Disrupting markets with technology … for social good

Tech startups are well known for their capacity to disrupt entire markets by addressing some of their flaws, inefficiencies or failures. In some cases, these market inefficiencies have huge consequences on the capacity of citizen to access the most basic services, or generate decent revenues for them and their families.

Let’s take the example of fresh food distribution in Africa. In many countries such as Kenya, small vendors usually distribute fruits and vegetables. They usually go to wholesalers where they buy low volumes - as they have very limited storage capacity – and go back to their shops where they sell most of these products in the same day. This inefficiency makes it almost impossible to have economies of scale, it multiplies transportation costs, pollutes, and creates an over–intermediated market that adds-up costs for end-consumers and reduces margins for upstream farmers. As a result, a banana produced in Kenya is sold, in a London supermarket, for the same price in a small street shop in Nairobi. Of course, this is not just an economic failure. It is a social one as well. The inefficiency embedded in the distribution system prevents all players in the value chain from generating sufficient margins, investing in productivity gains, further developing their businesses and creating more sustainable jobs for all. Consumers pay higher costs, producers receive very low wages. It’s a lose-lose situation. 
 

This is where disruptive technology jumps in. It does not always need to spring from Silicon Valley!  In fact, a Kenyan company called Twiga Foods – established in 2014 - has come up with a solution to solve the problem. They developed an app that allows more than five thousand small vendors to be directly connected with eight thousand local farmers. With their technology, Twiga Foods addresses the “last-mile distribution” issue and enables vendors to order low-priced, high-quality products via their phones, pay via mobile transfer, and receive their merchandise without ever needing to leave their kiosks. Twiga’s model improves margins for both producers and vendors, while making fresh products available at a better price for end consumers. It also reduces environmental pollution and food waste by better organising the logistics and delivery.
 

For an impact investor, Twiga Foods is the perfect success story. Lombard Odier has invested in the company through the work of specialised impact fund management company AlphaMundi. In 2017, the AlphaMundi Foundation interviewed 75 Twiga Foods clients (i.e. small vendors). They found that “93% of Twiga’s clients agree that buying products from Twiga saves time and money, with 63% reporting that their incomes have increased by more than 50%. 83% said that Twiga has helped them grow their business”.

Twiga is now going even further in its mission to improve the life of local farmers and vendors in Africa. They recently partnered with IBM Research to develop blockchain-based technology that can provide food kiosk retailers with affordable microcredit services.

For Tech investors, this is a unique opportunity to make a difference and provide tomorrow’s Tech4Goood unicorns such as Twiga Foods with the early stage capital that is desperately lacking today. And to start measuring success against social progress as much as financial performance.