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The Global Innovation Summit from September 28th to October 6th, 2017 was a forum for innovators, investors, and implementers to converge in Washington DC to exchange ideas about how innovation is integrated and implemented in international development. To help kick off an entire week of presentations and gatherings, one day of the summit was dedicated to conversations and presentations surrounding Scale to Impact, and the challenges and barriers faced by innovators and their new technologies in the quest to increase impact and spur development.

 

One key message of the Global Innovation Summit was the importance of human centered design in efforts to scale innovations in development. This bottom-up approach includes beneficiaries in strategy for what to innovate, how to build it, and how to distribute it. Using this method ensures that beneficiaries receive maximized support; and an innovation, process, or project that is designed to be effectively utilized by beneficiaries is more likely to achieve success with scale.

 

One innovator shared their experiences with incorporating human centered design as an approach to scaling their technology. Reel Gardening is a company that encases natural, high-quality seeds inside a biodegradable, nutrient-rich paper tape, making the growing process fast, easy, and effective. The process saves up to 80 percent in water consumption and yields quality, pest-free plants. However, the key farmer demographic could not afford to purchase the products offered by Reel Gardening, and school feeding programs - another target customer - weren’t buying the materials designed for schools because they were far too large in land area to sustainably maintain. These challenges could have been prevented using human centered design methods for inspiration, ideation and implementation. Realizing this, Reel Gardening tweaked their product for schools, producing smaller teaching plots and working with schools to incorporate agriculture in their curriculum.  They also incorporated a “buy one, give one” model, so they could leverage sales to a higher social strata in order to help the poorest people in the most need.

 

MyAgro used human centered design to create their product of mobile payments to incrementally pay for agricultural inputs. Realizing that smallholder farmers are not a homogenous or static group, MyAgro sought to help them overcome the expensive agricultural inputs with different packages to purchase seeds and other inputs incrementally or on layaway. They continued to integrate human centered design when they received feedback from customers who wanted more support; MyAgro then developed a network of local agents and vendors.

 

The approach used by Feed the Future Partnering for Innovation to negotiate milestones with potential private sector partners is reminiscent of human centered design. These milestones are carefully crafted with the consideration of partners, involving them directly in the planning process, but also motivating and incentivizing them to reach milestones that will improve their business strategies and operations in order to reach more smallholder farmers. This upfront, collaborative, and streamlined milestone-based approach is in itself an innovation, and was also showcased at Global Innovation Week.

 

MyAgro and Reel Gardening successfully incorporated human centered design in order to increase their scale, and Partnering for Innovation involved a variety of stakeholders in partnership development to create strong, successful partnerships. In agricultural development, farmers should be first, and human centered design is one way that organizations can ensure that innovation meets farmers’ needs.

One exciting innovation in agricultural technology is biological control products. Not only do these pest management products have huge market potential, but they also are environment-, farmer-, and consumer-friendly alternatives to traditional chemical pesticides. Unlike synthetic pesticides, biological control products are derived from natural materials such as animals, plants, and microbes, and are consequently less toxic and more targeted, while remaining highly effective at plant protection.

 

xHPjv2b.pngThis market has experienced rapidly accelerating growth. Since 1993, biological products have grown from being a $100 million to a $3 billion industry, and are projected to reach $5 billion by 2020 and $11 billion by 2015. In the future, the biological control market can potentially capture a $34 billion share of the $60 billion total plant protection market.

 

Despite this enormous potential, there are still a number of challenges both for companies hoping to enter this industry and for companies hoping to commercialize biological products in smallholder markets. First, there are a huge number of companies already competing, some, like Monsanto and Syngenta, already dominate the agricultural input industry and have significant resources and expertise. This means that market access is a significant barrier for smaller or local companies who do not have the same access to financial and human capital. Second, smallholders are often unaware of biological control products and are accustomed to using chemical pesticides, or no pesticides at all. This means that companies must invest in developing product knowledge and demand.

 

Whether you hope to enter the market or are a small biological control producer hoping to scale-up or expand across countries, we have identified a number of important considerations you should look at first:

 

1. Understand what the global and regional market trends are. North America and Europe represent the biggest shares of the market, while Latin America is the fastest-growing. While as a whole Africa represents a smaller share of the market, some countries that are already major agricultural exporters, such as Morocco, South Africa, and Egypt, have active biological control product markets. When considering the biological control product market in different countries, it is important to consider the type of crop, how it is used (if it is domestically consumed or exported), and the price-point of farmers.

 

2. Understand the key market drivers, and what market potential it offers you. The main driver of growth is consumer demand to reduce chemical pesticides. Consumers increasingly consider the health and environmental impact of their food, and biological control products offer a safer solution. Manufacturers are drawn to biological products due to the significantly lower cost of development, reduced pest resistance, and fewer regulatory hurdles. While new synthetic pesticides can take over 11 years to go from development to market and cost upwards of $286 million, biological products take only 3-5 years and cost between $25-50 million.  Farmers, in turn, are driven to use biological control products because they are safer for themselves, their families, and their lands. In addition, the products are also proven to increase crop productivity and quality, allowing them to sell and export more. Knowing these key drivers is essential to develop a targeted marketing plan and business strategy.


3. Understand the intellectual property framework. If you are developing a new innovation, or hope to expand into foreign markets, it is very important to consider intellectual property laws and patents. Patents play a key role in helping small companies compete, promoting innovation, and protecting inventions. For companies hoping to patent biological control products, there are several important considerations. First, in order for your invention to be eligible, it must be different from what occurs normally in nature. For example, if you alter microbes, or combine microbes that are not naturally found together, then you could patent them. However, if you just take a microbe out of nature and do not change it, you would not be able to patent it. Second, you must do extensive research to ensure that your invention is not already patented. Third, different countries and groups of countries have different intellectual property laws and standards, so you must research what is required in each country prior to expanding. Fourth, understand the difference between patents – which, while expensive and have expiration dates, offer formal protection – and trade secrets – which are free and have no expiration date, but require you to protect them.


4. Understand your comparative advantage. While large companies may have more capital and resources, local companies can use their knowledge of local markets, customs, and environment to their advantage. The most competitive producer of biological products in Chile, for example, is a company which developed a product derived from local organisms and as is such is especially adapted to the local climate and conditions.

 

To get the full story about global trends in the biological control product market and how they could impact your company, watch the recent Tech Talk:

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This is the final post in a series about real life case studies to demonstrate how companies can successfully develop and use business models that gain traction in smallholder markets. Last week, we looked at how local sales and service providers can help overcome distribution challenges. This week, we discuss how the outgrower model can benefit both companies and smallholders.


Smallholder farmers experience many challenges, including the inability to procure high-quality inputs, access knowledge about good agricultural practices, and access markets. This lack of accessibility can be improved by farmers developing long-term relationships with agribusinesses. To formalize these relationships, agribusinesses often adopt an outgrower model, where the business contracts with farmers to produce crops that the business will buy at harvest in exchange for providing farmers with services, technical assistance, and inputs during the rest of the season. This arrangement ensures that agribusinesses that require specific volumes and quality of harvested product have guaranteed production and farmers receive an agreed upon price. Outgrowing is most often adopted by agribusinesses using farmers to grow their certified seeds to buy back later, which they sell on to the wider rural population, and by agribusinesses procuring high value commodities from farmers for processing. Feed the Future Partnering for Innovation, a USAID-funded program, supports numerous companies that use an outgrower model, including Tolaro Global in Benin, Good Nature Agro Products in Zambia, and Txopela Investments in Mozambique.


From the Real World

Tolaro Global is a cashew processor in Benin that sources cashews from smallholder cooperatives. In addition to sourcing from them, Tolaro also provides advisory services to its 2,300 smallholder farmers, including training on tree pruning, orgaprocessing_by_Tolaro.jpgnic composting, fertilizing, and cashew harvesting and storage techniques. Tolaro is formalizing its relationship with the farmers to ensure a high-quality product for its roasting and seasoning processing facility. Not only does Tolaro guarantee a market for the farmers’ cashews, it also gives these suppliers a unique profit-sharing opportunity by providing class B equity stock based on the volumes and quality of cashew nuts supplied.


In Zambia, Good Nature Agro Products is a supplier of certified legume seeds. Good Nature relies on an outgrower model with more than 5,200 smallholders to produce quality seeds. Good Nature, through its 200 private extension agents, provides technical and advisory support and high-quality foundatio seed to outgrower farmers. The outgrower farmers then produce their own seeds to sell it back to Good Nature. Good Nature cleans, sorts, and packages seeds to be sold on to retail and institutional buyers. For Good Nature, the outgrower model is essential to ensuring seed quality and volume.


Txopela Investments, an investment firm, and its partner COPAZA, a farmer cooperative, have co-invested in the creation of Sociedade Beneficiamento Sementes (SBS), which they are building into a profitable supplier of agricultural inputs in Mozambique. An integrated outgrower farming model to reach new customer segments with improved seed is part of the business strategy for making SBS profitable. Outgrowers produce basic seed, which they sell to SBS for sorting and processing. SBS then sells improved seed back to these outgrowers to use themselves for growing crops as well as to sell to other farmers in their community. This model enables farmers to grow more produce of better quality, which Txopela aggregates and sells to value-added processors.


Through these partnerships, Partnering for Innovation has identified several important considerations for companies wanting to adopt an outgrower model. First, successful outgrower models must be built on strong relationships between the outgrower farmer and the agribusiness. The relationship must be based on trust and fairness, with both parties financially benefitting. Agribusinesses making this investment must be committed to a long-term and mutually beneficial relationship. Second, formal agreements are not normally enforceable in developing countries, and so the agribusiness and outgrower must be open and transparent in their communication and expectations for the relationship. Third, the outgrower models work best when applied to high valued commodities and/or specialized agricultural inputs such as hybrid and improved seeds. These crops and inputs normally require a high level of quality and consistency to receive higher prices and margins. Finally, agribusinesses must be prepared to invest in their outgrowers both through technical extension services and financial support of and access to quality inputs.

This is the fourth post in a series about real life case studies to demonstrate how companies can successfully develop and use business models that gain traction in smallholder markets. Last week we looked at the consumer financing model. This week, we discuss how using local sales and service providers can overcome distribution challenges.


Rural smallholder farmers often lack the access and capacity to directly procure products and services from agricultural input companies. In turn, these companies face high costs and logistical difficulties reaching farmers. As a result, agricultural input distribution systems are nascent and limited in many developing countries, and unable to meet the needs of smallholders. To address this challenge, some agribusinesses identify and train local community members to act as sales and service providers. These entrepreneurs then independently sell and distribute the companies’ products and services into underserved rural communities for a fee. Feed the Future Partnering for Innovation, a USAID-funded program, supports numerous companies that incorporate local sales and service providers as integral components of their business, including The Metal in Bangladesh, TECAP in Mozambique, and Hello Tractor in Nigeria.


From the Real World

The Metal is a leading agro equipment distributor in Bangladesh. It hopes to capitalize on the unmet need for rice and wheat harvesting services in Bangladesh by introducing a low-cost, high-quality mechanized reaper. However, it realizes that while there are millions of smallholders, most of these producers have plots too small to justify investing in a reaper. To distribute its product, The Metal targets local service providers who can purchase reapers and then offer reaping services to local farmers. The Metal supports these providers with a comprehensive training and support program. To raise public awareness, The Metal complements its sales with a widespread marketing campaign that includes demonstrations in fields and at community bazaars to educate farmers on the reaper’s benefits.  The benefits of this business model are threefold: The Metal benefits by diversifying and expanding its mechanization equipment offerings, local service providers are able to earn additional revenue, and smallholders are able to reduce their labor costs.

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Tecnologia E Consult oria Agro-Pecuaria (TECAP) is a large supplier of improved agricultural inputs and mechanization services in Mozambique. Through its partnership with Partnering for Innovation, TECAP seeks to expand its geographic coverage and enter the smallholder market segment. To accomplish this, TECAP is establishing three new agro-input stores in Nampula, Tete, and Manica and investing in a distribution network of agrodealers, franchisees, and agriculture development agents (ADAs). TECAP trains ADAs in business development, enabling ADAs to operate as rural entrepreneurs receiving commissions on the sale of inputs and mechanization equipment. This rural market distribution strategy allows TECAP to reach

more farmers, serving as the impetus for future market expansion.


Similar to farmers in Bangladesh, Nigerian smallholders’ plots are small, meaning the need for individual tractor services is seasonal and limited. To solve this challenge Hello Tractor relies on a network of youth entrepreneurs who work as local service providers, or “agripreneurs” to sell its “smart tractor” services. Hello Tractor identifies and trains youth agripreneurs on financial and business management so they can earn income providing mechanization services to their communities. Hello Tractor’s smart technology allows smallholders to request tractor services as needed via SMS, enabling them to increase their productivity without having to invest in their own tractors.


Lessons Learned

Through these partnerships, Partnering for Innovation has identified several important considerations for companies planning to develop a distribution model based on local sales and service. First, it is important to identify the right entrepreneurs. Not only must these entrepreneurs be familiar with the communities they aim to serve, but they must also be highly motivated and passionate about improving smallholders’ productivity. They also must be risk takers and business-minded. Second, companies need to understand the capacity gaps of local service providers and develop a comprehensive training program to address these needs. Training must focus on business and financial management as well as technical information about the product or service. Third, companies must think through their strategy for helping scale their services providers’ businesses. With the proper support, local service providers can expand, purchasing more tractors, for example, and hiring employees of their own to expand their services. Fourth, companies must continuously raise public awareness among smallholders to generate demand for the products and services offered by the local providers. Only by ensuring an end market will the local service provider model be able to expand. Finally, companies must develop strong linkages with financial and government institutions. Local sales and service providers need access to financing to grow their businesses. This, coupled with government policies such as short term subsidies, greatly enhances the ability of local providers to succeed.


Next week, we will discuss how the outgrower model can help businesses to have guaranteed production and smallholders to have a guaranteed end buyer.

This is the third post in a series about real life case studies to demonstrate how companies can successfully develop and use business models that gain traction in smallholder markets. Last week we looked at embedded rural advisory services. This week, we discuss how consumer finance can be provided effectively and profitably to smallholders.


Smallholder farmers often lack access to finance, limiting their ability to invest in inputs and services that increase productivity. Innovative consumer financing includes a range of financial solutions tailored to the unique needs of agriculture, such as accounting for crop cycles and seasonal cash flows. These solutions expand credit access and limit a lender’s financial risk. Feed the Future Partnering for Innovation, a USAID-funded program, supports a number of innovative financial institutions that are bringing better banking services to smallholders, such as Opportunity Bank in Mozambique and Malawi and Musoni in Kenya.


From the Real World

In Mozambique and Malawi, Opportunity Bank, with support from the financial NGO Opportunity International, provides financial products to smallholder farmers who normally lack the access to savings or collateral required for loans by traditional banks. Opportunity Bank tailored its loan products to account for crop cycles and defrayed risk through group loans that hold farmers accountable for each other during repayment of the loan. Loans can be used for purchasing inputs, transport, or mechanization services. Through this model, the bank benefits by developing an underserved market while farmers acquire the financing they need to increase yield and take advantage of market opportunities.

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In Kenya, Musoni is a cashless, paperless microfinance institution committed to serving rural smallholders. With support from Grameen Foundation, Musoni developed the Kilimo Booster loan, a product tailored specifically for smallholders that offers flexible terms and a customizable grace period based on a farmer’s seasonal cash flow.  In addition, Kilimo Booster is designed for the farmer’s convenience. Loan officers visit clients at their farms, approved loans are dispersed within three days of applying, and everything – from application to repayment – happens through a client’s mobile money account. This is a major shift from how traditional banks work with smallholder clients, and is made possible by Musoni’s tablet-based mobile application software that streamlines the application and loan management process.


Lessons Learned

Through these partnerships, Partnering for Innovation can summarize several important factors that can help financial institutions enter smallholder markets. First, mobile technology can be an important solution to reduce high transaction costs while maintaining loyalty and retention through interactions. Second, financial institutions will be more successful if they work with other key stakeholders to further their reach and help mitigate risk. These include working with extension agents to provide technical and financial training and with offtakers such as traders, brokers, and food processors to ensure farmers get fair value and timely payment for their commodities. Third, financial institutions targeting rural farmers must build the capacity of field staff to better understand agriculture and the technical and business challenges that face smallholder farmers, collectives, and associations. Finally, any financial institution working with smallholders must build internal commitment to these clients for the long term from the senior management level down to field operators. It is important that shareholders and financial backers support this vision and are willing to take on higher risks and lower returns to generate social impact and develop an emerging market.

Last week, we used real life case studies to demonstrate how companies can successfully develop an aggregator model. This week, we will discuss how rural advisory services can be integrated into a profitable business model.


In developing countries, smallholder farmers often lack the basic agronomic and business knowledge to increase productivity. This knowledge gap is often the result of weak or absent rural advisory services. Agribusinesses are uniquely positioned to provide these quality rural extension services. Private sector-led rural advisory services can both help a company’s bottom line and provide farmers with essential agronomic and business knowledge. When farmers have access to better crop production information and advice, they are better able to take the risk of investing in improved agricultural inputs, leading to higher productivity and incomes. For companies, building the capacity of smallholder farmers builds stronger ties and loyalty, leading to increased sales revenue of agriculture input and offtaking services, and more reliable supply chains. Investing in extension services leads to long-term benefits for farmers, shareholders, and the business. Feed the Future Partnering for Innovation, a USAID-funded program, supports numerous companies who embed advisory services in their business models, including Phoenix Seeds in Mozambique, Opportunity Bank in Malawi, and Tolaro Global in Benin.


From the Real World

In Mozambique, Phoenix Seeds is identifying 200 lead farmers as distributors for their seeds and training them in establishing demonstration plots based on good agricultural practices. These demonstration plots showcase numerous growing practices to educate farmers on land preparation, spacing, and proper handling and application of agro inputs. These lead farmers also raise awareness of Phoenix Seeds’ products, facilitating seed sales to neighboring farmers.

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In Malawi and Mozambique, Opportunity Bank contracts third parties UT Grain, Greenbelt Fertilizer, and Catholic Relief Services to provide its smallholder customers with GAP training to improve their productivity and financial literacy training to improve their basic understanding of crop budgets as well as the advantages of saving and borrowing from Opportunity Bank. This results in increased bank business as well as lower default rates on the loans provided to more than 15,000 farmers.


Tolaro Global is a cashew nut processor in Benin that sources cashews from farmer cooperatives. Tolaro provides advisory services to 2,300 members of these cooperatives, including training on tree pruning, organic composting, fertilizing, intercropping, and cashew harvesting and storage techniques. It also registers these farmers through the Fair Trade certification program. By establishing a close relationship with its suppliers, Tolaro benefits by receiving a greater quantity of high-quality product from a more loyal supplier base while farmers benefit from greater productivity and a 15 percent price premium for Fairtrade certification.


Lessons Learned

Through these partnerships, Partnering for Innovation has identified several important considerations for companies looking to embed rural advisory services. First, private sector agribusinesses must conduct a cost-benefit analysis to determine if the costs of providing extension services will be outweighed by the benefits in the form of improved quality, greater volumes, expanded markets or lower overall costs of doing business. Second, these firms must decide if it is better to provide these services in house or to contract third party partners. While a company may not have the initial internal infrastructure to offer extension, third parties can be expensive and a disincentive to firms from investing in their own capacity. Finally, providing embedded rural advisory services that complement an agribusiness’s products and services can strengthen existing relationships and attract new clients – creating a win-win for the farmer and business’s bottom line alike.

Next week, we will discuss how the Consumer Financing Model opens up a new market for financial institutions and provides smallholders with the investments they need.

Introduction

Since 2013, Feed the Future Partnering for Innovation, a USAID-funded program, has partnered with nearly 100 organizations working to commercialize agricultural innovations in smallholder markets. In each case, partners sought to fill unmet needs in the smallholder market, whether it was a lack of inputs, equipment, financing, or market linkages, and turn them into profitable business opportunities. As a result, these companies have developed a diverse array of business models to commercialize their agricultural innovations.


Through these partnerships, Partnering for Innovation has identified a number of different models and lessons learned on what factors facilitate or hinder success. Starting this week, we will explore four of these models: the aggregator model, the mechanization services model, the embedded rural advisory services model, and the consumer financing model. This week, we will discuss the aggregator model and factors that have made companies successful when using it, and in the coming weeks will explore the other the models.


Aggregator Model

Smallholder markets often lack linkages between agricultural suppliers and purchasers. Aggregator models introduce an intermediary actor that aggregates supply and often provides other ancillary services such as agronomic advice or access to inputs, thereby lowering transactions costs, reducing sourcing risks, and building farmer loyalty and retention. This model expands market access and increases productivity and income for smallholder farmers. Partnering for Innovation supports a wide range of aggregator models through partnerships with International Charity Fund Community Wellbeing (ICF CW) and Danone in Ukraine, Babban Gona in Nigeria, and Txopela Investments in Mozambique.


From the Real World

Danone buys raw milk from dairy farmers supported by the Ukrainian NGO ICF CW. These farmers are organized into ICF CW-facilitated cooperatives that assist in collecting and storing the milk. ICF CW provides training to cooperative and their farmer members on milk quality and hygiene, fodder production and animal feeding, farm and cow management, cooperative development, financial management, and milk marketing. ICF CW also provides critical assets to family farms such as milking machines, ventilation systems, and cold storage tanks. This aggregation of large volumes of milk benefits Danone and smallholders alike. Danone is able to reduce its supply and logistics cost, while farmers are connected to a cold value chain that ensures higher prices for their milk.

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In Nigeria, Babban Gona organizes smallholder farmers into a cooperatives and provides good agricultural practices training, sells improved agricultural inputs, and offers financing and a market for their commodities. By aggregating these farmers, Babban Gona is able to sell inputs to farmers at a lower price and also earn a higher price for the goods it sources from farmers, allowing it to make a profit from increased margins. In turn, farmer members benefit from access to agricultural input loans, inputs, training, increased productivity, and a guaranteed, high-value market for their commodities. Babban Gona can secure premium prices for its members’ commodities by ensuring that they produce a high quality product and through aggregated volumes.


In partnership with the cooperative COPAZA, Txopela Investments is establishing an improved seed and commodity company in Mozambique. It uses an outgrower model where smallholder farmers not only expand production of Txopela’s certified seed but also sell their commodity back to Txopela to process and export. Through aggregation, Txopela is able to capitalize on both revenues from seed and commodity sales while its outgrowers benefit from access to quality seed, agronomic training, and a guaranteed end market for their output.


Lessons Learned

Through these three partnerships, Partnering for Innovation identified a number of factors that help aggregator business models succeed in commercializing products and services in smallholder markets. First, aggregators must be committed to investing in and building their relationship with farmers. Second, since they compete with middlemen, they must offer an attractive value proposition to farmers to discourage side-selling. Finally, the aggregator model succeeds when companies engage farmers on multiple levels through offering a range of services and products.

Given that individual smallholders have small-scale output and demand, aggregators play a key role in organizing farmers into groups that increase their overall profitability and economies of scale. Next week, we will discuss the mechanization services model and how companies can successfully implement it!

 

Feed the Future Partnering for Innovation is a USAID-funded program that partners with private sector companies to commercialize agricultural innovations in smallholder markets. Through these partnerships, the program learns a lot about what works and what doesn’t work to get innovative products and services to smallholders. Partnerships with three companies recently ended: Grameen Foundation in Kenya, Zamorano University in Honduras, and the Metal in Bangladesh. These companies had the dual goals of growing their business and addressing unique challenges in their countries, including a lack of affordable microcredit in Kenya, an alternative to chemical pesticides in Honduras, and a need for mechanization services in Bangladesh. Over the course of their work with Partnering for Innovation, each partner achieved notable successes and identified important lessons learned.

 

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When Grameen Foundation and its commercial microfinance partner Musoni began their partnership with Partnering for Innovation, they hoped to use Musoni's digital technology to expand smallholders' access to affordable microcredit. Musoni had already entered the smallholder microfinance market with the Kilimo Booster loan, which includes favorable terms and a customizable grace period based on a farmer's seasonal cash flow. Through the partnership, Musoni and Grameen Foundation built a tablet-based software that streamlined the loan application and management processes, allowing Musoni to reach more farmers. To date, Musoni has made more than 14,000 Kilimo Booster loans, 54 percent of which went to women.

 

To achieve this success, Grameen Foundation engaged directly and consistently with stakeholders. First, they used a human-centered design process that addressed the needs of both loan clients and bank officers, and then they repeatedly tested their software and developed a strong field team of wealth creation officers. Through stakeholder engagement, Musoni was able to identify potential risks and design solutions. Through repeated testing and feedback, Musoni ensured that its product would be high quality and problem-free after entering the market. Finally, Musoni used wealth creation officers to provide financial information and extension services to clients and potential clients. By connecting directly with smallholders, these officers were instrumental in increasing uptake.

 

zamorano_university.jpgZamorano University originally developed its biological pest control product, NemaPower, to provide smallholders in Honduras a safer, more effective, and environmentally friendly alternative to chemical pesticides. Zamorano University became a Partnering for Innovation partner to help it meet rising demand and scale up production of NemaPower. Through the partnership, Zamorano University built an improved laboratory that reduced production time from 55 to 12 days, increasing annual supply by a factor of 20, and selling more than 9,000 doses of NemaPower.

 

Zamorano achieved this success through its understanding and support of both smallholders and distributors. Throughout the partnership, Zamorano needed to build demand for biological pest controls in a market dominated by chemical pesticides and develop a sustainable distribution network. To do this, Zamorano built a multi-step training program for farmers and leveraged relationships with local cooperatives and companies that could act as distributors. By using technicians to develop strong relationships with farmers, Zamorano was able to collect feedback and improve its training and distribution. Most recently, Zamorano partnered with Walmart to train Walmart's technicians in using NemaPower. Now, Walmart orders pest control products from Zamorano's distributors and trains the farmers from whom it sources to use these products to grow chemical-free produce.

 

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The Metal hoped to capitalize on the unmet need for rice and wheat harvesting services in Bangladesh by introducing a low-cost, quality mechanized reaper. Initially, however, The Metal struggled to sell the reaper to local service providers in smallholder markets, as many farmers were unfamiliar with the technology and continued to rely on labor intensive harvesting methods rather than renting reaper services. To overcome this challenge, The Metal partnered with Partnering for Innovation to test and develop a comprehensive marketing campaign. By concentrating interventions in one geographic area, the Metal was able to create a "control" group and an "experimental" group to evaluate the effectiveness of the marketing campaign. In addition, The Metal tested a wide variety of marketing strategies - from field and market day demonstrations to managing retail outlets to hiring sales and technical personnel - and compared them for cost-effectiveness.

 

Through its data-driven and scientifically designed strategy, The Metal successfully built the community awareness and product knowledge needed to commercialize the reaper. In total, it sold 87 reapers to local service providers in the "experiment" province. In turn, these operators provided reaping services to more than 4,000 smallholders. In the future, The Metal will use the results of its tested interventions to develop and implement marketing campaigns across the rest of Bangladesh.

 

Although their partnerships with Partnering for Innovation have ended, these three companies will continue applying their lessons learned to grow and provide smallholders with sustainable access to agricultural technologies and services.

In Bangladesh, members of the AgTech Team* are working with The Metal, an agricultural company that is commercializing small-scale farm machinery through its farm machinery hubs. In collaboration with Feed the Future Partnering for Innovation, The Metal is introducing and selling mechanized reapers to local service providers who in turn offer reaping services to smallholder farmers. The reapers are sold through six full-service farm machinery hubs that sell, service, and promote mechanized equipment. Sales are coupled with extensive operations, maintenance, and business training along with a broad-reaching public awareness and marketing campaign.

 

The partnership to commercialize the reaper services through the farm machinery hubs started in 2016, and since then many lessons have been learned that are useful for sharing with members of the AgTechXChange. One of the key lessons is that mechanization products (reapers, tillers, etc.) are still not affordable or practical for smallholder farmers to purchase because they have limited financial resources and small plots of land. They simply cannot afford the relatively expensive machinery.

 

Given the limitations for smallholder farmers to purchase machinery, The Metal adjusted its business model to identify entrepreneurs who could aggregate farmers into groups. In doing so, farmers could rent reaper services. The local service providers learned, by working through this model with The Metal, that they were able to pay off the loans they took out to purchase reapers and make a profit by offering reaping services to farmer groups.

 

One 35-year old entrepreneur, Hafizur Rahman, became a local service provider and began offering reaper services to other farmers in his community. Hafizur bought a reaper from The Metal and received training in reaper use, maintenance, and marketing. In the recent rice harvesting season, he provided services to fifty smallholder farmers and earned $1,050. This amount covered his operating costs within just 25 days of the season starting. You can read more about Hafizur and other entrepreneurs who are benefiting from The Metal’s business model by clicking here and you can see The Reaper in action below! You can also read about business models that are generally relevant to effectively working in smallholder markets here




* The AgTech Team is the staff of Feed the Future Partnering for Innovation, a USAID-funded program that helps to commercialize agricultural innovations in smallholder markets.


The Metal (Pvt.) Limited.Matthew Krause Bob Rabatsky

In August 2015 Feed the Future Partnering for Innovation initiated four partnerships with private sector companies in Ukraine focused on enhancing the productivity of small-scale farms. As in many countries, small-scale farmers in Ukraine lack access to knowledge, financing, and quality inputs. The four partnerships are working to mitigate barriers in the agriculture sector and increase productivity and profitability among farmers. Through this work the companies have realized several key lessons for success.


Farmer Adoption Requires Behavior Change

One of the largest hurdles for adoption of new products or services in Ukraine is the cultural norms and attitudes of farmers. Many farmers have used the same practices for years, and with limited resources are hesitant to invest in something new without seeing its benefits firsthand. Agribusinesses must convince farmers of the benefits of a product or service through capacity building and demonstration. In the case of AGROBONUS LLC, an agro-input distributor that established a new soil testing business, the company found great success in using seminars to promote both behavior change and its soil testing services. The seminars were designed to demonstrate the advantages of knowing soil content and adjusting nutrient application for maximum production. Agrobonus began to conduct seminars explaining the benefits and offered farmers a free first test so they could experience firsthand the soil testing process and Agrobonus’s recommendations. These seminars and free tests clearly benefited the farmers, but they also helped provide Agrobonus with a much deeper understanding of the challenges small-scale farmers face and what they expect from soil testing services. Understanding these challenges, Agrobonus is able to better design seminars to build capacity and promote behavior change among farmers, which has led to widespread adoption of its services.


Creating Demand

Many partners have realized that in order for farmers to be repeat customers, they must create market demand for the farmers’ end product. Without an end market for crops, farmers will not continue to return to purchase products or services. For example, Agrico Ukraine Ukraine supplies high quality potato seed to farmers. Through engaging with small-scale customers it learned that many small farmers could only sell potatoes at small local markets. These small markets bring small profits, making it difficult for farmers to invest in quality seed again the next year. Agrico realized an opportunity to help its clients access larger markets, while also catalyzing growth for the company. By buying back potatoes, packaging them, and selling them on to an existing network of retailers, Agrico will create new markets for its small-scale farmer clients, increasing their profitability and enhancing loyalty among its repeat customers. This allows Agrico to grow both its seed potato and consumer potato business.  


Importance of Strong Networks

Strong networks are critical to the distribution of products and to knowledge transfer, and can greatly increase outreach to farmers. BAYER, an agrochemical producer working to better educate farmers, is working with strategically selected distributors to provide capacity building to farmers. Using a training the trainers method, Bayer trains distributor staff in various topic areas designed to increase farm productivity and profitability. In turn, the distributor staff train the farmers they work with on a day-to-day basis. By using this method, Bayer has been able to reach a much larger number of farmers over a wider geographic area than if the company were to conduct the trainings itself. Additionally, Bayer is able to reach farmers through networks they already know and trust, which can increase the rate of adoption of practices. Over the last two years, Bayer has piloted this method of engaging with farmers and has seen such great success that it plans to fully integrate the practice into its core business model.


This September will mark the end of Partnering for Innovation’s work in Ukraine. But the companies it works with there will continue to build the capacity of small-scale farmers, while integrating lessons learned into their business models. By applying these and many other lessons, the companies will continue to expand their reach in Ukraine, building sustainable businesses that help farmers produce more and make more money.

In Kenya, urban produce vendors in Nairobi get up as early as 4 a.m. to purchase fresh produce grown in rural areas from urban wholesale markets, which account for more than 95 percent of fresh produce sold in the city. But urban vendors face high prices for the produce they source,  because the supply chain includes multiple middlemen, long distances traveled to get the produce from rural farmers to urban markets, and fluctuations in quantity and prices at wholesale markets. Bananas, for example, are sold by urban vendors and have the potential to be very profitable. However, the average farm-gate price of bananas, at just 14 US cents per kilo, increases to about 50 cents per kilo by the time it gets to urban vendors. Twiga Foods, a Kenya-based fresh fruit and vegetable supplier, developed and is using a mobile platform to decrease these costs so that producers get more income, vendors get a higher return, and consumers can access higher quality and more consistent fresh produce. To find out how, watch this video and check out the details below.

 

In partnership with Feed the Future Partnering for Innovation, Twiga Foods is expanding its network of rural collection centers to source more quality fresh produce from rural farmers to supply vendors in Nairobi. The mobile platform allows for “smart” collection in order to create efficiencies across the value chain. Farmers sell more produce, vendors don’t need to travel early in the morning to wholesale markets where prices fluctuate day-to-day, and Twiga stays in business to continually provide economic and social value to the market. Twiga Foods is making its technology company a successful venture that creates added value for smallholder farmers, vendors, and consumers. Some of the ways it is doing this are:

 

  • The Twiga mobile platform aggregates more than 600 vendors in Nairobi and then customizes purchases from smallholder farmers to supply vendors with more accurate volumes of fresh produce. This cuts costs for the vendors because of reduced (or zero!) travel costs, time savings, and getting consistent price and quantity that wholesale markets do not guarantee. 
  • The Twiga platform allows the vendors to offer consistent quality and volume to their customers, thus helping to stabilize and/or increase their sales and also helping Twiga to source ever more accurate volumes of fresh produce from smallholder farmers.
  • Twiga’s model helps rural farmers sell more of their produce directly to Twiga, rather than less of their overall crop to multiple middlemen. Additionally, producers are able to diversify their income by selling a variety of grades of produce to fulfill diverse inventories that vendors in urban markets demand.
    • The Twiga business model is that of a technology company rather than a food distributor, adding efficiencies within its supply chain and also across the value chain that equal gains for Twiga, smallholders, vendors, and consumers.
    • Twiga is focusing on continually innovating its technology platform and operation plan to maximize the gains it is currently seeing. This pathway will take it from supplying 600 vendors to 9,000 in Nairobi alone.

 

Check back on the Learn blog for updates from Twiga, write them directly through the AgTechXChange, and/or post your comments and questions below!

community.manager

What We Are Reading

Posted by community.manager Jul 10, 2017

Check out some helpful resources that the AgTech Team is reading!

 

The Ag Tech Market Map: Maps out 100+ startups that are “powering the future of farming and agribusiness” around the world with a particular focus on the U.S. Check it out to learn about cool new ag technologies and to find out who is funding them.

 

WeedScout is a Bayer-developed software that crowdsources experts’ images to identify weeds. Dr. Hans-Joachim Santel, Weed Scientist at Bayer, says that weed identification is the initial step in weed control and to ultimately helping reduce errors that affect farm profitability. When a farmer correctly identifies a weed, they can apply the correct practice and treatment to control the weed, meaning less time purchasing unneeded chemicals.

 

In Uganda, Pineapple Crisps Are a Money Maker for Nakiwala. Nakiwala is processing fresh fruits for sale locally and in the EU and is continually innovating her business model to create more profit. Learn from her experience to kick-start your off-the-shelf business solution that supports development outcomes.

 

Agricultural systems don't just feed the world, they create jobs that keep rural and urban citizens employed and national employment levels growing. Learn about how smart partnerships boost job creation by centering planning on business models that connect farmers, buyers and the public sector.

 

Women in Mozambique bear the brunt of civil war, droughts and floods, which ultimately affects entrepreneurs and how they overcome civil unrest to keep their business’ going while creating strong social value locally.

 

Should America Keep Giving Billions Of Dollars To Countries In Need? This article discusses a fundamental disconnect between Congressional expectations for what aid should measure up to, namely national economic gains where funds are dispersed (rather than the outcomes discrete program are geared to contribute to, like agriculture gains, education improvements, etc.). Helpful for understanding current debates about US foreign aid.

Facebook, Google, Amazon…why are these among the most powerful companies in the world? One important, and undeniable, reason is because they understand consumer behavior. These top companies understand what drives their customers' decision-making, and they capitalize on that knowledge. What’s more is that they’ve done this by applying simple metrics and marketing frameworks such as segmentation, targeting, and positioning. Information that companies are already collecting - such as demographics, usage patterns, and monitoring what their customers like, what they search for, and what they purchase - can be put to even more work sooner rather than later.

 

Smallholders are our customers. Whether we are agrodealers selling inputs to smallholder farmers, buyers/processors sourcing products from smallholder farmers, financial service providers lending to smallholder farmers, or development practitioners, smallholders are crucial to our business models as valued clients. Understanding their behavior and what drives their decision-making has enormous potential in improving our businesses. Quality farmer-level data generate important insight that supports marketing and our overall businesses.

 

However, getting the right data at the right time, while fostering trust among value chain actors, can be complicated and the costs and considerations associated with data collection and analysis can be daunting. We need to recognize the need to invest in quality data rather than let its layers of complexity stop us from collecting it, analyzing it, and using it. Data doesn’t have to be complex. Basic metrics can be extremely valuable despite the numerous variables that need to be thought through for collecting it. The work needs to be put in, though - there is no silver bullet, no one metric, that will solve all marketing issues. There is no one data collection strategy that will work for every scenario. The practical challenges are the ones to focus on and solve.

 

Importantly- all the data collection, and later analysis, must all be done within our often razor-thin profit margins.  Therefore, data must be robust yet low-cost. Check out the two webinars below, if you haven't already, to get tips about the value of data, what types of data to collect to support marketing, how to collect quality data, and how to use all of this data using the concepts of segmentation, targeting, and positioning.


Have more questions, thoughts, or ideas? Simply ask and post them below! 

 

* Farmer-level data can also be used for social impact reporting, an integral part of working with any development donor working with private companies in smallholder markets. Check out this article for more on that!


Collecting Marketing Data


 


Using Marketing Data

 

Smallholder farmers represent a huge and largely untapped market segment for agricultural companies. Despite there being 500 million smallholders in the world, most of these farmers lack commercial access to inputs, storage, loans, and other products and services that would increase their productivity and incomes, and build strong agricultural sectors in countries across the world. But smallholder markets are risky to enter, being poorly understood and producing small margins, so even companies that want to expand into these markets are hesitant. Donor funding, such as United States Agency for International Development (USAID) funding through Feed the Future Partnering for Innovation, can help offset the initial risk of entering or expanding in those markets, providing companies with the ability and confidence to invest their own money in new products, services, and strategies in smallholder markets.

 

Many of Partnering for Innovation’s partnerships help companies implement new distribution and marketing activities targeted at smallholder farmers, unlocking this massive market segment for these companies. Once companies are established in smallholder markets, they serve as a sustainable, long-term presence (unlike most development projects), providing access to agricultural products and services that are essential for smallholders to produce at a commercial level, increasing the amount and quality of food available as well as incomes for farmers and others working in agriculture like input suppliers and aggregators.

 

With a program investment of $25.8 million, Partnering for Innovation has generated $42.2 in private sector investment through its partnerships. For example, Partnering for Innovation’s $6.4 million investment in commodities trader Export Marketing Company Limited (EMCL) in Mozambique spurred EMCL to invest $13.6 in building 23 new agricultural hubs in underserved rural areas, providing smallholder farmers with access to inputs, mechanization, and storage, and greatly expanding EMCL’s commodities sourcing. With Partnering for Innovation’s support, EMCL is both expanding its business and providing smallholder farmers with the products and services they need to build productive and profitable farms.

 

Donor funding can be key in enabling companies to expand in emerging and developing markets. By helping offset the risk of entering these market, donors like USAID are spurring sustainable, private sector-led development that puts US taxpayer dollars to good use building markets and increasing incomes across the world.

Although most rural families keep chickens in Ethiopia, the most common breeds are highly susceptible to disease and have low weight gain and egg-laying productivity. Because of low productivity and high demand, farmers have been missing a key opportunity to improve nutrition and generate income. One Ethiopian poultry company, however, is changing that.

 

EthioChicken is addressing this market gap by commercializing improved chicken breeds and expanding its network of sales agents to reach rural farmers. Agents raise chicks for the first 40 days and receive a commission for each sale thereafter. In addition to training its sales agents and providing last mile access to more productive chickens, the company also expanded its sale of high-quality poultry feed.

 

In two years, with support from Feed the Future Partnering for Innovation, EthioChicken sold 3,073 MT of feed and more than 3 million day-old chicks, well over its goal of 2.2 million, to almost 350,000 rural households, and employed an agent network of 1,500 entrepreneurs.

 

A few keys to EthioChicken's success were:

  • Developing a strong training program for its sales agents that included both proper poultry raising strategies and savvy business practices. This program enabled EthioChicken to reduce losses and increase productivity.
  • A strictly for-profit business model that allowed it to effectively attract investors in addition to donors.
  • Working in close partnership with the Ethiopian government and Ministry of Agriculture, which helped EthioChicken market its products to rural customers.
  • Flexibility in its marketing model. In addition to focusing on economic benefits, it advertised the nutritional benefits of poultry, especially for women and children, making chicken more attractive for smallholder consumers.

  In addition, EthioChicken also noted a couple of trends: 

  • It found that smallholder farmers care a lot about value for money, and thus are willing to pay more for a high quality product.
  • Because of the limits of working in a developing country, EthioChicken had to take on more of the value chain operation - producing both chickens and chicken feed - than it might have in a different country. Companies operating in similar circumstances should be prepared to expand operations vertically.

 

Have you found that these are important factors to consider when working in smallholder markets? What are some of the lessons you've learned for commercializing a new product aimed at smallholder customers?


Andrew Bracken David Ellis Ethio Chicken

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