Linking farmers to markets

Linking farmers to markets helps farmers to escape the greed of middlemen and traders as it improves their knowledge of market prices and increases their bargaining power. Better roads in rural areas, for example, will encourage them to transport their produce to distant markets themselves and bypass middlemen. Similarly, the expansion of mobile network services into rural areas will effectively connect farmers to local and distant markets. Agricultural market information services (AMIS), several of which have been launched across Africa (see box), hold great promise for enhancing agricultural value chains.

Agricultural market information services are a set of tools for collecting and processing agricultural and livestock market information and delivering this information to farmers, as well as traders, food processors and government functionaries. These services aim to increase the transparency of the agricultural marketplace. Informed farmers can make better business choices, for instance which crops to plant or how long to store their produce until prices improve. Information from local and distant markets also helps farmers to decide how to price their products and where to sell them. Eventually, better business decisions improve their bargaining power and increase their income.

Many AMIS initiatives make more than just market information available to farmers. Indeed, they also provide agricultural extension advice, weather forecasts and prices for agriculture-related inputs. Some services even help farmers to find buyers for their produce and buy their farm inputs directly from manufacturers at favourable prices.

Learning quickly

Agricultural market information services usually make their services available via websites, though some also distribute their information via radio, newspaper and television. But increasingly their services are available as mobile agricultural value-added services through mobile networks and social media such as Facebook and Twitter.

The number of farmers using agricultural market information services is on the rise. Many of these services, such as Esoko, Manobi, LINKS, KACE and M-Farm, have been successfully employed by farmers. Many more of these services, however, have been less successful, often because they have either failed to provide timely, accurate and cost-effective market information or have not made their information easily accessible for the intended users.

Indeed, it is easy to underestimate the time and resources that are required to gather and process agricultural price information from local, regional and national markets. It is also difficult to adequately package information for customer groups that have levels of illiteracy. Another common problem is underestimating the challenge of reaching out to farmers in remote rural areas and the impact of the absence of government policies to create enabling environments.

Nevertheless, in their many forms agricultural market information services are an effective way of linking farmers to markets. Mobile value-added services have been introduced into the agricultural sector in most ACP countries, and people are learning lessons quickly about what does and does not help farmers. So knowledge of these services is developing rapidly.

Financial sustainability

One of the biggest challenges facing agricultural market information services to date has been how to achieve financial sustainability. These mobile value-added services must be built on robust business models. Moreover they also need coherent business plans that convincingly outline how initial pilot activities will be scaled up to achieve long-term financial sustainability.

As with so many other donor-supported agricultural development programmes, services operating with donor support do not tend to survive when a project ends. They should therefore opt for business models that are geared towards financial independence, so they can break even or ideally even make a profit and sustain themselves.

Sustainability requires that these services scale up operations, following the initial pilot and testing phases, to accommodate regular customer bases – not consisting of hundreds of farmers, but thousands if not tens of thousands of farmers. Governments, donors and development organisations may choose to subsidise these services for certain groups of farmers, but these services’ tools should be principally offered on a fee basis.

An agricultural market information system that has successfully scaled up its services is the Ghanaian platform Esoko. Launched in 2005 with funding from USAID, Esoko is now a profit-making company with private investors. One of its strengths is that it is able to operate independently from government or donor funding. Right from its start, Esoko adopted a tiered franchise-subscriber business model. It then made a targeted effort to expand its customer base, which substantially enhanced its technical platform and agricultural information services.

Esoko now works in Ghana, Burkina Faso, Cote d’Ivoire and Malawi. Esoko’s business model includes private franchises, a reseller programme and public–private partnerships. Franchise holders seek private equity investments and sell subscriptions to Esoko’s SMS-based agricultural information services, and training and consulting support. The franchise holders must meet minimum performance standards and share their revenue with Esoko. Resellers sell Esoko’s subscriptions, training and consulting services, and target companies that wish to use Esoko’s services as a complement to what they are already doing.

Other successful services, such as Manobi, KACE, M-Farm and LINKS have all adopted profit-making models and expanded their customer base to become financially independent from external funding. As a government programme, LINKS is the exception, but it can rely on secured funding and sustained support from a government that considers market price information an important public good.

Lessons learned

Clearly, identifying key target users of market information is just as important for the success of an AMIS as is a profit-making business model and a business plan that is geared to scaling up the number of customers in order to become financially independent.

Over time, farmers’ information needs may shift from information on market prices and demand to information on new markets and product development opportunities. But there are more lessons to be learned from both good and bad experiences. Following are some of the actions that need to be taken to ensure success:

Promote AMIS activitiesSome constraining factors include:

Agricultural market information services hold great promise for linking smallholder farmers to markets, but most of these services are still in their infancy. Initial successes have demonstrated that these mobile value-added services have great potential for enhancing agricultural value chains. They are effective in promoting communication between parties in the chain and provide farmers with real-time information on market prices and demand, weather forecasts and agricultural advice. As these success stories demonstrate, if providers manage to keep subscription costs low and if the information continues to be timely and reliable, farmers will use their mobile phones to access these services. This requires investing more in mobile phone network coverage in rural areas, developing more specialised and interactive mobile value-added applications that will help farmers to increase the productivity of their farms, and developing national ICT policies that will promote the use of mobile value-added information services.

 www.lmistz.netKACE M-Farm 

Established agricultural market information services