ICTworks

The proliferation of mobile phones among rural households in Kenya, Tanzania, and Ghana has seen a significant increase of digital information solutions for farmers. The AGRA financial inclusion team identified 150+ different ICT solutions in these countries that allow farmers to access information on market prices, good agronomical practices, and weather updates.

However, research from GSMA, CTA, and Mercy Corps found that many of these solutions do not sustain beyond the life of an award or a typical three-year donor project due to flawed business models.

To find out what does work, AGRA commissioned How to Grow and Sustain the Digital Harvest? – a business model assessment of fifteen ICT4Ag Solution providers in Kenya, Tanzania, and Ghana that yielded insights in flaws and possible improvements needed to grow and sustain the solutions that offer real value to users.

ICTforAg Business Model Flaws

The business model review identified eight key problems that hamper the growth and sustainability of the solution providers.

1. Smallholder farmers have little ability or willingness to pay for services.
2. Mobile network operators propose unfavourable revenue sharing models.
3. Affordable patient capital to finance scaling of solutions is difficult to find.
4. Solutions have no clear revenue model and struggle to fund their growth.
5. Limited customer segmentation, weak relationship management, and limited customer feedback mechanisms reduce user uptake and retention.
6. Farmers mistrust or resist innovation and technology if they feel automated payments and push messaging are using their airtime (phone credit).
7. Extension workers and traders, who are the potential promoters of the solutions, might fear for their job or income when trading is automated, prices become transparent, or extension messages are digitized. The need for change management at that level is often not recognized.
8. Solution providers insufficiently track financial key performance indicators as a measure of sustainability and have a limited view on their cost drivers.

Unfortunately, these flaws in business models and the lack of a clear business case for users, lead to solutions that do not have robust revenue models or do not empower customers to adopt the solutions.

Key Traits of Sustainable Business Models

The business model review found that five out of fifteen solution providers were sustainably delivering services, and they had these traits in common:

1. Revenue models where agribusinesses or institutions pay for smallholder farmers to access the service – hence the paying client differs from the user.
2. Low-cost digital delivery channels combined with expensive face-to-face promotion and marketing to gain trust from smallholder farmers and organize regular customer feedback.
3. Offerings that combine valued and focused services in partnership with trusted organizations that give access to content, users, or infrastructure.
4. Key performance indicators and customer feedback loops to monitor the business.
5. Diversified sources of revenue such as subscription and usage fees combined with advertisements and commissions. The selling of data collected through the solution is often mentioned as a revenue stream, but it is too early to see success cases of this potential revenue stream.

Potential New ICTforAg Approaches

After assessing their findings, AGOA came up with several new approaches that could help current and future ICT4Ag solutions become more sustainable, attract more resources, and have more users:

• Use a freemium revenue model adopted and promoted by early users – this allows the solution to demonstrate its value before customers are charged.
• Undertake a user-centered design process, where the content becomes more farmer-centric and the solution more user-friendly. Bundling with services that farmers have a willingness to pay for, credit for example, might improve uptake.
• Provide change management support at the level of promoters and institutions adopting the solutions.
• Forge symbiotic partnerships with other providers to share field agents, customer acquisition,  feedback services (call centers) and content generation, which could reduce costs of services delivery.
• Unite with other providers to lobby the mobile network operators for an equitable revenue share percentage and unite the financiers for patient affordable capital instruments.
• Present a strong business case for all actors involved (target customers, promoters, and content providers) and envisage an exit strategy for donor support.

The full How to Grow and Sustain the Digital Harvest? report has further insights and recommendations for ICT4Ag practitioners and this synopsis is a condensed version of the executive summary.