European farmers, responding to urbanisation and growing demand for food in the 19th century, banded together to form not only agricultural co-operatives, but financial ones. Today, African farmers are in a similar position, but they now have the opportunity to organise themselves in a different fashion, integrate value chains to their benefit and develop their businesses.
With technology, these farmers can shape their own solutions. Using simple mobile phones they can make payments, order farm inputs or sell their produce. As agri value chains become increasingly digitised, we need to ensure they remain inclusive, which requires careful data design with smallholders’ interests at its heart.
Demand for food is growing as populations, particularly those in developing economies, continue to increase. At the same time, sustainable food production requires the responsible use of scarce resources such as land and water.
The World Bank and FAO estimate that 95 per cent of the world’s farmers can be classified as smallholders. They produce 45 per cent of the world’s food, 70 per cent of which comes from sub-Saharan Africa, Latin America and south and east Asia.
Such scale of production means the world simply needs small farmers to thrive. Yet behind this picture lies the potential to increase maize yields, to take one example, by up to 400 per cent.
Years of efforts to train farmers, drive consolidation and support government interventions are not delivering on the potential that is clearly present in agriculture in Africa. Some farmers lack even the most basic services and logistics, let alone access to the finance or new technologies needed to scale their businesses and increase yields.
These smallest of farmers are price takers when bringing their produce to the world market. They are expected to adhere to global standards when they want to export, while cheap imports are destroying their access to local markets. On top of this, they face the adverse effects of climate change.
Despite these dire circumstances, however, they manage to produce a marketable surplus, putting food on consumers’ tables across the planet.
Agricultural supply chains might be opaque and fragmented, yet these smallholder farmers help to provide us with cheap cups of coffee and bars of chocolate on a daily basis — it must be the “invisible hand” of economist Adam Smith at work in how they find their way in a competitive market.
Large international players in food supply chains are increasingly aware that their future market shares depend on proven fair production and transparency all the way to the grassroots level. They cannot avoid growing consumer awareness of the means of production for the most essential of human needs: food.
This change will shape the near future. A digitised value chain will benefit all stakeholders by creating greater transparency about where our food comes from, while helping primary producers to access much-needed resources including finance, inputs and fair prices.
Fintech and agritech initiatives are already jumping upstream on the supply chain, bringing digital services to smallholder farmers and their customers including local traders and processors. Examples range from lending products in the form of digital “wallets”, allowing farmers to access small loans through their phones, to large food processors having the opportunity to monitor local farm gate prices in real time.
We have spoken to farmers who, for the first time, are setting aside cash for the next season rather than using it for their daily expenses. Technology is monitoring individual plots, enabling farmers to access pre-harvest advances when the need for cash is at its peak. All by using an old mobile phone with a simple menu.
The means are there to help these farmers deliver on their potential, the technology is already available at low cost. Stakeholders including agritechs and fintechs in the value chain must create a digital ecosystem that for farmers is easy to use and can deliver transparency, farming insights and greater access to finance. It will lead to better and sustainable yields.
Such a system will rely on farmers’ data. But, crucially, it must also respect farmers’ ownership of that data and use it for their benefit. Only then can farmers seek services and markets in an open and transparent environment.
That way, Adam Smith’s invisible hand can deliver on its promise and enable investors to support those vital links further up the supply chain.
Marianne Schoemaker is head of banking for food partnerships at Rabobank