Using technology to overcome challenges for farmers in value chains
Value chains are structured in ways that are unfavourable to smallholder farmers who often struggle to access finance, inputs and markets. An IIED webinar discussed how smallholders in East Africa can use technology to overcome those challenges and negotiate with buyers and input and finance providers from a position of strength.
Farmers in East Africa face challenges in their relationships with other actors in value chains, including information and power asymmetries. With the right set-up, technology can help farmers overcome those challenges by enabling them to come together to establish strong market linkages and access key financial services – while remaining in the driving seat.
IIED hosted a webinar to look at how a digital platform can help link smallholder farmers in East Africa to targeted services and strengthen their position with other actors such as buyers and financial institutions.
The webinar focused on the e-Granary platform. Inspired by a similar project in India, this platform is an ambitious initiative from the Eastern Africa Farmers Federation (EAFF), a non-political, not-for-profit umbrella network of smallholder family farmers from across the region.
The platform is operating in collaboration with Export Trading Group (ETG), a leading integrated agricultural supply chain group, and VisionFund Kenya (VFK), a micro-finance institution that believes in brighter futures for children, empowering families to create incomes and jobs and unlocking economic potential for communities to thrive. Launched in 2016, e-Granary is currently serving about 240,000 farmers in Kenya, 15,000 in Uganda and about 5,000 in Rwanda.
The webinar panellists were Stephen Muchiri, executive director of EAFF and CEO of e-Granary; Caroline Kariuki, project manager at VFK; Daniel Nyagah, a farmer and user of e-Granary in Kenya; and Giles Lewis, a grain and oilseed trader at ETG.
Mobile technology: an opportunity for smallholder farmers
Stephen Muchiri said that due to the fragmentation of agricultural value chains and the lack of collective organisation, farmers often struggle to access certified inputs, finance and insurance services. They also tend to sell their produce at low prices because they go through brokers instead of directly to buyers, and they lack knowledge of market prices.
But most farmers in Africa have access to technology via their mobile phones – and this is where e-Granary came into play.
e-Granary is an online platform led by farmers via the EAFF that links all relevant actors in the value chain. It helps farmers strengthen their position by allowing them to jointly negotiate with buyers, finance and input providers, and access key services.
For instance, EAFF negotiates supply contracts with buyers covering issues such as price, quantities and so on. e-Granary passes on the outcome of negotiations to farmers’ groups, who in turn provide feedback, which e-Granary incorporates and presents to the partners. Before the season starts, e-Granary carries out an assessment of past performances jointly with farmer leaders and other partners which informs future negotiations.
Caroline Kariuki outlined VisionFund Kenya's (VFK) contribution to the platform. VFK offers a ‘bundled’ product to the farmers that includes input financing, together with crop and life insurance. Importantly, VFK also provides financial literacy training and the insurer informs farmers about the advantages of having insurance.
e-Granary negotiated with VFK for lower interest rates and collateral requirements based on farm output. Farmers have been able to produce bigger quantities and increase their revenues as a result.
Giles Lewis said that ETG had set up a contract with e-Granary to provide fertiliser and purchase farmers’ produce at a minimum guaranteed price every season. For ETG this means better quality products and no need to negotiate with multiple producers – as would have been the case otherwise.
Daniel Nyagah reported on farmers’ experiences of e-Granary, which have been positive so far. He described how the platform assists farmers by providing credit, input and, importantly, training, and how they have managed to increase production.
Challenges for the platform and the farmers
The webinar panellists also spoke about key challenges. Setting up the platform, complying with regulatory requirements in individual countries, coordinating farmers organisations, buyers and other service providers is time consuming. Other challenges include climate change – which can affect the quality of products – and price drops at certain times of the year (when imports increase, for instance). These issues can in turn affect farmers’ ability to repay loans.
The panellists emphasised the importance of raising farmers’ awareness of the need to be insured (in particular crop insurance against climate change), and of getting farmers to trust and build partnerships with other actors. Bundling services such as input with insurance, and undertaking joint negotiations results in more affordable prices for farmers.
The platform cannot replace face-to-face interactions, which are important in helping farmers to decide whether to join e-Granary. The platform therefore needs to work closely with farmer groups and cooperatives to strengthen their member engagement and representative functions.
A wider impact on value chains
e-Granary is seeking to attract larger banks. With the data being generated (for example on aggregated demand for inputs, loans, insurance and produce), e-Granary is negotiating with other actors (including input and equipment suppliers, agro-processors, banks, advertising and logistic companies and so on) about joining the platform.
e-Granary also uses data analysis to inform government policy on issues such as input subsidies and distribution, food imports and taxation on inputs. E-Granary is talking to governments in Kenya, Uganda and Rwanda about mainstreaming the use of e-platforms in the agriculture sector. Through one its funders, AGRA, e-Granary is working with national governments to reform regional policies affecting smallholder farmers.
e-Granary plans to expand the training it offers to farmers: using its new data, e-Granary would like to introduce socio-environmental training (understanding the relationship between farmers activities and environmental change, for example). Providing more services is also a key objective. This includes access to mechanisation – which is key for farmers' growth, as Nyagah pointed out.
The platform holds potential for strengthening farmers’ position in agricultural value chains, increasing their bargaining power, and enabling them to build partnerships with other actors and also inform policy at the national and regional level.
The presentation by Stephen Muchiri is available on IIED's SlideShare site. A recording of the webinar can be viewed below and on IIED’s YouTube channel.
The webinar was part of IIED’s Empowering Producers in Commercial agriculture (EPIC) initiative, funded by UK Aid from the UK government through its Commercial Agriculture for Smallholders and Agribusiness (CASA) programme. CASA seeks to increase economic opportunities for smallholders by demonstrating the commercial viability of businesses with significant smallholder supply chains and by attracting more investment into the sector.