Dossier

ICT4Ag start-ups: Building a better e-agribusiness

The recent boom in ag-tech start-ups has helped to further agricultural transformation and improve farmers’ access to valuable ICT-enabled services. But to continue this progress it is pertinent that entrepreneurs design sustainable business models.

Approximately 1 million farmers receive context-specific information via Esoko’s SMS services © Esoko
Approximately 1 million farmers receive context-specific information via Esoko’s SMS services © Esoko

Thursday, 26 April 2018

The rapid evolution of ICTs is providing new opportunities for young entrepreneurs in agriculture. However, there are many hurdles to be overcome before these fledgling agribusinesses become profitable.

Technology has been hailed as the answer to agriculture’s transformation with its potential to increase farming efficiency, resilience and yields, whilst minimising costs. As Eleni-Gabre Madhin, CEO of Ethiopia’s first youth agribusiness incubator, blueMoon, told Spore in a recent interview, “Ag-tech is now considered the new fin-tech.” All of this excitement around technology in the sector has seen a boom in e-agribusiness start-ups, but what does it take to build a sustainable ICT4Ag business in such a competitive and demanding market?

No matter which sector they operate in, all start-ups must have a viable business strategy to attract initial investment and begin their path to profitability. Many young agripreneurs, particularly in ACP regions, lack the business ‘know-how’ to build a sustainable business model, which is part of the reason that a lot of start-ups never make it to scale. Among some of the key issues that continue to hamper the success of ICT-enabled businesses, Christian Merz, senior program officer of digital solutions at the Bill & Melinda Gates Foundation, identifies, “Lack of evidence, challenging economics and poor understanding of the consumer.”

Strategic planning

Like blueMoon, other initiatives such as the African Agribusiness Incubators Network, the Entrepreneurship Program for Innovation in the Caribbean and CTA’s Pitch AgriHack, have emerged to guide more start-ups towards sustainable growth. However, developing an effective business strategy requires trial and reflection, and the timeframe of programmes like Pitch AgriHack are often too short to complete this process. To start them off in the right direction, CTA therefore recommends that agripreneurs use a business model canvas – like the one provided by Strategyzer – to encourage start-ups to think about key aspects of their business model, including potential partners, cost structures, revenue streams and marketing channels.

Investing resources in developing a well thought-out business model during the conception of a business saves time and money in the long-term. In ICT4Ag, one of the key questions that start-ups need to consider is where their revenue will come from, as most smallholder farmers have a limited ability or willingness to pay for services. “It is easy to get excited about the large numbers of underserved farmers, but they can also be a challenging customer to acquire and monetise,” notes Michael Elliot, TechnoServe regional programme director for the Connected Farmer Alliance.

Multiple revenue streams

When designing their business models, agripreneurs need to think about how they can diversify their revenue streams for long-term sustainability. Targeting different customer segments by providing solutions directed at private sector value chain actors, farmer organisations or NGOs (i.e. organisations who have greater capacity to pay for services than the farmers themselves) is one way that ICT4Ag start-ups can generate revenue from different sources. Ensibuuko, a cloud-based storage system, offers financial management services to Ugandan Savings and Credit Cooperative Organisations (SACCOs) for a fee. SACCO farmer members are then able to check their balance, make deposits and withdraw money using Ensibuuko’s services on their mobile phones.

In West Africa, Farmerline, a software company founded in 2013, relies on both business-to-business (B2B) and direct-to-farmer revenue streams. Whilst providing content messaging to deliver tips on good agricultural practices, weather reports and market information to farmers in their local language, the company also offers data analytics and insight solutions to other value chain actors, government organisations and NGOs via its Mergdata platform. Mergdata benefits agribusinesses by boosting smallholder productivity with targeted advice to farmers, increasing transparency in the supply chain and enabling input providers to distribute products to farmers through a network of trained delivery agents. Global businesses, such as The Hershey Company, ECOM Trading and Armajaro, use Farmerline’s services to better manage their entire supply chain across West Africa.

Farmerline’s Paytime credit scoring and lending app also provides financial institutions with alternative data sources that can act as collateral for farmers with no credit history. By offering a range of services directed at a variety of customer segments, Farmerline became profitable within 3 years. As Ken Lohento, CTA senior programme coordinator for ICT4Ag, notes, “Developing different revenue streams and leveraging different customer segments, is a winning strategy.”

Market analysis

In the increasingly saturated ICT4Ag market, it is essential that aspiring agripreneurs not only identify a variety of revenue streams, but also carry out sufficient research before launching their e-agribusiness. It is only through analysing what already exists and then identifying gaps in the market that start-ups can hope to gain an advantage over their competitors. In her recent interview with Spore, Parminder Vir, CEO of the Tony Elumelu Foundation, stressed the importance of researching market opportunities, stating: “You cannot say, ‘I am an entrepreneur,’ until you have done an intense amount of research on your idea.” (See also ICT start-ups for crop production and marketing)

Most start-ups are founded on the development of solutions to problems, which have been identified through such research. Sokopepe, a Kenyan social enterprise, is primarily designed to address the lack of accurate records of farming activities and the difficulties farmers face in accessing credit as a result of poor record-keeping. The company developed its Farm Records Management Information System (FARMIS) to help smallholder farmers commercialise their operations by generating reports that identify their productivity trends (e.g. seasonal crop yields, labour costs, sales data and farm inputs), seasonal profit and loss statements, and income potential projections.

With the data Sokopepe accumulates from these records, the company connects farmers so that they can sell produce in bulk, as well as links them to input providers, insurance schemes and financial institutions. Kenyan farmer, Agnes Kendi Mwaki, told the Alliance for a Green Revolution in Africa’s (AGRA) financial inclusion team that FARMIS greatly benefited her during their study of 15 ICT4Ag solution providers in 2016. “I would therefore be willing to pay for Sokopepe’s services because I see it as an investment and not a loss,” she explained. Mwaki is not alone. Sokopepe’s FARMIS service evidently fills a gap in ICT4Ag, which has helped it to maintain a monthly user growth rate of 5%. At this rate, the company expects to break-even in 2020 by which point it aims to have attained 60,000 smallholder subscribers.

Testing usability

Start-ups must engage with their target end-users to develop ICT solutions that directly respond to existing needs and gaps in the market. “Apart from making sure you have reliable revenue streams, the most important thing is to make sure you are offering something that really provides value for customers,” advises Ken Lohento.

Developing ICT-enabled services that add value for farmers requires businesses to pilot products and gather user feedback, so that services can be adapted accordingly, before rolling the product out on a larger scale. One company that has done this well is Ignitia, which delivers daily weather forecasts to Ghanaian farmers via SMS under its iskaTM service. In 2013, after iskaTM’s first rainy season in operation, Ignitia gathered feedback on the usefulness and accuracy of its forecasts by directly contacting individual subscribers and farmer organisations using the service. The pilot study reported that 93% of subscribers consulted the forecasts when planning their daily farming activities and the user retention rate was over 95%, which was likely due to the high (84%) accuracy of the forecasts.

Despite the positive results of the pilot and Ignitia’s provision of weather forecasts in four local languages, illiteracy remains a major barrier to service uptake. This is a common problem that ICT4Ag providers face, which makes constant monitoring and evaluation of the usability of such services integral to ensure alterations to products actually improve the services being provided. In 2016, for example, Ghanaian farmer Mahama Amadu, lamented the removal of weather symbols from Ignitia’s forecast messages. “If they could go back to what they were previously doing with the symbols, then every farmer would be capable of understanding their messages, at whatever level,” he told AGRA. It is access to such insights that helps start-ups to develop a product which farmers are willing to pay for.

Extension training and marketing

Follow-up visits to local farming communities that use its services are scheduled by Farmerline every 6-8 weeks to measure the impact of its voice messages and offer additional training in the use of its mobile technology. Even when audio services are provided in the local language, many farmers in rural areas are not technologically literate and struggle to access the information they need without being trained to use ICT-enabled services.

Face-to-face extension training in the use of ICTs should be integrated into the marketing strategies of most ICT4Ag start-ups. Wefarm, the world’s largest farmer-to-farmer digital network, enables farmers to ask and answer questions related to best farming practices online and via SMS. The company runs training courses to ensure ease of use for its consumers and advocate its peer-to-peer model. One of the company’s key challenges has been getting farmers to realise that Wefarm’s network is truly free to use, as many smallholders have been taken advantage of by services with hidden costs. In his interview with Spore, Martin Stimela, co-founder of Brastorne Enterprises, explains that “…having face-to-face customer care helps to build trust in service providers.”

Wefarm trains field agents as brand  ambassadors, who then carry out face-to-face training with other farmers on how to use the system. The company also organises training days in conjunction with farmer cooperatives and hosts radio campaigns to communicate their service offering to the public. As a result of these activities and the growing network of active users who provide quality answers to farmers, Wefarm has increased farmers’ trust in its platform, which now boasts over 720,000 farmer subscribers from Kenya and Uganda. Once farmers have signed up, the value of Wefarm speaks for itself, with 80% of farmer users saying they gain value from the service and the company’s consequent 90% retention rate.

Profiting from partnerships

In addition to extensive marketing and training campaigns, the formation of strategic partnerships can help to further uptake of ICT4Ag services. Brastorne Enterprises has partnered with Orange Botswana to roll out its mAgri mobile app, which provides farmers with access to farming information, markets, finance and low-cost communication. Partnering with a well-known telecommunications company has allowed the start-up to tap into a large pool of pre-existing customers and grow its active user-base to 300,000 within 2 years. The partnership has also helped Brastorne to overcome the issue of trust, as the mAgri service gained automatic legitimacy via its association with Orange’s brand.

Partnerships not only increase start-ups’ ability to acquire customers and gain visibility, but can also help to build a more attractive product. Rather than simply offering one service, businesses can offer a bundle of value-added ICT4Ag services if they partner with a variety of organisations that have different capacities (see also Sooretul: local food products just one click away).

CTA’s Market-led User-owned ICT4Ag-enabled Information Service (MUIIS) is based on this model. Through partnerships with satellite-based agricultural data providers, eLEAF and aWhere, remote sensing technology company, EARS, and Ensibuuko, MUIIS is able to offer farmers context-specific weather alerts and agronomic advice via their mobile phones, as well as index-based weather insurance for maize, beans, sesame or soybeans – all under one subscription.

Given the costs and infrastructure required for service delivery, the provision of the MUIIS package would not be possible without forming partnerships with organisations that have relevant capacities. So partnerships are also helpful to share some of the costs of service provision and marketing, which is an important consideration for agribusinesses that are just getting started.

Sourcing finance

Seed capital to enable ICT4Ag start-ups to get off the ground is not yet readily available, particularly in ACP regions, which makes it all the more essential that e-agribusinesses have a clear cost structure and feasible business model to maximise their chances of receiving a loan or grant (see Spore blog on Unlocking access to finance for youth agripreneurs).

Only start-ups that have thought about all of the outlined issues – from identifying a range of revenue streams to delivering a product that responds to farmers’ needs and ensuring that they are able to use it – will even be considered for support from incubators, entrepreneurship programmes, angel investors or financial institutions.

CTA’s recent publication ‘An ICT Agripreneurship Guide – A Path to Success for Young ACP Entrepreneursoffers more detailed information for young people interested in developing e-agribusinesses.

Esoko’s long-term success

With over 10 years of successful ICT4Ag service provision under its belt, Esoko offers a good example of a sustainable e-agribusiness model. “The key to Esoko’s continuing success is our constant pursuit of knowing what farmer’s needs are, and feeding this directly into our service offering,” an Esoko spokesperson explains. “Every step of the way, we have listened to what farmers’ challenges are and have adapted our services accordingly.”

Launched in 2005 as an experiment to discover how mobile technology could enhance the livelihoods of rural communities across Africa, Esoko initially started delivering information on market prices to farmers via SMS. The company soon established a call centre to address literacy issues and offer information in local languages. However, Esoko quickly realised that farmers needed more than just price information, so crop advice and weather alerts were added to its information and communication services, along with the opportunity for commodity buyers to more easily connect with producers.

To further diversify its service offerings and revenue streams, Esoko has subsequently developed two additional products: Insyt and Knowledge Plus. Both products are based on a B2B model, whereby Insyt offers mobile and web-based data collection tools to help government agencies, agribusinesses or NGOs carry out market research and profile their beneficiaries; while Knowledge Plus enables such organisations to curate content and deliver the desired information to remote communities in a format that can be accessed offline. With its enumerator network across Ghana, the company has profiled 2.2 million people and mapped over 42,000 ha of farmland.

Esoko’s ability to collect data and disseminate information so easily and efficiently sets it apart from other similar ICT4Ag service providers. To increase its pool of farmers using the platform – which now stands at approximately 1 million – Esoko partnered with Vodafone Ghana in 2015. Through the Vodafone Farmers’ Club, Esoko provides farmers with market prices, location specific weather forecasts and agricultural tips at a discounted price of €0.36 per month. The value of its services for farmers and businesses alike has ensured that the company’s user-base continues to grow.

Stephanie Lynch

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The Technical Centre for Agricultural and Rural Cooperation (CTA) is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.