Module 9: Strengthening Agricultural Marketing

Download the PDF of Module 9

Table of Contents:

• Overview
   
• Topic Note 9.1: Mobile Phones as a Marketing Tool
   
• Topic Note 9.2: ICTs Improve Logistics, Lower Transaction Costs
  • Innovative Practice Summary: In South Asia, Mobile Phones Amplify Investments in Extension and Infrastructure to Bring Farmers to Markets
  • Innovative Practice Summary: Across Africa, Mobiles Ease Market Logistics
• Topic Note 9.3: ICTs Facilitate Market Research
  • Innovative Practice Summary: Evidence of the Impact of Immediate Market Information in Asia and Africa
  • Innovative Practice Summary: Web Portals Offer the Big Picture on Markets in Africa, Europe, and Asia
• Topic Note 9.4: ICTs Facilitate Access to and Delivery of Inputs
  • Innovative Practice Summary: Agribusiness Advises India’s Farmets through e-Choupal Kiosks
  • Innovative Practice Summary: Zambian Farmers Buy Subsidized Inputs via Mobile Phone
• References and Further Reading

Overview

One of the best definitions of marketing is that “marketing involves finding out what your customer wants and supplying it at a profit.” Probed more deeply, this deceptively simple sentence manages to encompass most facets of marketing. It is also a convenient structure around which to explain the expanding role of ICT in strengthening agricultural marketing.

The phrase “finding out what your customer wants” emphasizes the role of communications in agricultural marketing. It encompasses two kinds of information: (1) the immediate information required on the market’s demand for specific volumes and quality of agricultural products and (2) the longer-term information on market trends (referred to here as “market intelligence”) required to make future plans for the farm. ICTs, especially mobile phones, facilitate the provision of both types of information. ICTs are used for real-time market research to obtain current information and help users gradually accumulate market knowledge and insight.

“Supply” emphasizes the critical role of transport and logistics in moving products efficiently and effectively from rural production areas to consumption points, which increasingly are located in distant urban markets. The management of supply chains—the aggregation of product, organization of transport, and consolidation of loads—is increasingly improving through the use of ICTs.

The phrase “at a profit” has as a subtext the multiple issues surrounding the reduction of costs and improvement of prices. Reducing costs can involve, for example, reducing transaction costs, reducing losses following the harvest, gaining better access to cheaper inputs, and increasing productivity for an overall reduction in the unit costs of production. Improving prices can involve, for example, gaining a stronger negotiating position, exploring alternative markets, or making better decisions on where and when to sell product.

This module begins with an overview of the need for and impact of ICTs in agricultural marketing, especially from the perspectives of producers, consumers, and traders. The overview concludes by reviewing lessons and envisaging future developments in ICTs for agricultural marketing, suggesting potential policy changes and active interventions to improve their utility. (Note that although mobile phones feature significantly in the discussion, the emphasis is on their contribution to agricultural marketing. For a comprehensive discussion of mobile phones in agriculture, see Module 3.)

The second major part of this module consists of four topic notes that drill deeper into the role of ICTs in agricultural marketing, focusing on lessons from the field. The main themes include: mobile phones as a marketing tool (Topic Note 9.1); evidence that ICT is changing logistics and transaction costs (Topic Note 9.2); the use of ICTs for market research (both for acquiring immediate market information and acquiring market intelligence over time) (Topic Note 9.3); and the use of ICTs to make input supply and use more effective (Topic Note 9.4).

Farmers’ Changing Information Needs and Sources

Studies of farmers’ information needs paint a mixed picture. Information needs differ significantly between countries and within countries for farmers producing different products. Farmers differ in their perceptions of the information they require (as revealed by market research) and in their priorities when they come to access information. The primary message underlying these disparities appears to be that farmers require a package of information and that their needs and priorities change throughout the production cycle.

Farmers’ information sources outside their immediate network have not always been reliable, but the situation is changing (box 9.1). Very often farmers’ primary source of information continues to be progressive farmers (figure 9.1 presents an example from India). Farmers give more credibility to information provided by other farmers considered to have a similar status and cultural profile.

Box 9.1: Changing Sources of Information for Farmers A number of initiatives by governments aim to provide market price services, driven by the view that greater price transparency is a public good. Price has been disseminated in many ways—chalked on notice boards, broadcast by local radio stations, published in newspapers, and (more recently) posted on websites. The information on these websites is confined mainly to product standards and specifications as well as market studies—particularly of external markets but increasingly of local value chains—including databases of contacts such as buyers, traders, agricultural processors, and input suppliers. To the extent that these sites become more accessible, their usefulness could increase, but at present they are out of reach for most rural people. Government-run market information services have been criticized because their poor accuracy and lack of timeliness have resulted in little immediate economic impact. Public market information systems collect, analyze, and disseminate information. They are generally considered to carry out the price analysis satisfactorily. There are weaknesses in price gathering, as there are few incentives for accuracy or for working outside office hours. The major criticism has been that the information does not reach farmers on time, if at all. Mobile phone applications are changing farmers’ sources of market information. Agricultural applications support logistics with graphical presentations of available supplies and methods for traders to upload price and supply information directly. They facilitate marketing by linking buyers and sellers. Private companies have started to either sell subscription-based information services or to use price information as a means of promoting other products to farmers—most notably to sell mobile phone services (rural markets being among the few unsaturated markets for mobile phone services) or inputs (particularly fertilizer). These services generally rely on local-language text messages to farmers’ phones. In the main, the information has been well received by farming clients, with good reports on its quality, accuracy, and timeliness and positive evaluations of its impact. Source: Author.

 

According to market research by a private company in India, farmers’ information priorities include accurate local weather forecasts, technical information sequenced according to the stage in the crop cycle, data on the costs of production, and market supply and price information. These priorities shift during the production cycle—for example, market information is of little interest until the start of the harvest. In practice, when a subscription-based agricultural information service was rolled out, farmers claimed that the market news service was the most valuable.

Figure 9.1: Percentage of Farmers Relying on a Given Information Source, India

Source: Mittal, Gandhi, and Tripathi, 2010.

 

Through examples from India, Indonesia, and Uganda, figure 9.2 illustrates how farmers’ information priorities and sources of information can differ. It is worth bearing in mind that Ugandan farmers mainly supply commodities like coffee, whereas the Indian farmers are specialized apple producers from Kashmir. For market information, these farmers rely very little on the Internet but turn to multiple other sources, including farmer organizations, other farmers, newspapers, radio, TV, and short messaging service (SMS) and voice services. (Click here for Figure 9.2)

Some sense of farmers’ actual demand for information services can be gained from figure 9.3, which compares farmers’ use of voice and SMS delivery mechanisms in Uganda. Technical advice was the most popular agricultural information service, provided via phone-in hotlines, followed by SMS-based technical and weather advice, with SMS-based market price services coming third.

 

Figure 9.3: Ugandan Farmers' Use of Voice and SMS-Based Agricultural Information Services

Source:  Kumar, n.d.

 

 

 

 

 

 

 

 

 

 

 

 

Lessons and Future Developments

Quantitative evidence is increasingly available on how market information affects prices paid to farmers (Click here to visit table 9.1). The results are generally positive in terms of farmers’ income and prices. There is some evidence that consumer prices can be lowered; it is also clear that traders who have access to ICT and mobile phones can raise their margins.

The scale of the effect on farmers’ prices appears to depend on a number of factors, including:

• The effectiveness of the informal market information networks that already exist.
• The stability of the price structure—for example, whether the government controls prices for a staple crop or whether fixed contract pricing is widely used.
• How the product is sold—for example, ICTs may have a greater effect where negotiation is part of the sales process and a lesser effect when sales are by auction.
• The type of product being marketed. Circumstantial evidence suggests that market information systems have a greater effect on prices of higher-value, less-perishable products such as onions, potatoes, and pulses and a lesser effect on prices of extremely perishable products such as leaf salad. (For an exception, see “Remote farmers with perishable crops” in this module.)

By all indications, the phone—especially the mobile phone—is the most powerful marketing tool available to farmers and traders. The latent utility of the technology is still being discovered, and the scale of its impact is still being understood. Even so, the studies reviewed throughout this module indicate the phone’s potential for reducing asymmetries of information between traders and producers, lowering transaction costs, and enhancing farmers’ ability to fine-tune their production strategies to match the accelerating rates of change in consumer demand and marketing channels.

It remains unclear whether market information services can be delivered on a financially sustainable basis by the private sector or whether they can ever be delivered efficiently and effectively by the public sector, given its history of gathering inaccurate data and disseminating it badly. The private sector is finding it difficult to develop a working business model to charge farmers for agricultural information and market services delivered through ICTs. Some governments are interested in purchasing SMS-based agricultural information services, either to empower their field extension officers or to provide holistic agricultural information services directly to farmers. The content can consist of technical, marketing, weather, costing, pest, and disease alerts as well as information on government schemes. SMS-based services are likely to cost considerably less than sending out mobile extension officers and be more accessible than Internet-based services (Click here for box 9.2. Note: Use the zoom function for closer details). 

In the long run it is difficult to anticipate the eventual balance between privately run agricultural information services and government services. It is very likely that the optimum configuration could involve some kind of public-private arrangement. For example, the collection and analysis of information could be outsourced to the private sector, which could use such a platform to create additional value-added services for the network of businesses and institutions that support the farming sector. Another option is for the agricultural department to create a database of farming clients and negotiate lower SMS costs. This platform can be used to deliver a fast, targeted, and holistic package of information services consisting of public-good information and also private-sector messages to the farming community. Such a service has the potential of creating a cadre of smaller-scale commercial farmers, who will be better adapted to changing agricultural markets, trained in the use of modern information systems, and able to access services and receive advice via their mobile phones.

Box 9.2: Unit Costs of SMS Messaging in Selected Developing Countries In the future SMS will increasingly enable the two-way flow of information. The emergence of open-source software is facilitating the dissemination of targeted SMS messages on a large scale (see the discussion of FrontlineSMS in Module 8). Agricultural line departments and projects are using this technology to better control and improve their agricultural information dissemination. In particular, this new technology should help eliminate the recognized weaknesses in dissemination by government-run market information services. The prices charged for sending SMS messages differ hugely from country to country and region to region. They tend to be significantly lower in South Asia than in Africa (see figure). For a mobile phone company, the actual costs of SMS transmittal is a fraction of the price charged. Informed opinion often puts the costs at between US 0.01 and 0.02 cents each. The margins that SMS messages generate for mobile phone companies are particularly high. In the minds of mobile phone company executives, their challenge is to balance the high margins generated by SMS messaging with the potential of those messages to generate additional revenue from voice services. This equation is not fully understood. Even so, there is considerable scope for a regulator to insist that SMS rates be significantly reduced for the transmission of public-good information. For example, in South Asia the total cost for a private company to deliver a single agricultural text message is believed to be around 2 US cents. This cost is divided into one-third (that is, about US 0.6 cents) for broadcasting the SMS, one-third for sales and marketing, and the remainder for the whole operation of collecting and analyzing information and operating the business. Even at this relatively low cost, farmers still resist paying for this information. Where the public sector wants to use SMS technology to disseminate information to government staff and farmers, the affordability of the technology is highly relevant. A World Bank project coordination office in India recently negotiated to broadcast 100,000 SMS messages at US 0.4 cents each. (Click here for box 9.2. Note: Use the zoom function for closer details) Source: Author.

For the development practitioner, the key messages of this module relate to the benefits of accelerating the dissemination of mobile phone technology (Topic Note 9.1), especially to areas where its signal, and therefore its impact, have not yet reached. In many countries, profits generated by mobile phone use in urban areas are set aside specifically for extending the mobile phone network further into rural areas. Typically these funds are underused. This module provides a broad swathe of empirical evidence of the benefits of phone technology for improving rural income and, potentially at least, for reducing transaction costs and thus consumer prices. In occasional instances, technologies such as mobile phone amplifiers and transmitters, focused on marketplaces, will extend the distance over which wireless signals can travel and encourage additional agricultural trade to emerge. Many of these ICT infrastructure issues are discussed in Module 9.2.

Although ICTs appear to reduce transaction costs (see Topic Note 9.2), most of these cost savings presently accrue to traders who have invested in mobile phones. To date, disappointingly little analytical work has been done to provide empirical evidence of these effects. These kinds of studies need to be done. They are likely to be important for informing better investment decisions on infrastructure, particularly at the nexus between investments in roads, markets, and communications technology. Given accelerating urbanization and the increasing emphasis on food security, the development sector needs a better understanding of how to ensure that the reductions in transaction costs that are possible along the agricultural marketing chain especially benefit those at both ends of the supply chain—the rural producers and urban consumers.

As discussed in Topic Note 9.3, market intelligence and market education are increasingly important to farmers’ survival in increasingly competitive markets. Given the projected acceleration of change in consumer demand, the emergence of new marketing channels, and the evolution of modern variations within traditional marketing channels, better information will help farmers align production more closely with changing demands.

It can be argued that if the situation were left to resolve itself, the bulk of the benefits generated by these new market opportunities would go to the larger-scale and better-off farmers and to the trading sector. To redress that imbalance, there may well be a role for extension—particularly the public extension services—to alert farmers to new market opportunities, provide training on changing market conditions (especially experiential training), and transmit important market intelligence, especially through the Internet.

Not only do farmers have difficulty identifying the best markets for their produce; they often have difficulty discovering where and when they can purchase inputs, especially if private input suppliers have been crowded out by government distribution of subsidized inputs. ICTs can provide this information (see Topic Note 9.4).

Input-supply companies can use text messages to promote their products and provide technical advice to farmers. Electronic voucher schemes offer potential for implementing subsidy programs that “crowd in” the private sector and enable more precise targeting of input supply programs to the poor.

Table 9.2 summarizes the role of ICT in agricultural marketing, based on whether the ICT consists of enabling infrastructure such as telephones or deliberate applications. It also suggests what the future is likely to hold. (Click here for Table 9.2.)

Topic Note 9.1:     Mobile Phones as a Marketing Tool

Trends and Issues

Although the mobile phone’s main purpose among the public is for social interaction, it is proving to be a powerful marketing tool. Around 60–70 percent of calls are made to family and friends; business calls typically constitute 5–10 percent of calls. Learning to exploit the economic benefits of the mobile phone is a skill that takes some time to develop (see the evidence from Malaysia later in this section). Younger users are typically better able to exploit the mobile phone’s business advantages.

A building body of knowledge, summarized in the section that follows, indicates that phones, especially mobile phones, have a positive impact on agricultural incomes. The evidence suggests that farmers use mobile phones to tap into a wider range of knowledge and information than they could access previously. Farmers build up a network of contacts and draw on this wider experience and expertise to obtain critical information more rapidly. Essentially the mobile phone, its special applications, and the Internet (although to a lesser extent currently) are becoming management tools for farmers, specifically in relation to marketing.

Research data are emerging on just how much farmers are starting to use mobile phones to assist in marketing their production. For example, work in Bangladesh, China, India, and Vietnam showed that now about 80 percent of farmers own mobile phones (Minten, Reardon, and Chen n.d.). They use them to speak to multiple traders to establish prices and market demand. More than half concluded selling arrangements and prices on the phone (the exception was rice farmers in China). This work illustrates just how much phone access is driving change in marketing systems.

Greater access to information and buyers steadily adds to farmers’ market knowledge and gives them greater confidence to diversify into higher-value (often perishable) products. The additional knowledge translates into a more accurate understanding of demand and an enhanced ability to control production and manage supply chains. Farmers’ behavior is changing, and their farming is becoming more commercial. Trends emerging around the use of mobile phones include: (1) farmers deal directly with wholesalers or larger-scale intermediaries rather than small-scale intermediaries; (2) farmers conduct market searches over a wider number of markets; and (3) farmers develop a broader network of contacts than their peers who do not own mobile phones.

Greater access to information seems to help farmers make better decisions around:

• Transportation and logistics. Farmers begin to leverage economies of scale. They can organize and coordinate among themselves and (larger-scale) truckers to consolidate volume. Greater coordination also occurs around the timing of aggregation, collection, and volumes. Larger volumes can lower costs and enable farmers to realize higher prices.
• Price and location. An ability to compare prices increases farmers’ power to negotiate with traders. It also enhances farmers’ ability to change the time and place of marketing to capture a better price.
• Supply and demand. Farmers gain greater control over their production and product sales by finding new sources of demand, improve their ability to adjust supply and quality to market conditions, and learn about quality, grades, and product presentation.
• Diversification of their product base. Over the longer term, a better understanding of market demand and consumer trends helps farmers diversify into higher-value crops and capture greater value.
• Access to inputs. Farmers can make more informed decisions about which inputs are better or cheaper to buy and when and where to best obtain them.

Evidence of Impact of Phones on Marketing

The evidence to date indicates that farmers (as well as other stakeholders in the supply chain) increasingly use ICT, particularly mobile phones, to reduce their costs, increase the prices they receive, and eventually acquire market knowledge that improves supply-chain efficiencies and adjusts supply more closely to changing demand. There is also an intriguing suggestion that farmers’ use of the phone creates a greater sense of trust with trading partners, presumably because information asymmetries are reduced.

• Peru: Rural access to telephones raises incomes from farms and other rural businesses. When Peru privatized its telecommunications industry in the 1990s, the government required the telecommunications company to install public telephones in 1,526 small rural towns across the nation. Some years later, a study of 1,000 rural households distributed across towns with and without public telephones found positive links between public telephone use and incomes. Telephone use resulted in a 13 percent increase in per capita farm income and a 32 percent lift in nonfarm income (Chong, Galdo, and Torero 2005).
• Filipino farmers used mobile phones to improve income and build trust with trading partners. In the Philippines, Labonne and Chase (2009) compared the impact of mobile phones on subsistence farmers and commercial farmers who generate a marketable surplus. The study found little benefit for the subsistence farmers, but commercial farmers benefited significantly, as measured by improvements in their consumption of 11–17 percent. A particularly interesting finding was that farmers reported improved relationships with trading partners following the acquisition of mobile phones. They may believe that the relationship is more fair, since they now can negotiate better terms.
• In Malaysia, mobile phone use was linked to increased profits among younger owner/managers of farms and smaller agribusinesses, especially with growing experience in using the technology. When 134 younger agriculture-based entrepreneurs were interviewed about their perceptions of the impact of mobile phones on their businesses, they reported two overarching benefits: They could draw upon a wider network of people for information (a “wisdom of crowds” effect), and they could obtain information at a greatly increased speed (Shaffril et al. 2009). Other benefits, such as market information, time savings, and technology, were of a lower order (figure 9.4). The overall impact was an increase in businesses profits, especially after the entrepreneurs had used their mobile phones for more than two years.

 

Figure 9.4: Commercial Farmers and Small Agribusinesses Rate the Relative Importance of Using Mobile Phones on a Scale of 1 to 4 (Very Useful), Malaysia)

Source: Shaffril, et al. 2009.

 

 

 

 

 

 

 

 

 

 

 

• Mobile phones in Niger bring better price integration, improve profits for traders, and reduce consumer prices. In Niger, Aker (2008) found that mobile phones reduced search costs by 50 percent compared with personal travel and that mobile phone use increased both traders’ and consumers’ welfare. Traders’ profits increased by 29 percent—not because they traded more product but because they obtained better prices through real-time market research conducted via mobile phone. Mobile phones were also associated with a 3.5 percent reduction in average consumer grain prices. Aker also found that the use of communications technology had several benefits. Search costs were significantly reduced, coordination among market participants improved, and market efficiency increased as traders became engaged in the search process themselves rather than being on the receiving end of a one-way communications system. Traders were able to expand their reach of searchable markets, sell in more markets, and increase their network of contacts. An average trip to a market located 65 kilometers away in rural Niger can take two to four hours round trip, compared to a two-minute call.

   

“[With a mobile phone], in record time, I have all sorts of information from markets near and far.” —Grain trader from Magaria.

“[Now] I know the price for two dollars, rather than traveling [to the market], which costs twenty.” —Grain trader from Zinder.

• In Morocco, mobile phones changed farmers’ cropping mix and marketing methods. A survey of a small sample of farmers in Morocco found that mobile phone use resulted in a 21 percent increase in income (Ilahiane 2007). An even more relevant finding was that the technology changed farmers’ behavior: Increasingly, they spoke directly with wholesalers or larger-scale middlemen rather than smaller intermediaries. Farmers changed where they marketed their crops, switching markets to capture better prices and often resorting to larger and more distant markets. They coordinated with local truckers to improve product transport and identify where to deliver their products. Some farmers developed a two-way trade, bringing products back from the market to sell in their own rural communities. A particularly important change was that they used their new market knowledge to become more market oriented in their production, move away from producing low-value crops, and diversify into higher-value enterprises. The knowledge gained from using the mobile phone reduced the perceived levels of risk and helped them target their production to specific, identified market opportunities.

Figure 9.5 illustrates where the impacts of ICTs on agricultural marketing occur along the links in value chains, thus indicating the information required and the technology involved. (Click here for figure 9.5). The diagram has two key messages. First, ICT potentially has an impact on the management of every step in the production marketing chain, from planning to sales. Second, almost all of these functions are likely to be carried out by mobile phone. Other potential services, such as market price information, market intelligence, and specific cell-phone-based applications, largely perform support and secondary functions that make farmers’ mobile phones more useful.

Lessons Learned

The experiences in using ICTs to improve access to market information reveal that ICTs contribute to:

• Reduced logistics and transportation costs. Farmers obtain the latest information with a phone call instead of making a long trip to a market. They can coordinate with other local farmers to use one large truck rather than several smaller ones to deliver their products.
• Improved negotiation power. Farmers’ increase their power to negotiate, particularly with traders, based on their ability to understand pricing in multiple markets, to cut out intermediaries, and to sell directly to larger-scale buyers.
• More sophisticated marketing plans based on price information. For example, farmers can modify the date of marketing, product permitting, or switch to alternate markets, transport and regulation permitting.
• Broader and deeper networks. Farmers communicate by phone with traders and farmers outside of their immediate geography as opposed to making a physical trip. The ability to communicate more easily and to triangulate information creates deeper trust in key trading relationships.
• Innovative partnerships. For example, partnerships are facilitated and built among groups of producers, or by virtue of direct communication with corporations and traders, or through the ability to supply product based on just-in-time and/or quality needs.
• Informed use of inputs. Farmers improve their capacity to raise yields through better use of inputs and/or use of better inputs. They can identify sources of inputs, obtain them more cheaply, and are better able to buy and apply them at the optimal times.
• Improved farm business management. Farmers can become better managers through better information about which inputs to use, new knowledge about grades and standards for produce, and increased interaction with corporations, traders, and other farmers.
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Topic Note 9.2:     ICTs Improve Logistics, Lower Transaction Costs

Trends and Issues

The higher the transaction costs, the smaller the geographical area in which it is feasible to market any product. Without market access, productivity is low (Kunaka 2010), and options for the farming enterprise are limited.

Driving down transaction costs in the supply chain delivers very clear public goods. It can create benefits, especially for poorer urban consumers, by lowering the costs of food. Lower transaction costs also offer the prospects of higher net returns for producers.

As noted in the overview, field observations show that in many places ICTs, particularly mobile phones, are transforming how rural logistics function. The resulting improvement in logistics can be seen through lower transaction costs, improved potential profits, and less wastage. By giving people the ability to replace distance with “space-shrinking technology,” mobile phones enable market agents to better coordinate product supply and demand, strengthen existing trade networks, facilitate the assembly of products to reach a critical mass, and enable products to be delivered cost-effectively to new markets. Despite these positive impacts, other factors can still limit increased supply-chain efficiency, such as geographic position, limited access to transportation and credit, and poor access to inputs.

An ICT-enabled logistics system can help in:

• Collection—bysetting out well-organized collection routes.
• Aggregation—by assembling markets with sufficient critical mass to attract large-scale traders. Traders use the quantity and variety of products and the mobile phone network to conduct real-time research and identify arbitrage and market opportunities for the products they buy directly in rural areas.
• Delivery—by coordinating directly with other farmers or truckers to organize times, dates, volumes, and so forth.

Currently, ICTs mainly benefit those who can afford the technology—mostly the traders. The logistics system will not be fully transformed and smallholders will not fully benefit from the ICTs described here until the technology is ubiquitous and market information is less asymmetrical. At that point, prices and the returns realized by farmers are likely to improve, as well as the downstream positive effects on consumer food prices.

A typical rural agricultural value chain has several steps. Production takes place on small plots of land. Very small volumes of the produce are then sold to a local aggregator, who perhaps collects it on a bicycle or bullock cart. This intermediary then sells the aggregated (but still small) volume to another intermediary, perhaps one with a tractor.

In such a manner, product cascades through the hands of several intermediaries, who increase the load size at every step, before it reaches the end market. Small aggregate loads generally incur high unit transport costs. In addition, each small-scale trader has to charge a relatively high margin per kilogram to make a living wage. The aggregate margins are relatively high. The resulting multiple handlings also cause significant wastage through loss or spoilage, further impacting the price that the smallholder receives and the consumer pays.

Table 9.3 and figures 9.6 and 9.7 serve to overlay this description of a rural value chain with some sense of scale and numbers. Most farmers need transport to move small loads (units under 80 kilograms) over relatively short distances (of 1–10kilometers). Rarely are motorized transport services available, affordable, or even necessary to meet this demand, particularly in sub-Saharan Africa. (Click here for Table 9.3).

Figure 9.6 provides an indication of how unit costs for transporting produce change depending on distance, road quality, and transport mode. The key take-aways are: (1) the high cost of head loads and pack animals; (2) the low unit costs, particularly for short distances on bad roads, of intermediate modes of transport such as ox carts, handcarts, and bicycles/trailers; and (3) the greater cost efficiencies of mechanized transport, especially medium-sized trucks, when the distances and the quality of the roads are reasonable.

Figure 9.6: Transport Costs for Different Vehicles in Developing Countries (US$ per Ton-Kilometer)

Source: Sieber 1999.

 

 

 

 

 

 

 

 

 

 

Figure 9.7 demonstrates the importance of critical mass in lowering transport costs. A vicious circle is often observed in the field: Even with a new road, truckers will not invest in additional vehicles until they see a substantial increase in the volume of agricultural produce that needs to be transported; at the same time, farmers are wary of expanding production without evidence that the necessary transport services will be in place to deliver their surplus to external markets. One solution to this conundrum is to aggregate product into sensible critical masses at particular times and places. For example, a 10-ton (medium) load would need to be made up of product from 150 to 200 smaller-scale farmers, a process that is being greatly facilitated by the use of ICT, especially mobile phones.

 

Figure 9.7: Transport Costs in Relation to Demand, by Mode

Source: Seiber 2009

Additionally, there is little transparency around the availability of facilities for transportation, warehousing, storage, processing, and so on. One particular feature of rural transport internationally is the high costs in Africa, which are often four times the cost in South Asia of transporting larger loads over longer distances. Some of this difference in cost is ascribed to the cost of vehicles and poor quality of roads in Africa, but a significant proportion is believed to be the consequence of cartels. (In contrast, in Pakistan, for example, transport brokers regularly operate to consolidate loads and improve transport efficiency with backhauls.) This lack of information results in high transaction costs at each stage in the value chain and offers little opportunity to leverage economies of scale or move swiftly to alleviate blocks in the supply chain.

The literature on ICTs’ impact on rural logistics largely focuses on data obtained from user surveys and case studies. Little research has been done to assess the direct impact of mobile phones on reducing transaction costs related to agriculture. The lack of information is not surprising, given that logistics is generally regarded as an infrastructural issue and that its synergies with ICT have not been considered.

Trends and Issues

Findings on how mobile telephony enhances marketing by improving supply-chain management include:

• More efficient use of existing storage, packaging, transport, and processing facilities.
• Increased monitoring and coordination of freight transport operations, including product collection, delivery, and security.
• Quick response to any disruptions in the supply chain (for example, disruptions such as vehicle breakdowns clear up more rapidly).
• Reduced travel time and expensethrough the ability to call markets to obtain information instead of having to travel there.
• Disintermediation and improved transport efficiency as mobile phones facilitate the assembly of product, which enables larger trucker/traders to buy sensible-sized loads directly in rural areas. Suppliers can use mobile phones to conduct real-time market research, and entire truckloads can be bought and sold while still on the road.
• Synergies between investments, so that combined investments in roads, telephone communications, and electricity have a greater aggregate benefit than separate investments ever could have. (If a single investment were to be made, however, the most cost-effective investment would probably be telephones.)

Principles and Guidelines for Potential Interventions

Information technology is stimulating a quiet communications revolution in traditional agricultural marketing channels in many developing countries. The benefits largely reside with traders, who use the technology to maximize profits by lowering search and transaction costs. The key question from development practitioners is how to design ICT interventions that enable producers to improve their returns and/or help urban consumers to buy food at lower prices. Little empirical evidence is available on the scale of these effects or on the practices and investments that could enhance them.

A combination of economic intuition, observation, and research indicates that important synergies can be created from a confluence of investments.

• Address policy issues around increasing access to the poorest. Despite phenomenal growth in telephone lines and mobile phone networks, access is still highly inadequate and unequal. Today, the main beneficiaries of ICTs are those who have the technology, enabling them to increase their profits. Not only are the poor and those living in rural areas at a disadvantage, but full utilization of the technology is impossible, even for those with access, until universal access is achieved. In other words, a full transformation of the logistics system will not happen until the technology becomes ubiquitous, intensifying competition and carrying the potential long-term benefits of reducing transaction costs.
• Look for possibilities to create an integrated rural infrastructure investment program. Investments that help to remove intermediaries are believed to have good potential for improving marketing efficiencies and lowering transaction costs. Studies in South America have demonstrated synergies between investments in roads, telephones, and electricity, although individually telephones consistently show the highest return (Jansen, Morley, and Torero 2007). Integrated rural infrastructure investments could include, for example, investments that improve agricultural productivity, rural roads, and rural markets (specifically assembly or primary wholesale markets) and extend rural mobile phone coverage. For example, in areas where phone signals are weak, a mobile phone amplifier, located at a market, would facilitate conversations and flows of information around market opportunities and needs, logistics, and prices. Markets themselves could be built in selected hubs in rural areas where local farmers can convene and sell produce. Experience indicates that such markets must be located correctly. Normally these investments are made in existing and expanding marketplaces, often with public investment linked to improvements in market management. For example, a market committee is formed of stakeholders to actively promote the market, oversee its operation and management, and become empowered to act on its further development.
• Create capacity in farmer organizations and groups. Coordinated activities by farmer groups offer potential for improving opportunities and farmer incomes through many channels—in operating the market, in actively being empowered to seek out competing transport options, and in organizing (through mobile phones) sensible collection routes that ease logistics, create the necessary critical mass of products, and attract larger-scale and more efficient buyers and traders. As this topic note emphasizes, ICT will increasingly provide avenues to link producer organizations, cooperatives, smaller transporters, and others. (See the discussion in Module 8.)

INNOVATIVE PRACTICE SUMMARY
In South Asia, Mobile Phones Amplify Investments in Extension and Infrastructure to Bring Farmers to Markets

The following examples from Bangladesh, India, and Sri Lanka describe how poultry farmers and vegetable producers managed to market their produce more efficiently. The situations of these producers may be quite different, but the catalyst in each instance was the advent of mobile phones. The example from India shows how benefits are magnified through complementary investments in infrastructure (in this case, roads and phone networks)

Bangladesh: Market Extension and Mobile Phones Give Women Chicken Farmers New Leverage with Traders

As part of a Swiss-funded livelihoods project in Bangladesh, community organizations, particularly women’s groups, were provided with a six-step, experiential training program in marketing. The program covered the selection of key products to market (step 1); basic economics (step 2); market research (step 3); review of findings (step 4); presentation of action plans and agreement by the community (step 5); and implementation of the chosen action plan (step 6).

One women’s group (image 9.1) traditionally sold backyard chickens to a visiting trader. When they visited the nearby market town, they were shocked to discover that chickens were selling for nearly twice the price they were receiving. They agreed that they would be prepared to consolidate their chickens and transport them for sale directly into the market town. Before committing to this action, however, they wanted to confront the trader with their increased market knowledge.

When they challenged the trader about the price disparity, his reply stunned them. He explained that he could not afford to pay them more because he had to cover all his transport costs with the few (normally 8–10) chickens they had available for sale. The women asked, “How many chickens will you need to be able to pay us sensible prices?” “Around 50,” was the trader’s reply.

When it was established that the traveling trader had his own mobile phone, an arrangement was reached that the community would phone him whenever they collectively had 50 chickens for sale. The arrangement worked. The price has increased by 60 percent, enabling the women to aggregate chickens from a far wider group of nearby villagers and encouraging increased production, as backyard chickens are now considered a profitable enterprise.¹

Image 9.1: The Bangladeshi Community Who Solved Their Chicken Marketing Problems Through Mobile Phones

Source:  Authors

Primary Rural Wholesale Markets Capitalize on New Roads, Increased Vegetable Production, and Mobile Phone Coverage in Assam

Planning studies for an agricultural competitiveness project in Assam, Northeast India, showed flat or declining turnover in traditional wholesale markets but rapidly rising lease incomes for weekly consumer markets (haats). Deeper investigation revealed that only a small proportion of the haats were booming (about 13 percent) They had developed into daily wholesale markets selling tens of thousands of tons of product.

Figure 9.8: The Emergence of Primary Wholesale Markets at Well-Located Weekly (Haat) Markets in Assam

Source: Project documentation for the Assam Agricultural Competitiveness Project.

 

 

 

 

 

 

 

 

 

 

 

 

When these markets were visited and stakeholders interviewed, an explanation emerged. The markets were booming owing to investments in new rural roads, expanded vegetable production following increased investment in irrigation, and the arrival of larger-scale truckers (with 10-ton vehicles) to buy product.

The trucker/traders described the benefits of these larger markets: They offered sufficient product for sale to provide choice, they offered a variety of products, and the turnaround times were quick, but the critical change was the extension of the mobile phone network. The network enabled trucker/traders to carry out real-time market research with their customers to meet their produce requirements and prices.

Instead of product passing through the hands of multiple small traders, resulting in high unit transport cost, significant postharvest losses, and a high overall aggregate margin, the transaction costs were reduced. The Assam Agricultural Competitiveness Project is investing in these successful “super-haats” to provide them with the facilities required for the growing volumes of business they transact.²

Image 9.2: Produce for Sale at an Assamese "Superhaat."

Source: Authors

Sri Lanka’s Smallholders Could Reduce Cost of Market Information by Using Mobile Phones

Ratnadiwakara, de Silva, and Soysa (2008) calculated the information-related transaction costs of smallholder farmers who sell their vegetables at one of Sri Lanka’s largest wholesale agricultural markets (Dambulla). The four vegetables that were most heavily traded (by volume) were considered in the study: tomatoes, onions, eggplant, and chilies.

Information-related costs formed 70 percent of the transaction costs incurred by farmers growing those crops. On average, a farmer made 24 visits to the wholesale market during the crop cycle at an average cost of US$ 2 per visit, which included travel, food, and related costs. The total search cost for a farmer averaged US$ 52, of which over 80 percent was the cost of travel.

If half of a farmer’s market visits could be replaced with phone calls (assuming a phone call costs US$ 0.37), the total search cost would be reduced by 33 percent, without even accounting for time saved.

INNOVATIVE PRACTICE SUMMARY
Across Africa, Mobiles Ease Market Logistics

The examples that follow, from West and East Africa, describe how farmers and entrepreneurs use mobile phones to ease the traditional barriers to moving and marketing produce. Some rely on sophisticated applications; others rely on a series of phone calls.

With Mobile Phones, Ghana’s “Market Queens” Transform the Onion Trade

The onion wholesalers known as “Market Queens” increasingly use mobile phones to coordinate supply among themselves and to improve profits by facilitating reductions in their transportation and opportunity costs (Overa 2006). These costs are particularly high in commodity chains that are geographically extensive and organizationally complex, such as the onion trade in Ghana.

Mobile phones allow traders to save on time and transportation costs because they are able to coordinate trucking and conduct their business in multiple locations or on the road (Click for table 9.4). The phone also gives wholesalers greater access to their customers, which helps them to build trust and a good reputation. In turn, these qualities encourage more transactions at less cost and risk.

Remote Farmers with Perishable Crops Reach More Ugandan Markets when Mobile Phone Coverage Expands

Uganda’s mobile phone network expanded from covering 46 percent of the population in 2003 to 70 percent in 2005. Using panel data from 856 households in 94 communities across the country, Muto and Yamano (2009) estimated the impact of mobile phones on farmers’ market participation.

Improved access to price information appeared to reduce marketing costs and increase farm-gate prices. Mobile phone coverage was associated with a 20 percent increase in sales of bananas, although the same was not true for maize. This difference suggests that expanding mobile phone coverage has been more useful for perishable crops and that farmers have gained particularly from being able to arrange transportation more efficiently.

Farmers’ price gains are greater in areas close to the district center than in more remote areas, but the farther a farmer is located from the district center, the greater the impact of mobile phone coverage on market participation. The expanded mobile phone network favored banana farmers in remote areas, who tend to have lower production costs, compared to banana farmers near district centers, where production costs were higher. The results also suggested that even households without mobile phones benefited from the network, possibly because traders used mobile phones to reduce transportation costs.

With Mobile Phones and Training, Ugandan Farmers Supply Fast-Food Chain

The Nyabyumba Farmers’ Group reached an agreement to supply Nandos, a multinational fast-food restaurant in Kampala, with graded ware potatoes³ at a fixed price throughout the year. Supplying these outlets offered farmers higher incomes and more stable demand but required farmers to make significant improvements in product quality, quantity, and business management (Kaganzi et al. 2008).

To meet these conditions and engage with this higher-value market over the long term, farmers needed to become more organized and strengthen their partnerships with service providers. A purchase agreement specified the following conditions: Nandos would receive 50 bags of 100 kilograms each every two weeks throughout the year; potatoes would not be washed; bags would contain only one variety; each potato would be approximately 80 grams, oval, with few eyes; and a fixed price of US$ 170 per ton would be offered throughout the year, payable by check on the 15th of each month after delivery.

The key challenges were to ensure that farmers could consistently produce potatoes to these standards and communicate directly with their client. Farmers’ lack of grading knowledge and initial inability to produce potatoes that met Nandos’ quality standards caused 80 percent of their production to be rejected. Training reduced the rejection level to less than 10 percent in less than a year.

To ensure direct communication, the chairman of the Nyabyumba Farmers’ Group purchased a mobile phone to maintain regular contact with Nandos as well as other members of the cooperative. The phone facilitated collection, delivery, and the fine-tuning of harvesting and dispatch to match demand in Kampala.

Mobile Maps Optimize Logistics for Senegalese Producers and Exporters

Manobi (http://www.manobi.net/worldwide/), a private ICT provider in West Africa, has developed a number of applications to facilitate agricultural marketing. For example, Karaya gum producers have a contract to supply local exporters, but exporters claim that they do not know how much stock is available and so cannot carry enough cash to pay farmers at the sale point. Producers often are obliged to sell to local middlemen instead at a lower price.

Manobi reports that its new mobile phone application gives gum growers a dedicated system for recording their inventory, which is displayed on the exporter’s mobile on a map (image 9.3). Exporters can optimize their collection logistics, more accurately estimate cash requirements, and save money on transport. Gum growers sell at higher prices directly to exporters and are paid cash on delivery. Manobi claims that as a result gum producers have increased their sales income by 40–50 percent (Annerose 2010).

Image 9.3: Inventories of Karaya Gum Mapped and Displayed Through a Mobile Phone Application

Source: Annerose 2010.

Topic Note 9.3:     ICTs Facilitate Market Research

Trends and Issues

Multiple and complex dynamics operate around market demand. Consumer demand changes constantly. Demand for specific products fluctuates daily and weekly; longer-term trends in consumer demand vary as well. Marketing channels continuously evolve. The rate of change in consumer demand and marketing channels is accelerating. Ultimately, the farming community will be better off if it can align production more closely to market changes and opportunities.

To become adept at pairing production with opportunities, farmers and others along the value chain need to become better at acquiring market information that is immediately useful and at acquiring longer-term knowledge related to markets. This topic note is organized around these two needs.

Market Information, Intelligence, and Knowledge

Immediate market information is used largely to sell existing crop and livestock products in ways that maximize their profitability, mainly by creating a better understanding of short-term fluctuations in pricing and demand. Most often, short-term information improves price negotiation, but it can also influence the timing of sales and the selection of the market. This kind of information tends to change rapidly, and its timeliness and accuracy is of great importance.

It is longer-term market information, referred to here as “market intelligence,” that affects farmers’ longer-term decisions. Examples of these decisions include the choice of product to produce, the choice of marketing channel to use, and other strategic decisions aimed at maximizing profits. To be made well, these kinds of decisions require an understanding of competing suppliers, buyers’ needs, product specifications, market trends, and other key issues for specific products. Generally these decisions also build on the aggregate knowledge created through the acquisition of short-term market information over a period of time. The key development challenge lies in assembling and disseminating this information in a timely manner, not just to traders or larger-scale farmers but also to smallholders so that they can make more sensible management decisions and increase their profitability.

Figure 9.9 shows how market information can significantly affect farming profits. Profitability is highly affected by prices, largely because any change in price has little or no effect on costs, so the effect impacts directly on the bottom line. An inability to find buyers for products also has a profound effect on profits. By accumulating market knowledge, however—from a combination of market information and market intelligence—producers gain an opportunity to identify and diversify into alternative and more profitable products.
 

Figure 9.9: Farmers' Incomes Are Highly Sensitive to Market Issues: Prices, Volume and Enterprise Diversification

Source: Authors.

 

 

 

 

 

 

 

 

 

The main goal of increasing access to market information is to empower farmers to take greater control of marketing their production and orienting their production to identified market opportunities. A deeper understanding of short-term and long-term market dynamics should, on balance, enable farmers to become more commercially savvy and profitable.

Figure 9.10: Commercial Farmers' Information Needs and Sources

Source: Authors.

 

 

 

 

 

 

 

 

In essence, the ability to conduct market research—to gather both short- and longer-term information—will increasingly become part of the mix of farming skills. In most situations, market information is fragmented, anecdotal, outdated, inconsistent, and incomplete, although the situation differs by product. For example, markets for staple cereals, which are often subject to price controls, move relatively slowly. Information about these markets is more widely known. However, for products that are more perishable or for which consumer demand is shifting, the market situation is far more opaque.

The primary role of government in promoting the acquisition of immediate information through ICTs is to focus on the overarching importance of maximizing mobile phone coverage while improving access to the technology for the rural poor. An equally important role for government is to support producers in using the technology to become more commercially astute and better attuned to changing markets for agricultural products. The overall aim is to strengthen farmers’ position in their day-to-day trading and, over time, enable them to focus production on satisfying consumers’ and buyers’ demands and to develop skills in market servicing (the capacity to develop relationships with stakeholders in the next stage of the value chain).

Producers’ Market Information Needs and Research Strategies

Figure 9.10 provides a sense of the package of information that farmers need with respect to immediate information and long-term market intelligence. It also displays the likely sources of that information.

In the day-to-day marketing of their products, farmers are mainly at a considerable disadvantage. Their market information will come from a neighboring farmer who may have visited a market on the previous day. A trader’s core skill is to read the market, assess supply and demand, and compute how these factors might affect price. Increasingly traders will triangulate their information with information from others. Given the opportunity, traders will exploit farmers’ relative ignorance to buy low and, ideally, sell high. The power balance in these negotiations is altogether different when the trader senses that that the farmer-interlocutor also appreciates the real market situation and can access different markets, buyers, and outlets.

Field observations show that traders use their mobile phones extensively for finding information (such as local and more distant prices and product availability), negotiating prices, and conducting entire transactions on the phone. These observations increasingly are supported by empirical evidence; figures 9.11 and 9.12 present examples from Kenya and Ghana.

Research on negotiation approaches indicates that it is important to obtain as much information as possible prior to a negotiation. This information should include the trading patterns, goals, and preferences of those that one is negotiating with. Groups provided with more information in advance achieved more effective and efficient outcomes as well as higher levels of satisfaction with the negotiation. These findings reaffirm the findings from the Philippines discussed earlier in this module, where farmers reported feeling increased trust in their trading partners after farmers had gained access to mobile phones.

Figure 9.11: Traders' Perceived Benefits of Using Mobile Phones, Kenya

Source: Okello 2010.

Research on tomato farmers’ negotiations with rural traders in Ethiopia showed that on average farmers’ initial asking price was about three times higher than the final price they obtained from buyers (Jaleta and Gardebroek 2007). Yet when farmers had market price information—typically obtained by a mobile phone call to acquaintances close to the central market—the difference between their initial asking price and the final price was reduced by 16.5 percent. In other words, market information increased farmers’ bargaining power by one-sixth.
 

Figure 9.12: Traders' Perception of the Benefits of Using Mobile Phones, Ghana

Source: Egyir, Al-Hassan, and Abakah 2010.

 

 

 

 

 

 

 

Still other evidence indicates that farmers increasingly use mobile phones for real-time market research. In Bangladesh, for example, about 80 percent of farmers now have mobile phones; of these, two-thirds have owned mobile phones for three to five years (Minten, Reardon, and Chen n.d.). About 70 percent of rice growers and 30 percent of potato growers contact multiple traders by phone to explore selling opportunities and prices, and about 60 percent will agree on the details of the trading deal over the phone. These findings explain and lend further weight to the findings presented earlier (for example, from Morocco, Malaysia, and the Philippines) on how the use of phones appears to increase farmers’ incomes and profits. An example from Georgia (box 9.3) provides additional evidence.

Box 9.3:     Winter Salad Grower in Georgia Improves His Negotiating Position with Itinerant Traders by Mobile Phone Georgia has traditionally been the major supplier of winter greens to Russia, primarily to the Moscow wholesale market. The salad crops are purchased directly at the farm gate by a 5-ton trucker/trader, who delivers the bundled leaves to the Moscow wholesale market. To negotiate from a position of strength, the farmer would phone a colleague in the Moscow market to establish wholesale prices and make some estimates of supply. From experience, the farmer had good estimates of transport costs from Georgia to Moscow and of the typical margin the trader achieves. Using these figures, the farmer arrived at a sensible estimate of the price he was likely to receive, and he used this information as the basis of his opening offer. Source: Authors.

One of the most famous studies of the impact of mobile phones was carried out by Jensen (2007), who tracked impacts on the fisheries subsector as mobile phone coverage was extended along the coast of Kerala, South India (see Module 3 for details). The results were dramatic. Because farmers could identify the best markets for selling their catch, price volatility was reduced, wastage was significantly lower, fishermen achieved higher average prices, and consumer prices fell.

The marketing of caught fish differs from the marketing of most agricultural products, however. Fish typically swim in shoals, making for a “feast or famine” supply, whereas consumer demand is relatively stable. Fishermen, unlike most farmers, have their own transport, but they may not have information about where it is best for them to transport their fish for sale. By using their mobile phones, they can seek out nearby undersupplied beach auctions and deliver their fish directly to markets where supply is low and prices correspondingly high.
 

Accessing Immediate Market Information: Lessons Learned

Short-term (immediate) market information refers to the constant (daily or weekly) changing picture of supply and demand requirements or a product in terms of quality, taste, grading, delivery, size, color, and alternative market opportunities. Figure 9.13 sets out the three ways that producers are likely to use this information. As shown in the previous discussion, farmers in Georgia used market information to strengthen their negotiating position, whereas in Kerala fishermen used market information to switch to alternative markets. Producers also use market information to decide when to harvest produce or, if possible, where to store it until they can sell it at higher prices.

Figure 9.13: How Farmers Use Market Information to Improve Prices and Profits

Source: Authors.

The enlightened debate among practitioners centers on the relevance of the public sector’s role in market information services compared with that of the private sector, and on whether the best way forward is a partnership between the two sectors. Some take the view that if telephone infrastructure is provided, stakeholders will find a way to use the technology for gathering the price and market information that they need.

How is this debate playing out? The public sector in different countries has invested in its own market information systems. As explained in the overview, this role consists of three functions: (1) enumeration (collecting price data); (2) data analysis; and (3) dissemination. Their performance has generally been poor over the last decade.

Government employees have few incentives to attend wholesale markets out of normal office hours to collect real-time data. Analysis of price data sets frequently reveals disturbing gaps or suspicious similarities in prices from day to day. Field surveys often reveal little confidence in the information by farmers and traders. The information is rarely used except to give a general sense of the broad changes in product prices, and often it arrives so late that it services only for retrospective analysis by academics. In addition, government market information has been mainly posted on Internet sites to which small-scale farmers have almost no access (box 9.4).

Box 9.4:     Government-Provided Information on Market Prices: A South Asian Example A South Asian government took the view that the existence and dissemination of complete and accurate marketing information was the key to achieving both operational and pricing efficiency. Not only did farmers need agricultural market information to plan production and marketing, but market participants needed the information to arrive at optimal trading decisions. The government’s market information system was established in 2000 as an Internet portal with the aim of providing easy access to daily prices and arrivals by commodity. The operating budget is some US$ 900,000 per year (which does not include enumerators’ salaries but does cover the US$ 11 monthly bonus if 20 daily reports are submitted). The system reports on 1,700 markets. The Internet site receives some 1.75 million hits per year at a public cost of US$ 0.5 each. The users are not farmers. They are graduates in the 35–44 age group, who are mainly academics or work for agriculture-based companies. It is claimed that outreach to farmers has not happened because of inadequate infrastructure (computers and networking), coupled with a lack of manpower and trained personnel in rural areas. Though still useful for broader economic growth, the ICT scheme has not yet reached those targeted in the outset of the intervention. Source: Authors.

 

Even if farmers can obtain the information from the Internet, the information is of limited use for changing the balance of power in negotiations between farmers and traders. Despite these challenges, there is major potential for government-provided ICT services to improve as resources become available, infrastructure expands, and technological learning becomes more widespread. (See Module 13, where key lessons in building more effective IT-driven public services are discussed). In the future, smartphones might make Internet-based dissemination more effective, especially for interventions that seek to expand market intelligence (see the innovative practice summaries).

As discussed in the overview, however, open-source software that can be downloaded onto a laptop computer to send targeted SMS messages to a database of mobile phone owners may have a far greater impact. This technology offers the prospect of delivering market price information directly to farmers’ mobile phones and thus empowering farmers to understand the value of their products and immediately firm up their negotiation positions. If governments do venture into this territory, a key issue will be the unit price of each SMS message (as discussed in the overview).

The private companies that have emerged more recently (typically in the last four to eight years) to deliver market information take a pro-active approach to understanding potential customers’ information needs, and they build feedback loops to learn how their services can be better attuned to demand and more responsive to complaints. They use their own enumerators, whose employment depends on the accuracy of their price reporting. Generally their customers—mostly younger, more literate, and larger-scale farmers—have reacted positively. In the service operated by Reuters Market Light, evidence indicates that the information is further distributed by recipients to 5–12 others. In this process, the status of the primary recipient is elevated in their rural community. As emphasized in the overview, the early lesson is that it is not at all easy to manage and operate financially viable businesses selling information to farmers.

A third (and seemingly the most effective) option for providing market information is some kind of public-private partnership. Partnership with the private sector helps to overcome some of the public sector’s challenges in gathering and disseminating accurate market data. Under outsourcing arrangements, for example, governments may purchase SMS-based agricultural information for extension agents to distribute or for direct distribution to farmers.

Another option is for the government line department to take responsibility for disseminating information itself. To do so, the department must build its own producer database, including information on producers’ locations, key enterprises, farm sizes, and so forth, and negotiate with mobile phone companies to obtain SMS prices that more accurately reflect the actual cost of sending SMS messages. The government covers the costs of this service as well as the costs of running an incentivized market price reporting service by selling the SMS service to others—input suppliers, banks, and other companies—who wish to target messages/information to the farming community. Using the platform created to generate income by selling targeted messaging is a role that can be outsourced. If and how this sort of arrangement will play out in practice remains to be seen.

Accessing Market Intelligence: Lessons Learned

Aside from increasing their profits and competitiveness through immediately useful information related to prices, markets, and logistics, farmers require information about market changes that may influence their production and marketing choices over the longer term. The purpose of market intelligence is to improve farmers’ understanding of changes in agricultural marketing and demand so that they can adjust their plans and production more closely to changing circumstances and generate the highest value.

Figures 9.14 and 9.15 illustrate why it is vital to understand the implications of changing patterns in consumer demand for agricultural products.(Click here for Figure 9.14). (Click here for Figure 9.15). The figures show projected increases in consumer expenditure on food over the longer term in India. They are based on a combination of income elasticities for various food categories, the impact of urbanization, population increases, and a projected annual growth rate of 5.5 percent in GDP. Per capita cereal consumption is projected to be flat, and growth in demand for cereals is forecast to be broadly in line with population growth. Strong growth in consumption is expected for animal proteins (surpassing 5 percent), processed products (over 6 percent for milk and other processed foods and beverages), and high-value crops (over 4 percent). Demand for fish is projected to grow at more than 5 percent. Given that about half of India’s fish is sourced from the sea, meeting this demand will require fish supplies from freshwater sources such as lakes, rivers, ponds, and fish farms to grow by about 10 percent per year. In business language, freshwater fish demand constitutes a “booming market.” The single agricultural subsector that will deliver the greatest increase in farm-gate income is milk.

Patterns of consumption will change elsewhere as well. Huge increases in Africa’s urban population (approximately 4.3 percent per annum) over the next decade will place strong additional demands on agriculture to supply a different mix of products. Changes in marketing systems will occur at the same time. Agribusiness will increasingly look to source raw material directly from producers. New, alternative marketing channels are emerging in many countries to deliver higher-quality products to supermarkets, hotels, exporters, and other buyers.

To facilitate diversification, farming communities are thought to require product-based information, which typically includes:

• A general overview of the market. What is themarket’s size, value, and growth rate? What are the divisions between sectors? Who are the competing suppliers?
• Product specifications. What are the prevailing grading and packing standards and consumer and market preferences (taste, color, size, season)?
• Marketing issues. What are the typical prices and seasonal price patterns, quality premiums, and marketing channels? What is the prognosis on future prices and changes occurring in the supply chains for the market?
• Key contacts. What are the names, addresses, and telephone numbers for key contacts, particularly buyers, agribusinesses, and traders but also specialist input suppliers and transport operators?

Development practitioners often underappreciate the value of names and addresses. Publishers in the agricultural sector understand the value that stakeholders place on contact databases, as they can be the key information required to open a new market opportunity, enable producers to deliver product a step further up the supply chain, or discover an alternative way of doing things. Field experience has repeatedly shown that larger-scale traders and agribusinesses are interested in making more direct purchases in the field, provided producers can collectively aggregate a critical mass of product.

Information that can be categorized as “market intelligence” changes slowly and is used occasionally (rather than every day). It is most naturally housed on a website from which individual farmers, farmer organizations, traders, and extension personnel can download and print it out for reference. The information is generally considered to be a public good (and thus unlikely to be delivered on a financially sustainable basis). For this reason, the information is mostly funded publicly, although the preparation of market intelligence is often outsourced.

Principles and Guideliens for Potential Interventions

Based on the accumulating evidence, experience, and lessons learned, a number of principles and guidelines are important to consider in developing market intelligence:

• Market intelligence is one of the building blocks for stronger knowledge of the changing market for agricultural products. The provision of market intelligence is primarily seen as a public-sector activity that should enable more disadvantaged farmers to explore and discover market opportunities for themselves. Because the information is relatively slow to change, is required only occasionally, and mostly needs to be downloaded and printed for later reflection, it can be conveniently housed on an Internet site.
• Market information on prices, supplies, and demand can positively affect prices paid to farmers, but only if it is done well. Farmers need a package of information that changes as their priorities change throughout the agricultural season. This information package can encompass weather forecasts, technical advice, market prices, pest and disease alerts, and messages about schemes and support from the appropriate line departments. Market information on its own is not enough to make farmers both more productive and more profitable, however. An integrated approach to information generation and delivery is required.
• Both the private sector and government are having difficulty in delivering ICT-based information in a sustainable, effective way. One approach is to outsource the supply of agricultural and market information to the private sector. This approach would help to underwrite their finance, enable them to use the financial security to build a platform for a range of value-added services, and enable them to look for alternative income sources from other private companies delivering products and services to the farming community.
• An alternative arrangement is a public-private partnership, in which the public sector plays a dominant role. New open-source technology is making it possible for government institutions to provide far more targeted information, primarily by sending local-language SMS messages or voice messages directly to farmers’ phones and by allowing feedback from the field. The technology helps overcome the major criticism that government information systems do not reach their clients. Open-source systems can become the foundation of an ICT-mediated extension service that alerts clients to pest and disease problems, other information vital for production, and opportunities to participate in new government schemes. The potential for generating income to cover operating costs would be significantly increased if the government would use its resources to build an accurate and useful database of its farming clients, with their mobile phone numbers and farming characteristics, and leverage a very substantial reduction in the cost of SMS messages (see the next point). The extension service will have the very real possibility of selling SMS broadcasting services to clients supporting the farming sector, such as banking institutions (to send messages, technical and price information, and loan repayment reminders to borrowers) or input suppliers (to promote products, remind farmers to buy inputs, and respond to pest, disease, and plant/animal nutrition issues). Sales of such services, along with the collection of price data, may best be done by the private sector or suitably incentivized individuals.
• Lower the cost of SMS. Clearly there are important opportunities for enhancing the range, scale, and impact of information dissemination by working with the regulator to reduce prices for bulk messaging to producers. Development institutions need to be able to benchmark costs to strengthen negotiations when proposing the development of public good, SMS-based information services.
• Invest in farmer education and extension training. Helping smallholders to understand needs for grading, organization, coordination, and market opportunities is critical to success. Marketing education, especially experiential marketing training, can be an important element in leveraging the benefits that ICT can bring to farmers’ prices and returns.

INNOVATIVE PRACTICE SUMMARY
Evidence of the Impact of Immediate Market Information in Asia and Africa

The summaries that follow describe how various strategies for disseminating short-term market information have affected (or are anticipated to affect) farmers’ profits. The delivery methods vary considerably, ranging from immediate access through SMS and radio to the physical circulation of information sent via SMS to extension agents.

Better Incomes for Farmers with Better Market Information in Madhya Pradesh

Goyal (2008) compared farmer prices in the regulated market (mandi) for soybeans in two areas of Madhya Pradesh. In some areas, 1,600 Internet kiosks (e-Choupals) (http://www.itcportal.com/sustainability/lets-put-india-first/home.aspx) operated by ITC disseminated price information, whereas the other areas relied only on the mandi for such information (Click here for Figure 9.16).

Goyal found that farmers obtained better prices when they had access to a wider range of market information. Farmers’ price increases ranged from 1 percent to 5 percent, with an average of 1.6 percent. The additional farm income from soybeans in Madhya Pradesh was estimated at about US$ 10–20 million per year. This income was almost certainly a transfer from traders to producers as a result of producers’ greater market knowledge and improved strength in negotiation.

In India, Reuters Provides SMS-Based Market Information to Farmers

In 2007, Thompson Reuters introduced the Reuters Market Light (RML) service in India, a mobile information service sending customized message to farmers in their local language (for details, see Module 3. A survey of the 243 farmers that received the Reuters Market Light package (onion, wheat, pomegranate, soybean, and tomato farmers) found that around 60 percent believed that they obtained improved prices and often changed the time and location of sales. The information was passed on to 5–12 others.(Click here for Figure 9.16).

The analysis did not demonstrate any overall impact on prices paid to farmers. This finding needs to be seen in context, however. Produce prices are rising rapidly in Maharashtra, and the vast majority of produce is sold by public auction, where knowledge of earlier prices has little or no impact on the price that farmers receive. The research was carried out only for one year when this new information technology was provided to a number of randomly selected farmers, but farmers will need time to learn to exploit this marketing tool.

The data did show that RML users were able to achieve 8–9 percent increase in prices for the relatively small volume of produce sold directly to visiting traders, and that the service appeared to have a greater effect on younger users, who may be on the front end of a learning curve. Younger users tended to receive higher prices (6 percent) than nonusers of the same age and to increase the proportion of produce that was graded.

Government Program to Equip Extension Workers with Timely Agricultural Information and Improve Farm-Gate Prices in Maharashtra

The annual cost for an extension officer to operate in India is around US$ 5,000–7,000 per year. These officers are generally isolated. They are rarely trained or provided with up-to-date technical data and market information to disseminate to farmers.

Under a new Agricultural Competitiveness Project to improve the market orientation of production, 20,000 extension officers (plus other farmer decision influencers) who own mobile phones will receive annual subscriptions to SMS-based information services.⁴ The services (in the local language) will be tailored to suit local agricultural specialization and consist of technical information, local weather forecasts, price information, overviews of the market, and information related to the competitiveness project, such as training opportunities, government agricultural schemes, and so on.

The cost will be around US$ 10–15 per year (constituting about 0.2 percent of the operating cost for an extension officer). Each officer will receive around 1,000 messages per year. Extension officers will be specifically tasked with disseminating the information to smaller-scale and more disadvantaged farmers.

The annual cost of the SMS program will be about US$ 500,000. Annual crop sales in wholesale markets in the state are valued at about US$ 8 billion per year. If the SMS market information service for 20,000 extension officers in Maharashtra has an effect similar to that of the 1,600 Internet kiosks in Madhya Pradesh (where the e-Choupal scheme raised prices paid to farmers by 1.6 percent), it could generate an increase in farm-gate income of some US$ 120 million.

Radio Raises Farmers’ Maize Prices in Uganda

Svensson and Yanagizawa (2009) assessed how prices paid to farmers were influenced by market information collected by the Market Information Service Project and disseminated through local FM radio. The information was broadcast through daily bulletins of 2–4 minutes and a longer weekly program that provided district market prices.

Having access to a radio was associated with a 15 percent higher farm-gate price. Where market information was not disseminated through the radio, there was no effect. The results suggest that reducing the information asymmetries between farmers and other intermediaries increased farmers’ bargaining power.

Market Price and Supply Information for Farmers in Senegal

Manobi’s Time2Market (T2M) application provides real-time information on prices and arrival status of products in markets (Annerose 2010). Manobi independently collects the information, which it uploads onto a central database using mobile phones that dial in to the server via WAP (wireless application protocol, which is specifically designed for handheld wireless devices to browse Internet content). It offers access to the data for producers, exporters, and public agencies through the web, WAP, SMS, and voice.

Farmers can check prices before they set off to sell their produce and discover where they are likely to find the best offers. Farmers have secured, on average, about 15 percent higher profits after having paid net costs, including the price of Manobi’s service.

Esoko Develops a B2B Market Information Exchange to Increase Market Efficiencies in Ghana

Esoko’s (http://www.esoko.com/) business model is to become a market information exchange that aggregates and delivers market information and intelligence.⁵ The idea driving the model is that most businesses in the agricultural value chain collect and deliver their own data; Esoko will provide tools and a platform and co-opt businesses to generate content for the platform.

Esoko pays on an incentive basis to acquire information, using targets and bonuses. Their revenue-generation model is based on levels of subscriptions (bronze, silver, gold, platinum), each with a different pricing structure and its own mix of content and tools.

The impact of this information on traders, exporters, transporters, procurers, and others in the agricultural value chain is still to be determined. The service is believed to have the potential to reduce inefficiencies in the value chain. For example, an exporter took 60 days and needed 5 people in the value chain to procure a natural plant product, but with Esoko’s technology, the procurement process required 31 days and 3 people, improving both the major traders’ and producers’ share of the export price.

Esoko offers options for farmers as well. Anyone with a mobile phone can request data for the cost of an SMS, without a subscription. For a subscription of US$ 1 per month, farmers can automatically receive information on commodities, markets, and other topics of interest.

In developing a model for selling information to farmers, Esoko encountered a few challenges. Farmers are widely dispersed in the field and hard to reach. It is also difficult to quantify the exact value that the service generates for farmers. Free field trials for farmers elicited self-reported evidence of a 20–40 percent improvement in revenue. Sixty-eight percent of farmers said that they would pay for the service; every farmer who received information would forward it to a further 10 farmers. (For additional details on Esoko, see IPS in Module 3.)

INNOVATIVE PRACTICE SUMMARY
Web Portals Offer the Big Picture on Markets in Africa, Europe, and Asia

The summaries that follow describe web portals that offer market intelligence in three quite different settings: South Africa, Moldova, and India. The information spans a wide range, including long-term price trends, quality standards, options for marketing export crops, market advice specifically developed for smallholders, and overviews of value chains for individual products. This kind of information can shorten the time that producers need to acquire a sound knowledge base to develop production and marketing strategies.

Market Intelligence from Price to Advice in South Africa

Market intelligence is included as part of a marketing extension program developed by FAO and the Republic of South Africa. Overviews of the markets for different products are posted on the program’s website. They are downloaded by farmers as well as extension officers providing marketing extension training, particularly to South Africa’s emerging cadre of black farmers.

The reports cover horticultural crops, livestock, dairy, wool and mohair, and broilers and eggs, and aside from the information on markets, they include price histories, grading standards (fat codes for beef animals, for example), and advice on market options for smaller-scale farmers. Figures 9.17 and 9.18 reproduce examples of marketing information for horticultural crops and fresh produce in South Africa (http://www.nda.agric.za/docs/GenPub/marketEx.htm).(Click here for Figure 9.17).

Figure 9.18: Average Tomato Sales for Three Fresh Produce Markets, South Africa

Source: NDAA 2000.

 

As an adjunct to this information, the Department of Agriculture website (http://www.daff.gov.za/) lists over 40 value chains, providing an overview of the market for a range of products, including field crops, livestock, and horticultural products. The Agrimark website (http://www.agrimark.co.za/about_frame.htm) posts weekly reports on key commodities such as sugar, maize, and livestock, which build up a picture of the market for these products over the medium term. This is a good example of how government can provide a comprehensive market intelligence service aimed at building farmers’ understanding of the market. Interestingly the main criticism of the information has been the urgent need to update it, especially the contact details of key organizations.

“Export Moldova” Portfolio Provides Detailed Export Market Assistance

Another example of ICT used to provide market intelligence comes from Moldova, where the USAID/CNFA website, “Export Moldova” (http://www.acsa.md/category.php?l=ro&idc=178), has been incorporated into the larger national extension service website. Export Moldova provides a portfolio of important information to traders and producers to facilitate their access to export markets. The information covers 13 products and drills down to detailed market information on export markets, varieties, packaging, and postharvest handling and processes, as well as EU quality standards, the standards endorsed by Global G.A.P., and similar information.⁶

Detailed Market Price Projections from India’s AGMARK Service

In India, under the World Bank-funded National Agricultural Innovation Project (NAIP), a consortium headed by the Tamil Nadu Agricultural University has developed a largely web-based market intelligence service (although SMS and print media are also used). The service, AGMARK (http://www.tnagmark.tn.nic.in), carries out a number of functions aimed at improving farmers’ prices and their understanding of the bigger marketing picture for selected products.

Like the Moldova portal, the NAIP portal offers information on grading standards, export processes, and postharvest technology, but its innovative element is a projection of future prices based on rigorous surveys of the trade, international information, and an understanding of Indian and global production data (figure 9.19). With this information, the service generates future price estimates to enable growers to improve their decisions to sell or store products.

Figure 9.19: India's Farmers See the Bigger Picture: AGMARK's Market Price Projections

Source: Tamil Nadu Agricultural University

 

 

 

 

 

 

 

 

 

 

 

 

Topic Note 9.4:     ICTs Facilitate Access to and Delivery of Inputs

Trends and Issues

Farmers’ yields deviate from potential yields for a variety of reasons: poor climate or weather may play a part, along with other factors such as socioeconomic status, physical infrastructure, institutional and government policies, or poor access to farming technology or finance. The benefits of narrowing the yield gap include increased productivity and profits. These issues—covered elsewhere in this sourcebook—remain a central challenge in improving farming efficiency. Why don’t farmers use inputs and intensify their production more? The response to this question often is limited to farmers’ lack of knowledge about technology, its affordability, and farmers’ access to working capital.

Yet farmers may also lack information on how to get inputs. Farmers can be unsure when inputs are available, particularly when the government distributes subsidized inputs. Farmers’ buying habits may also be suboptimal; a little “nudging” at the right time could help them purchase inputs at the correct time. This note examines how much of the yield gap is related to problems in accessing inputs and how ICT can be used to facilitate access. To date, research on this subject has been limited; it might be important to prioritize for further research.

ICTs and Improved Access to Inputs: Lessons Learned

Farmers’ need accurate information on agricultural techniques, including input use, and they also need to source good-quality inputs in a timely way for production. In a study of mobile phone use in India, six of the focus groups interviewed highlighted difficulties in sourcing inputs such as fertilizer, seed, and agrochemicals for plant protection. They highlighted this problem twice as frequently as the next key problem, which was their lack of irrigation. Several groups noted that they lacked information for distinguishing genuine products from the counterfeits flooding the market, which remain a significant productivity drain. Their concern over accessing inputs was echoed in surveys of how Indian farmers used their mobile phones. The search for inputs—particularly seed, fertilizer, and plant protection chemicals—was listed high among farmers’ reasons for using mobile phones.

Even if they know where to buy inputs, farmers do not or cannot always buy them at the right time. Duflo, Kremer, and Robinson (2009) argue that a tendency to procrastinate may explain why so few African farmers use fertilizer, despite knowing that it raises yields and profits. Only 9 percent of farmers interviewed believed that fertilizer would notincrease their profits, yet only 29 percent had used any fertilizer in either of the two preceding seasons. When asked why, almost four-fifths of the respondents said that they did not have enough money to buy fertilizer, although fertilizer was readily available, and even poor farmers earned enough to buy fertilizer for a portion of their fields. Better intentions made little difference. Virtually all farmers said they planned to use fertilizer the following season, but only 37 percent actually did so.

Duflo and colleagues contend that the reason for this gap between thought and action is that many farmers are biased toward the present and procrastinate repeatedly. Right after the harvest, when farmers are cash-rich, most can afford to buy fertilizer. But they don’t. They postpone the purchase, believing they will make it later. It seems that a small discount, and little “nudging,” could improve the intensity of input use.

The question is whether ICT, with targeted messages, could be effective for helping farmers to become more rational and better-organized buyers of inputs. In other circumstances, having access to such information through ICT seems to provide clear benefits (Click here for Table 9.5):

• In India, farmers with access to ICT services reported 10–40 percent yield increases, primarily through gaining better access to hybrid seed and being encouraged to introduce new farming practices (Vodafone India 2009). All farmers claimed that their mobile phones had led to increased yields, with some also citing price and revenue improvement. These increases are a result of better information flows through the use of mobile phones and other ICT services such as the e-Choupal.
• A national survey of Indian farmers found that only 40 percent of farm households accessed information about modern agricultural techniques and inputs.⁷ The survey also found that almost all small-scale farmers reported some increase in convenience and cost savings from using their mobile phones to seek information such as input availability.⁸
• In a survey of farmers who received the RML service, 50 percent said they reduced expenditures on agricultural inputs because of SMS information services. The service is also changing farmers’ behavior: 44 percent said that it changed their fertilizer applications and 43 percent said that it changed the timing of spraying.⁹

A reason commonly cited for the difficulty in obtaining inputs is that the government will often distribute subsidized inputs, often through schemes that last only a few years. These policies restrict the potential for the private sector to supply inputs, and when government programs end, no company can sustainably deliver inputs to the farming community.

Principles and Guidelines for Potential Interventions

Given the multidimensional challenges of designing an effective intervention to supply inputs, a successful design will take a multipronged approach:

• Find innovative ways to form private-sector partnerships. Better involvement and organization of stakeholders can improve farmers’ access to information about inputs. Agribusinesses and input suppliers have an incentive to invest in ICT services that provide input information because of the potential benefits that can be realized from increasing input sales. Moreover, input suppliers and dealers can come together to create partnerships to facilitate access to inputs. They can do so by combining their data and communicating via SMS. It is certainly envisaged that SMS systems can and will be used by input supply companies to alert farmers to the arrival of inputs, remind them to purchase inputs, and provide timely advice on proper input use, especially for treating emerging pest and disease problems.
• Identify ways to use ICT to improve governance of subsidy programs. ICT offers a means of delivering subsides to the intended beneficiaries. It enables community procurement of inputs and input delivery through the private sector. The embedded e-payment system guarantees timely payment from the government and encourages the emergence of a private network of input suppliers.
• Education and information dissemination are key components of supplying inputs through ICT. It is critical for farmers to have a rooted understanding of the potential long-term implications on productivity and profits of using better inputs in a timely manner. On a more practical level, farmers need information about how to source inputs and identify counterfeit supplies, which remain a significant productivity drain.¹⁰ Examples are emerging in Nigeria of e–systems for verifying the provenance of specific agricultural inputs. Similar systems might be applied elsewhere.

The innovative practice summaries highlight two experiences in supplying inputs based on the use of ICT, one from India and one from Zambia. These innovations seek to overcome some of the limitations encountered in input supply programs, such as the challenges of transmitting information on input use to widely dispersed farmers or of ensuring that government-subsidized inputs reach the intended beneficiaries.

INNOVATIVE PRACTICE SUMMARY
Agribusiness Advises India’s Farmets through e-Choupal Kiosks

ITC is an agribusiness that provides information services to India’s farmers through 6,500 e-Choupal (Internet) kiosks (http://www.itcportal.com/sustainability/lets-put-india-first/home.aspx). Started in 2000, the kiosks presently operate in 40,000 Indian villages to reach approximately 4 million farmers. These kiosks are hubs where farmers can obtain price information, seek options for selling their produce, buy inputs, and obtain advice on farming practices related to input use. Services are offered free of charge; ITC earns its revenues from commodity transactions at the kiosks and from using the kiosks to market other goods such as agricultural inputs.¹¹ In addition to the kiosks, ITC will also offer information services to farmers over mobile phone, thus deepening its relationship with the farmer (Kumar n.d.).

Table 9.6 shows the impact of e-Choupal service on farmers’ yields and costs. Ultimately ITC expects half of its revenue to come from input sales.

INNOVATIVE PRACTICE SUMMARY
Zambian Farmers Buy Subsidized Inputs via Mobile Phone

In Zambia, an electronic voucher (e-voucher) system is being piloted by the United Nations World Food Program (WFP), CARE, and the local Conservation Farming Unit (CFU). With the help of Mobile Transactions (a company specializing in low-cost payment and financial transaction services) (http://www.mtzl.net/), the e-voucher system empowers smallholders to obtain subsidized inputs from private firms (giving the firms, in turn, an incentive to expand and improve their business).¹² (Click here for Table 9.6)

An e-voucher is redeemed in the following steps:¹³

1. On receipt of the e-voucher, which resembles a prepaid mobile phone card, the farmer goes to a registered agrodealer. He/she buys inputs using the voucher and the amount of top-up cash required to complete the purchase.
2. He/she scratches the first foil to reveal a PIN. The agrodealer uses the PIN to validate the authenticity of the farmer’s voucher and certify receipt of the top-up payment. Upon validation, the redeemable cash value of the scratch card is automatically credited to the supplier’s transaction account from the master “subsidy account.”
3. Upon delivery (which is either immediate in the case of an agrodealer or later if the buyer purchases from an agent), the farmer scratches the second PIN to confirm delivery and complete the final authorization, which allows the agrodealer or agent to receive final payment from the master subsidy account.

Under the government’s Fertiliser Support Programme (FSP), small-scale farmers had difficulty accessing inputs owing to delays in input distribution and poor monitoring of the program’s fertilizer distribution.¹⁴ The mobile transaction system enables electronic monitoring of the e-voucher system, documenting which vouchers have been redeemed, where, and for which products, thereby improving the efficiency and effectiveness of the input subsidies.¹⁵ Because farmers are registered with the system, they can be identified more effectively for specific training programs with input- and productivity-enhancing components. Moreover, the e-voucher system supports private agribusinesses by making them the direct source for inputs; as more private input dealers choose to participate, competition may increase.

References and Further Reading

• Aker, J. C. 2008. “Does Digital Divide or Provide? The Impact of Mobile phones on Grain Markets in Niger.” Center for Global Development Working Paper No. 154. http://www.cgdev.org/ content/publications/detail/894410, accessed January 2011.
• Annerose, D. 2010. “ICT for Social and Economic Development.” Presentation by Manobi at the World Bank, Washington, DC, August.
• Banjo, G., H. Gordon, and J, Riverson. 2010. “Rural Transport: Improving its Contribution to Rural Growth and Poverty Reduction in Sub-Saharan Africa.” Washington, DC: World Bank.
• CESS (Centre for Economic and Social Studies). 2007. Preparatory Study for the Multi-State Agricultural Competitiveness Project.Unpublished study, CESS, Hyderabad.
• Chong, A., V. Galdo, and M. Torero. 2005. “Does Privatization Deliver? Access to Telephone Services and Household Income in Poor Rural Areas Using a Quasi-Natural Experiment in Peru.” Inter-American Development Bank Working Paper No. 535. Washington, DC: Inter-American Development Bank.
• Dixie, G. 2007. “Marketing Extension: A Powerful Six-Step Process from Bangladesh.” Presentation at the University of Illinois at Urbana-Champaign. http://lightning.itcs.uiuc.edu/india2007/ grahame_dixie.html, accessed April 2011.
• Duflo, E., M. Kremer, and J. Robinson. 2009. “Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya.” NBER Working Paper No. 15131. Cambridge, USA: National Bureau of Economic Research. Poverty Action Lab, http:// www.povertyactionlab.org/sites/default/files/publications/99_ Understanding_Technology_Adoption.pdf, accessed January 2011.
• Egyir., I. S., R. al-Hassan, and J. K. Abakah. 2010. The Effect of ICT-based Market Information Services on the Performance of Agricultural Markets: Experiences from Ghana. Unpublished draft report, University of Ghana, Legon.
• Fafchamps, M, and B. Minten. n.d. Impact of SMS-Based Agricultural Information on Indian Farmers. Unpublished draft report.
• Ferris, S., P. Engoru, and E. Kaganzi. 2008. “Making Market Information Services Work Better for the Poor in Uganda.” CAPRi Working Paper No. 77. Washington, DC: CGIAR System wide Program on Collective Action and Property Rights (CAPRi)
• Goyal, A. 2008. “Information Technology and Rural Markets: Theory and Evidence from a Unique Intervention in Central India.” University of Maryland, College Park.
• Ilahiane, H. 2007. “Impacts of Information and Communication Technologies in Agriculture: Farmers and Mobile Phones in Morocco.” Paper presented at the Annual Meetings of the American Anthropological Association, December 1, Washington, DC.
• ITC. 2010. ITC e-Choupal’s Agri Interventions.
• ITU (International Telecommunication Union). 2008. 2008 Global SMS Prices. Geneva.
• Jaleta, M., and G. Gardebroek. 2007. “Farm-gate Tomato Price Negotiations under Asymmetric Information.” Agricultural Economics 36(2):245–51.
• Jansen, H. G. P., S. Morley, and M. Torero. 2007. “The Impact of the Central America Free Trade Agreement on Agriculture in Five Central American Countries.” Working Paper No. 26. San José, Costa Rica: Regional Unit for Technical Assistance (RUTA).
• Jensen, R. 2007. “The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector.” Quarterly Journal of Economics 122(3):879–924.
• Kaganzi, E., S. Ferris, J. Barham, A. Abenakyo, P. Sanginga, and J. Njuki. 2008. “Sustaining Linkages to High Value Markets through Collective Action in Uganda: The Case of the Nyabyumba Potato Farmers.” CAPRi Working Paper No. 75. Washington, DC: CGIAR System wide Program on Collective Action and Property Rights (CAPRi).
• Kakunta, C. n.d. “Distributing food inputs via mobile phone.” Zambia Daily Mail, http://www.daily-mail.co.zm/media/news/viewnews .cgi?category=20&id=1277968851, accessed April 2011.
• Kumar, P. S. K. n.d. “Mapping and Preliminary Evaluation of ICT Applications Supporting Agricultural Development: An IFC sponsored Study in Uganda, India, and Indonesia.” Presentation. ACDI/VOCA, http://www.acdivoca.org/site/Lookup/ACDIVOCA_ MappingEvaluationofICTAppsforAg/$file/ACDIVOCA_ MappingEvaluationofICTAppsforAg.pdf, accessed July 2011.
• Kunaka, C. 2010. Logistics in Lagging Regions: Overcoming Local Barriers to Global Connectivity. Washington, DC: World Bank.
• Labonne, J., and R. S. Chase. 2009. “The Power of Information: The Impact of Mobile Phones on Farmers’ Welfare in the Philippines.” World Bank Policy Research Working Paper No. 4996. Washington, DC: World Bank.
• Lokanathan, S., H. de Silva, and I. Fernando. 2010. Price transparency in agricultural produce markets: Sri Lanka. Draft. ENRAP, http://www.enrap.org/research/icts-for-livelihoods-research/ icts-for-livelihoods-research-papers/ICT4RLPaper_V6.doc/view, accessed February 2011.
• Minten B., T. Reardon, and K. Chen. n.d.. The Quiet Revolution of “Traditional” Agricultural Value Chains in Asia: Evidence from Staple Food Supply to Four Mega-cities. Unpublished draft, International Food Policy Research Institute, Washington, DC.
• Mittal, S., S. Gandhi, and G. Tripathi. 2010. “Socio-Economic Impact of Mobile Phones on Indian Agriculture.” Working Paper No. 246. Delhi: Indian Council for Research on International Economic Relations (ICRIER). http://www.icrier.org/pdf/WorkingPaper246.pdf, accessed April 2011.
• Muto, M., and T. Yamano. 2009. “The Impact of Mobile Phone Coverage Expansion on Market Participation: Panel Data Evidence from Uganda.” World Development 37(12):1887–96.
• NDAA (National Department of Agriculture). 2000. “The South African Horticulture Market.” Training Papers 2 and 3. Pretoria.
• Okello, J. 2010. Effect of ICT-based MIS projects and the use of ICT tools and services on transaction costs and market performance: The case of Kenya. Unpublished draft.
• Overa, R. 2006. “Networks, Distance, and Trust: Telecommunications Development and Changing Trading Practices in Ghana.” World Development 34(7):1301–15.
• Ratnadiwakara, D., H. de Silva, and S. Soysa. 2008. “Transaction Costs in Agriculture: From Planting Decision to Selling at the Wholesale Market: A Case-Study on the Feeder Area of the Dambulla Dedicated Economic Centre in Sri Lanka.” 3rd Communication Policy Research South (CPRsouth) Conference, Beijing. SSRN, http://ssrn.com/abstract=1555458, accessed January 2011.
• Shaffril, H. A. M, M. S. Hassan, M. A. Hassan, and J. L. D’Silva. 2009. “Agro-based Industry, Mobile Phone and Youth: A Recipe for Success.” European Journal of Scientific Research 36(1):41–8.
• Sieber, N. 1999. “Transporting the Yield.” Transport Reviews, 10(3):205–20.
• __________. 2009. “Freight Transport for Development Toolkit: Rural Transport.” Washington, DC: World Bank.
• Svensson, J., and D. Yanagizawa. 2009. “Getting Prices Right: The Impact of the Market Information Service in Uganda.” Journal of the European Economic Association 7(2–3):435–45.
• Vodafone India. 2009. “India: The Impact of Mobile Phones.” Vodafone Policy Paper, No. 9. http://www.vodafone.com/ content/dam/vodafone/about/public_policy/policy_papers/ public_policy_series_9.pdf, accessed July 2011.
• 1 For more information, see Dixie (2007). 
• 2 For more information, see the documentation for the Assam Agricultural Competitiveness Project (http://web.worldbank.org/external/projects/mainpagePK=64283627&piPK=7323...).
• 3 Ware potatoes are potatoes grown for human consumption rather than for planting.
• 4 Information in this section is based on the Project Appraisal Document for the Maharashtra Agricultural Competitiveness Project (http://web.worldbank.org/external/projects/main?Projectid=P120836&theSit...).
• 5 Information in this case study is based on personal communication with Esoko staff.
• 6 CNFA is the Citizens Network for Foreign Affairs. 
• 7 Situation assessment survey of farmers conducted by the National Sample Survey Organization (June 2005), Government of India, quoted in Mittal, Gandhi, and Tripathi (2010).
• 8 Mittal, Gandhi, and Tripathi (2010).
• 9 The World Bank and Reuters are funding a project commissioned by Oxford University’s Economics Department and International Food Policy Research Institute (IFPRI) to quantify the impact of the RML service on farm profitability. 
• 10 Mittal, Gandhi, and Tripathi (2010). 
• 11 “ITC’s Rural Development Philiosophy at Work” ITC, http://www.itcportal.com/ruraldevp_philosophy/echoupal.htm, accessed July 2011.
• 12 Mobile Transactions Zambia; see http://www.mtzl.net/info/index.php?option=com_content&view=article&id=26....
• 13 Based on testimony to the Parliamentary Committees on Agriculture and Lands on Performance of the Fertiliser Support Programme in Zambia.
• 14 Based on testimony to the Parliamentary Committees on Agriculture and Lands on Performance of the Fertiliser Support Programme in Zambia.
• 15 Kakunta (n.d.). 

   

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