E-Agriculture

Anita Campion

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Anita Campion
Anita CampionAZMJUnited States of America

There are many ways in which ICT applications can help to strengthen value chain finance and the relationships between strategic partners, such as:

  • to monitor changes in client risk profiles,
  • to manage timing of cash flows,
  • to monitor the transfer of goods and payments from a distance (GPS can be used to monitor location of goods over time and whether on-time delivery is expected, which is especially important for perishable products),
  • to facilitate web-based linkages and market information from overseas buyers.

 
Also Value Chain actors can facilitate access to higher cost technology by leasing it to farmers to ensure higher quality standards (e.g. Parmalat leases cold storage equipment to its dairy farmers in Nicaragua).

The more I have worked in agricultural value chain finance, the more I have become aware of the importance of having access to timely market information. When conducting a training on Agricultural Value Chain Finance in Mali in which market information related to the potential strengthening of shallots, potatoes, tomatoes and rice, a managing director of the large agricultural bank exclaimed “This is the kind of information we need to make good agricultural loan decisions, more so than the guarantees are typically offered.”   Also, a respected colleague, Siobhan Green of Sonjara Inc., a small woman-owned ICT firm based in Falls Church, VA (www.sonjara.com), emphasizes there is a sizable difference in access and usage of ICTs by gender and education/wealth, which need to be factored into financial inclusion strategies. She recently shared with me a number of relevant links, which I share with you below:

Link to an Assessment of Market Information Systems in East Africa:
https://communities.usaidallnet.gov/ictforag/node/406?utm_source=ICTworks&utm_campaign=c0c6e8e101-MC-RSS-Email&utm_medium=email&utm_term=0_0814c7961e-c0c6e8e101-48215873

From USAID Agrilinks Site, sorted by ICTs - mostly blog posts and discussion from Rwanda conference:
http://agrilinks.org/site-search/ICTs

List of African mobile agriculture services and applications (Oct 2012):
http://www.oafrica.com/mobile/list-of-african-mobile-agriculture-services-and-applications/

A list of ICT articles on Natural Resource Management:
http://frameweb.org/CommunityBrowser.aspx?id=4965&view=a&lang=en-US

Anita Campion
Anita CampionAZMJUnited States of America

Good point Michael,
In fact, one of the more interesting ICT applications I have seen related to agricultural development comes from GeoTraceability Ltd.  They provide traceability and mapping solutions that record small holder farm size, socio economic and agricultural information, such as disease and pest prevalence and fertilizer usage.   This valuable information is attached to business models for new and enhanced smallholder production and AZMJ is exploring with GeoTraceability the possibility of using their information data sets to reduce risks associated with farmer finance.  One of the common concerns cited by agricultural finance specialists is that local financial institutions rarely have the tools or ability to determine the actual productive land size for which a loan proposal is made. GeoTraceability's system documents land size and conditions, primarily for certifications and traceability concerns, so this and other information collected could be used by local financial institutions to systematically reduce risks and make better loan decisions.

Anita Campion
Anita CampionAZMJUnited States of America

Thanks Julie, That is great coverage of the role of ICT in microinsurance.  In 1999, I wrote “Automating Microfinance” for the MicroFinance Network when ATMs were the new thing, we have come a long way since then! There are now so many ways microfinance providers use ICT in day to day operations, such as:

  • Use of smart phone and IPads for loan analysis in the field
  • Cell phone banking, primarily for fund transfers and savings storage, but increasingly used for loan payments, which usually starts in urban areas before gradually expanding to rural areas.
  • Weather-based index insurance used to remove moral hazard related to traditional crop insurance.
  • Real-time information on portfolio quality information for active monitoring and collections.    

What concerns me is that we still lack enough demonstration of the cost savings and productivity enhancements by using these ICT applications. My sense is that that the financial institutions intuitively know they are benefiting from ICT, but to convince more microfinance and microinsurance providers to expand to rural areas, we need to show the cost savings and break even points for using these technologies. In research AZMJ conducted for the Interamerican Development Bank, "Interest Rates and Implications for Microfinance Institutions," (available at
http://www.iadb.org/en/publications/publication-detail,7101.html?id=68488), we found that most successful rural microfinance providers were achieving significant volume through the use of ICT and innovative distribution systems, which allowed them to cost-effectively cross subsidize the higher costs of rural outreach.  At the same time, we found that competition (not regulation) was the greatest driver of lower interest rates. So one of the questions we need to look at is how do we balance the need for achieving scale to cost-effectively serve rural clients with the need for competition to keep costs reasonable for those clients?  I welcome any thoughts and examples of ways in which we have documented to cost savings of using ICT. Thanks!

Anita Campion
Anita CampionAZMJUnited States of America

Thanks Julie, That is great coverage of the role of ICT in microinsurance.  In 1999, I wrote “Automating Microfinance” for the MicroFinance Network when ATMs were the new thing, we have come a long way since then! There are now so many ways microfinance providers use ICT in day to day operations, such as:

  • Use of smart phone and IPads for loan analysis in the field
  • Cell phone banking, primarily for fund transfers and savings storage, but increasingly used for loan payments, which usually starts in urban areas before gradually expanding to rural areas.
  • Weather-based index insurance used to remove moral hazard related to traditional crop insurance.
  • Real-time information on portfolio quality information for active monitoring and collections.    

What concerns me is that we still lack enough demonstration of the cost savings and productivity enhancements by using these ICT applications. My sense is that that the financial institutions intuitively know they are benefiting from ICT, but to convince more microfinance and microinsurance providers to expand to rural areas, we need to show the cost savings and break even points for using these technologies. In research AZMJ conducted for the Interamerican Development Bank, "Interest Rates and Implications for Microfinance Institutions," (available at
http://www.iadb.org/en/publications/publication-detail,7101.html?id=68488), we found that most successful rural microfinance providers were achieving significant volume through the use of ICT and innovative distribution systems, which allowed them to cost-effectively cross subsidize the higher costs of rural outreach.  At the same time, we found that competition (not regulation) was the greatest driver of lower interest rates. So one of the questions we need to look at is how do we balance the need for achieving scale to cost-effectively serve rural clients with the need for competition to keep costs reasonable for those clients?  I welcome any thoughts and examples of ways in which we have documented to cost savings of using ICT. Thanks!