝑇ℎ𝑒 𝐹𝑖𝑛𝑡𝑒𝑐ℎ 𝐴𝑠𝑠𝑜𝑐𝑖𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝐾𝑒𝑛𝑦𝑎 𝑖𝑠 𝑜𝑓𝑓𝑒𝑟𝑖𝑛𝑔 𝑎𝑛 𝑒𝑥𝑐𝑙𝑢𝑠𝑖𝑣𝑒 𝑜𝑝𝑝𝑜𝑟𝑡𝑢𝑛𝑖𝑡𝑦 𝑡𝑜 𝑠𝑝𝑜𝑡𝑙𝑖𝑔ℎ𝑡 𝑦𝑜𝑢𝑟 𝑗𝑜𝑢𝑟𝑛𝑒𝑦, 𝑖𝑛𝑠𝑖𝑔ℎ𝑡𝑠, 𝑎𝑛𝑑 𝑖𝑚𝑝𝑎𝑐𝑡 𝑖𝑛 𝑡ℎ𝑒 𝑑𝑦𝑛𝑎𝑚𝑖𝑐 𝑤𝑜𝑟𝑙𝑑 𝑜𝑓 𝑓𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝑡𝑒𝑐ℎ𝑛𝑜𝑙𝑜𝑔𝑦. 𝐵𝑦 𝑠ℎ𝑎𝑟𝑖𝑛𝑔 𝑦𝑜𝑢𝑟 𝑒𝑥𝑝𝑒𝑟𝑖𝑒𝑛𝑐𝑒𝑠, 𝑦𝑜𝑢'𝑙𝑙 𝑛𝑜𝑡 𝑜𝑛𝑙𝑦 𝑔𝑎𝑖𝑛 𝑣𝑎𝑙𝑢𝑎𝑏𝑙𝑒 𝑒𝑥𝑝𝑜𝑠𝑢𝑟𝑒 𝑓𝑜𝑟 𝑦𝑜𝑢𝑟 𝑐𝑜𝑚𝑝𝑎𝑛𝑦 𝑏𝑢𝑡 𝑎𝑙𝑠𝑜 𝑐𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑒 𝑡𝑜 𝑡ℎ𝑒 𝑐𝑜𝑙𝑙𝑒𝑐𝑡𝑖𝑣𝑒 𝑘𝑛𝑜𝑤𝑙𝑒𝑑𝑔𝑒 𝑎𝑛𝑑 𝑔𝑟𝑜𝑤𝑡ℎ 𝑜𝑓 𝑡ℎ𝑒 𝑓𝑖𝑛𝑡𝑒𝑐ℎ 𝑐𝑜𝑚𝑚𝑢𝑛𝑖𝑡𝑦.
𝐼𝑓 𝑦𝑜𝑢'𝑟𝑒 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡𝑒𝑑 𝑖𝑛 𝑏𝑒𝑖𝑛𝑔 𝑓𝑒𝑎𝑡𝑢𝑟𝑒𝑑, 𝑝𝑙𝑒𝑎𝑠𝑒 𝑠𝑒𝑛𝑑 𝑎𝑛 𝑒𝑚𝑎𝑖𝑙 𝑡𝑜 𝑝𝑟@𝑓𝑖𝑛𝑡𝑒𝑐ℎ𝑎𝑠𝑠𝑜𝑐𝑖𝑎𝑡𝑖𝑜𝑛.𝑎𝑓𝑟𝑖𝑐𝑎. 𝑂𝑢𝑟 𝑡𝑒𝑎𝑚 𝑤𝑖𝑙𝑙 𝑏𝑒 𝑖𝑛 𝑡𝑜𝑢𝑐ℎ 𝑡𝑜 𝑑𝑖𝑠𝑐𝑢𝑠𝑠 𝑡ℎ𝑒 𝑛𝑒𝑥𝑡 𝑠𝑡𝑒𝑝𝑠 𝑎𝑛𝑑 𝑎𝑟𝑟𝑎𝑛𝑔𝑒 𝑎𝑛 𝑖𝑛𝑡𝑒𝑟𝑣𝑖𝑒𝑤 𝑡ℎ𝑎𝑡 𝑠ℎ𝑜𝑤𝑐𝑎𝑠𝑒𝑠 𝑦𝑜𝑢𝑟 𝑢𝑛𝑖𝑞𝑢𝑒 𝑝𝑒𝑟𝑠𝑝𝑒𝑐𝑡𝑖𝑣𝑒 𝑎𝑛𝑑 𝑎𝑐ℎ𝑖𝑒𝑣𝑒𝑚𝑒𝑛𝑡𝑠.
𝐷𝑜𝑛'𝑡 𝑚𝑖𝑠𝑠 𝑡ℎ𝑖𝑠 𝑐ℎ𝑎𝑛𝑐𝑒 𝑡𝑜 𝑖𝑛𝑠𝑝𝑖𝑟𝑒 𝑜𝑡ℎ𝑒𝑟𝑠, 𝑓𝑜𝑟𝑔𝑒 𝑐𝑜𝑛𝑛𝑒𝑐𝑡𝑖𝑜𝑛𝑠, 𝑎𝑛𝑑 𝑠𝑜𝑙𝑖𝑑𝑖𝑓𝑦 𝑦𝑜𝑢𝑟 𝑝𝑜𝑠𝑖𝑡𝑖𝑜𝑛 𝑎𝑠 𝑎 𝑡ℎ𝑜𝑢𝑔ℎ𝑡 𝑙𝑒𝑎𝑑𝑒𝑟 𝑖𝑛 𝐾𝑒𝑛𝑦𝑎'𝑠 𝑓𝑖𝑛𝑡𝑒𝑐ℎ 𝑙𝑎𝑛𝑑𝑠𝑐𝑎𝑝𝑒. 𝑊𝑒 𝑙𝑜𝑜𝑘 𝑓𝑜𝑟𝑤𝑎𝑟𝑑 𝑡𝑜 ℎ𝑒𝑎𝑟𝑖𝑛𝑔 𝑓𝑟𝑜𝑚 𝑦𝑜𝑢 𝑠𝑜𝑜𝑛!