Delivering on digital solutions for smallholder farmers in Africa is a task that the FtMA has boldly accepted. The FtMA is a public-private sector led consortium of actors seeking to transform Food value chains in emerging markets by building long-term linkages between farmers, buyers, financiers, and input providers.
Supporting FtMA to Scale Innovation
Like the old saying – “If you want to go fast, go alone. If you want to go far, go together” – farmers in the Farm to Market Alliance (FtMA) have not only increased their household incomes significantly in a short period of time, but also increased their yields and reduced crop loss in the long term.
FtMA is a consortium of eight global members formed in 2015 with the objective to make markets work better for farmers. They can access affordable credit, quality inputs, effective post-harvest management, and other agricultural technologies while gaining access to markets. FtMA currently operates in four countries – Rwanda, Tanzania, Kenya, and Zambia – with plans to scale up across Sub-Saharan Africa. The program has reached over 150,000 farmers in various value chains.
Since 2016, AFA has supported FtMA in developing, designing, and rolling out a digital platform to meet the needs of the consortium. These engagements can be summed up as four activities as listed below:
- Digitization of FtMA service platforms and User Experience testing to enable lower cost and more scalable service offerings
- Design of digital credit products and partnership development to enhance more suitable loan product offerings for smallholders
- Development, financing, and coordination of aggregator models to address challenges around access to finance and aggregation of produce
- Data strategy development to optimize data value to alliance partners and ultimately help FTMA better serve its farmers.
Case Study Insights
The FtMA is a market facilitation platform first, enhanced by digitization
FtMA is a buyer platform at its core, which is enhanced (but not defined) by a digitized service offering. The World Food Program’s historical experience in working with buyers and their understanding of the shortcomings in these dealings has had a positive impact on the digital design and development of the FtMA solution. Changing behaviors from analog systems with indelible features requires a rigorous approach to adoption methodologies beyond mere sensitization and education campaigns, as one wise man famously stated:
“Innovation makes enemies of all those who prospered under the old regime, and only lukewarm support is forthcoming from those who would prosper under the new“
The Prince, Niccolo Machiavelli.
Country context really matters
FtMA has had to adapt its model significantly across each of its markets to account for country differences, e.g., in the maturity of the financial sector, the strength of aggregator networks, and mobile money penetration. One size does not fit all and adoption of innovations such as technology is subject to both structure and agency without giving primacy to either. Each country context needs to be observed and analyzed to understand not only the economic peculiarities but also the cultural, social, and political phenomena. Even simple variables such as the choice of the value chain to digitize can have widespread implications on eventual adoption.
Solving for aggregation is not as simple as “cutting out the middle man”
Identifying, organizing, and adapting to different aggregators – whether they are agro-dealers, cooperatives, traders, or off-takers – is critical to connecting farmers to market and de-risking transactions. One of the challenges AFA is currently unraveling is the question of whether to replace current ‘middle layers’ in the value chains or empowering them through digital interventions. The shared economy perspective suggests collaboration with these ‘middle layers’ to enable them to provide services optimally to their customers and suppliers while increasing the efficiency and effectiveness of their business models.
A significant organizational effort is required to transition from analog to digital structures
To enhance the conversion of existing analog structures to digital ones involves a higher level of effort than building out “native digital” processes. Digital skills must also be developed amongst market stakeholders, not only at a value chain level but also at an organization level. Practices that are contrary to the digital innovation will need to be analyzed and reviewed in the new technology to be adopted. Organizations have taken bold steps such as setting up new entities e.g. Commercial Bank of Africa set up CBA Group and Equity Bank set up FinServe Africa, to limit the impact of current paradigms and processes in their respective parent organizations, which could derail the adoption of new technologies.
Platform-based linkages to buyers can be a major driver of financial inclusion for smallholders
FtMA’s platform has proven an effective channel to offer financial services to smallholders. Its digital platform allows a shift of focus from farmer groups to individual farmers where appropriate. Even in a more mature digital environment like Kenya, offering digital financial services has proven challenging – traditional financial institutions have not shown flexibility to go fully digital and FtMA has had to initiate trials by partnering with more agile FinTech organizations. The question remains: Is the individual smallholder financing market viable for commercial banks, FinTechs, and microfinance institutions? Through FtMA, we are observing limitations for commercial banks to enter this low-value, high-cost acquisition market with their current engagement models. MFIs with their high touch models present both advantages and disadvantages in addressing the needs of these markets, especially the flexibility to scale to new products and value chains. FinTechs have proven to have the right mix of services to reach this market with the exception of adequate pan-optical capabilities to support onboarding and debt recovery activities.
A clear data strategy is needed to drive value and define data sharing parameters
Finally, platforms like FtMA can generate a lot of critical data for banks, insurers, buyers, input providers, value chain actors, and farmers. To derive value from this data, there needs to be clear planning upfront – it will not happen automatically. The topic of data has currently entered into the realm of taboo with recent announcements on data security and protection of data ownership rights. Organizations collecting, shaping, and disbursing customer data will have to be cognisant of juridical edicts pertaining to data sharing and ownership, and build prerequisite models that fit their contexts. This case study provides a succinct study on how to go about digitizing agricultural value chains in selected Sub Saharan countries. Whilst not all questions are answered, there are useful lessons and signals to look out for to formulate successful adoption strategies.
Sieka Gatabaki, Digital Financial Services Manager, AgriFin Accelerate.
Paul Kweheria, Tanzania Country Director, AgriFin Accelerate.