Quick Wins for Digital Agriculture: Why Digitizing Aggregation Centers is a Fast Path to Long-Term Impact for Smallholders
When exploring opportunities in the digital agriculture ecosystem, discussion often focuses on buzzworthy technologies like the internet of things, artificial intelligence, blockchain and satellite imagery. There is no doubt that some of these technologies will eventually define the future of the agriculture sector. But let’s start with the basics – getting farmer organizations and SMEs to use digital technologies to streamline their operations. Farmers and small businesses represent an interesting opportunity for digital solutions to structure supply chains and bring significant efficiency gains – and these gains aren’t dependent on technologies that are years away from fruition.
Farm to Market Alliance (FtMA) was formed to make markets work better for farmers. FtMA is a consortium of eight agribusiness organizations (AGRA, Bayer, Grow Africa, IFC, Rabobank, Syngenta, WFP and Yara), working with local private sectors to deliver products and services to smallholder farmers. The consortium has been operational in Kenya, Rwanda, Tanzania and Zambia for the past three years, and has already engaged with close to 150,000 farmers. The program, through partnerships with local private sector, helps smallholders receive appropriate information, investment and support from seed to market, and provides a range of agricultural trainings. This comprehensive support ensures that farmers can confidently plan, grow, store and sell their crops, maximizing their productivity, profitability and resilience over the long term.
A Digital Platform for Smallholder Farmers
Over the past two years, FtMA (supported by MercyCorps’ AgriFin Accelerate program and the World Food Programme’s Innovation Accelerator) has developed a digital platform, consisting of a mobile app, SMS gateway and web portal. The platform aims to boost both programs’ efficiency and scale, and increase the number of products and services offered to farmers by local private sector actors. It helps coordinate and optimize the flow of information needed to drive strong value chain service delivery, making sure that end-to-end services work for smallholders. Farmer organizations, which are the main users of the FtMA app, use it to better manage their membership and deliver key services, including inputs, information and aggregation. The app is a tool for them to strengthen coordination, transparency and trust with member farmers and their numerous private sector partners.
The collaboration started with the digitization of group activities such as recording the volume of crops aggregated by farmers and ordering inputs ahead of planting. Aggregation refers to a process in which individual farmers bring their produce to designated collection points – aggregation centers – where the crops are collectively marketed, awaiting their pickup by buyers. It is one of the most critical and time-based activities involved in agriculture programs. Farmers want to quickly sell part of their crops to meet some of their immediate needs and smooth their limited cash inflows. Buyers, on the other hand, want to be able to plan their logistics and pick high-quality produce at competitive prices during the peak harvesting period.
There were three components that we looked at when designing the platform:
- Using the FtMA mobile app to digitize the details (eg: name, number, amount of crop sold, acreages, etc.) of the farmers who come to the aggregation center to sell their produce, and providing them with digital receipts of the produce sold;
- Communicating the pricing being offered by the buyers through an SMS to member farmers, and;
- Assisting buyers with logistics by providing real-time data on the produce available at each aggregation center.
Access to real-time aggregation data also ensured the quick diagnosis of issues like warehouses overflowing with commodity, truck delays in produce pick-up, questions about last-mile pricing and others. At the beginning, we focused on 26 farmer organization covering 40 aggregation centers. To date, over 41,000 farmers from 200 farmer organizations have registered on the FtMA digital app in Tanzania, recording farmer profiles, financial services, input and equipment orders, and crop sales.
Four emerging benefits of equipping benefits of farmer organizations with digital tools
The FtMA pilot generated important learnings around the development of digital architecture and the potential benefits for farmer organizations and all other ecosystem players. Here are four takeaways:
- Build a farmer registry based on the transaction records of farmer organizations, rather than just a database of farmers:Farmer organization usually try keep a detailed paper record of their farmer membership and their transactions. However, based the capacity and investment within the farmer organization, the detailed ledger of all transaction and individual farmer database can differ. Most of the farmer organizations with limited capacity end up with just a paper database of farmer membership, their numbers and acreages and limited transaction data over a few months. This offers little insight to partners like buyers and financial institutions, who look at investing in these farmer groups. In contrast, the app can create an automated ledger for the farmer organization, providing details such as how many members participated in the aggregation season and the quantity of produce brought by each member, as well as cash flow reconciliation at the end of the season. The app also enables farmer organizations to communicate with members independently or as a group. In the future, farmer organizations and farmer profiles can be used by financial institutions and buyers to pilot various credit instruments, such as financing in advance of harvest, buyers co-investing in the warehouse, etc.
- Build trust by automating payment receipts: A digital receipt for market transactions goes a long way in building the trust between farmers and the organizations that serve them. It can allow farmer organizations to provide farmers with more transparency around pricing, commissions and payment periods and also enables farmers to use receipt as a collateral for taking personal loans. Automating transactions helps in piloting payment systems, such as direct payments to individual farmers’ bank or mobile money accounts. Digital receipts as proof of past transactions can even serve to build farmers’ credit history, providing an opportunity to unlock access to agricultural finance.
- Increase potential investment options for donors and investors: Having a view of aggregation centers that includes all the farmer transactions, produce collected and sold, and quantity and quality of produce over a period of time provides donors and investors with new investment opportunities. Donors can use these insights to consider data based investments into activities like increasing warehouse space, logistics support and relationship-building between farmer organizations and member farmers.
- Develop new innovative products and services, tailored to the needs of farmers: Real-time data collected with the app can be used to bring in and co-develop customized services based on transactions, rather than generalizing the services across all farmer organizations. Through digitization we can introduce multiple market access options, like buyers bidding on aggregation centers or pre- and post-harvest contracts. The app also allows private sector players to offer various agro-input, post-harvest and financial services in a transparent manner, personalized for each farmer organization’s needs.
FtMA is now working on digitally incorporating various ecosystem players into the platform, including agro dealers, financial institutions, government institutions, buyers and other services providers. This could further optimize the flow of information and coordination within the supply chains.
Image provided by Farm to Market Alliance.
Homepage image courtesy of DFID.