Digitalisation in Agriculture

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Introduction

With the agriculture sector being pivotal for sustaining the livelihoods of people living in rural areas, and the provision of food & income, information and communication technologies (ICTs) present a tremendous opportunity to harness the sector’s full potential and ‘leave no one behind’. ICTs offer solutions for rural populations that help to improve productivity, to enhance food and nutrition security, to access markets, and to earn and even significantly increase their income. ICTs have cross-cutting transformative potential that can accelerate progress on the Sustainable Development Goals (SDGs) in the context of rural development, specifically SDG 4 – Quality Education, SDG5 – Gender Equality and SDG 17 – Partnerships for the Goals.

ICTs can benefit the agricultural sector by offering farmers services that improve their access to inputs, financial services and markets, by gathering and disseminating information, and by facilitating social learning and exchange. In Africa, the majority of these services still rely on SMS and voice-based systems, but the increasing smartphone penetration holds promise of a new world of services for the continent’s young rural population keen on technology. Yet, it is important to tailor high-tech ICT solutions to smallholders’ needs and their existing skills and capabilities to use advanced technologies. Additionally, much depends on finding the sustainable ICT4Ag business models needed to promote the uptake of internet-supported solutions also in the poorest parts of the world.

Over the past five years, ICT4Ag has become the most widely adopted acronym for the use of Information and Communication Technologies (ICT) in the agricultural sector. ICT4Ag encompasses all ICT’s that are/can be used in the field of agriculture, and which range from older technologies like (analog) video, radio and television to computing, internet, remote sensing, mobile and digital broadcasting. ICT adoption in the agricultural sector has, however, started relatively late. This may be attributed to the perception of agriculture as a difficult environment, and its low salience in the donor agenda until relatively recently. The increasing attention was stimulated by advances in technology that made the cost of ICT services lower, information and data easier to access, store and exchange. The development of innovative business models and partnerships played their role as well.

The GSMA report estimates that, at the end of 2019, there were 477 million unique mobile subscribers in sub-Saharan Africa. This number accounts for 45% of the population and continues to rise, as well as smartphone adoption. GSMA expects this number to double by 2025. The number of mobile users will grow from 272 million in 2019 to 475 million in 2025. As for mobile data consumption in sub-Saharan Africa, it is expected to grow more than fourfold by 2025. Hence, ICT4Ag’s importance for the agricultural sector will only expand.

Blockchain for agriculture

Blockchain is an emerging digital technology that has a potential to address the gaps of the traceability of products as well as accountability and transparency of agricultural value chains. In agriculture and food supply chains, where numerous actors are involved from the raw production to the supermarket shelf, there is a need to provide a distributed, peer-to-peer, yet secure, way to perform transactions among different parties. Blockchain technology allows to secure transactions by opening them to all stakeholders in the chain, thus keeping a consistent view and agreement among the participants. Removing the role of intermediaries and increasing transparency helps to reduce corruption. Below are several examples of applications of blockchain in agriculture:

Food Traceability

Food Traceability facilitates the identification of product provenance and can increase consumers’ trust and loyalty. Companies such as Walmart and Kroger, Nestle, Unilever, Cargill and Carrefour embraced the technology and included it into their supply chains.

Land Governance

Blockchain can support Land Governance. Proving ownership of land and property in the Global South sometimes presents a challenge. The Distributed Ledger Technology (DLT) are a secure, fast, and immutable method to register land titles, providing greater legal clarity to land tenure systems, avoiding corruption and fraud, and unlock capital. Physical assets registered on the DLT, such as land titles, can be used as a collateral.

Financial services

Blockchain technology affects the way banks, credit card companies and investment funds operate. It makes banking transactions and provision of financial and insurance services faster, cheaper, more secure and inclusive. The banking industry has started testing the blockchain technology with cryptocurrencies and other assets that can be exchanged on blockchain directly without involvement of a third party that would normally charge for services. A number of banks such as ING, Société Générale, Barclays, Standard Chartered and BNP Paribas, large corporations like Unilever, Sainsbury’s and Sappi as well as fintech start-ups started using DLTs to track physical supply chains and unlock access to financing for sustainable sourcing.

ICT solutions are especially promising to bridge the gap of access to financial services in the countries of the Global South and provide financial services to people living in remote areas, lacking services commonly available in cities. The rise of smartphone penetration and improvements in connectivity indicate that the possibility that farmers could harness blockchain’s technology full potential seems realistic. Yet, even if blockchain offers advanced security, regulatory and legal frameworks are crucial to guide the use of blockchain technology in food supply chains and possible security risks.

ICT-supported financial services

Low-income consumers lack access to finance as a result of a perceived lack of creditworthiness by large-scale institutions or the high transaction costs, moreover, small-scale loans being unprofitable for large institutions. It is therefore not surprising that most farmers don’t have bank accounts.

In contractual farming, there are usually long distances between the farmers and the lead firm. Making payments in cash can be risky and resource consuming, taking into consideration the remote location of the farms. This leads to delays in payments and seriously limits the farmers’ potential to increase or even sustain their production and income. The use of mobile payment services is increasingly offering a solution to this issue. Mobile payment services are easier to access than conventional banking services and allow timely money transfers. However, the availability of a local agent where a farmer can withdraw cash is a prerequisite. At the same time, while timely processing of payments is of high benefit for farmers, they are used to cash money and might mistrust the new modalities, and thus show low acceptance. Opening a mobile payment account cannot be forced on the farmers. The incentives and awareness-raising measures are instrumental to convince farmers to change their financial behavior. 

Pay-as-you-go (PAYG) business models driving innovation

Pay-as-you-go (PAYG) business models make products and services accessible to low-income consumers, thus, driving financial inclusion. While PAYG is known mostly from its successful application in solar home system business models, it can be applied to any productive capital inputs such as tractors, water pumps, and irrigation systems. PAYG utility solutions enable innovative models for energy, water and sanitation services that are affordable, clean, safe and reliable. PAYG models allow people to make incremental payments, often through mobile money, for example, for a solar household system that can power phone and radio charging, as well as other appliances such as TVs and fans, thus, representing an opportunity to make progress with UN Sustainable Development Goal 7: Affordable and Clean Energy. These innovative PAYG utility solutions demonstrate how enabling users, especially those in low-income segments, to make regular, affordable mobile money payments for crucial energy, water and sanitation services drives both financial inclusion and social impact.

The lack of cost recovery for grid extension and mini-grid projects, high up-front cost of energy access and the lack of private investment as well as well-targeted subsidies for renewable projects form a barrier to expanding energy access. UNCDF CleanStart report highlights the increasing role of digital payments and inclusive digital ecosystems in achieving sustainable energy for all. Also, blockchain technology is used to enhance and finance energy access.

Internet of Things Solutions

Internet of Things (IoT) solutions will be central to efforts to improve productivity and efficiency in operational processes. IoT-enabled solutions have the potential to help address regionwide challenges in key sectors, such as energy, water, agriculture, transportation & logistics, manufacturing and healthcare (GSMA, 2020).

The ‘internet of things’ is making it possible to connect diverse and multiple devices through the mobile network. The data generated can be analysed using cloud-based technologies to inform strategic policy and project design decision-making processes or deliver information. This has the potential to significantly reduce transaction costs and to improve smallholders’ access to markets (GIZ, SNRD Africa, 2018).

GIS and remote sensing

Technology such as sensors and geographical information systems (GIS) can increase productivity and efficiency of agricultural practices. Sensors and geographical information systems (GIS) can be used in a broad range of application fields: (1) for GPS-mapping of parcels and visualization on Google Maps and connection with farmer registry; (2) for continuous monitoring (climate, water consumption, soil moisture); (3) for the identification of additional agricultural lands using satellite and airborne imagery; (4) GIS can enable the correlation of natural parameters, agricultural practices, and the resulting yields; (5) drones can be used for the creation of digital elevation models in case of drainage issues, for the design of irrigation schemes, for harvest control, etc (Elsäßer, 2017).

Around 70 percent of global freshwater withdrawals go into agriculture. Sustainable water management is pivotal in order to increase water use efficiency and ensure food and nutrition security. Sensors can improve water resource management and mitigate the risk of unsustainable water extraction rate by measuring the soil moisture and controlling the sprinklers for the best conditions for the plants.

Sensors can be used in a solar-powered irrigation monitoring system to measure solar irradiance (e.g. on horizontal and inclined surface), dynamic water level, rainfall, and wind speed (Sass & Hahn, 2020). In addition, the SPIS monitoring system can be expanded with sensors in the reservoir and in the irrigation system itself. More sophisticated (and expensive) monitoring devices may include automatic data logging. The data logger continuously records and stores all system parameters over a longer period of time. Special evaluation software allows for quick data analysis on site. In remote areas not connected to the public grid, data loggers are usually solar-powered and may even include modern communication devices (GSM) with the option of checking system performance via smart phones.

Using GPS for geo-mapping the farmers’ plots can be very useful for a better understanding of the local conditions, e.g. this data can help to identify the best crop varieties for the specific parcels in order to optimize irrigation schemes and plans, to mitigate pest incidences, to optimise transportation routes. Drones with infrared sensors can be very effective for early warnings and for harvest control. Satellite images are a good source for the identification and development of new agricultural lands. However, precision farming requires the high investments in software and powerful hardware and the high level of expertise which makes it justifiable for large contract farming schemes only. Furthermore, the mapping needs frequent updates. At the same time, GPS mapping of the farmers’ plots and visualisation via Google maps is a low-cost solution with high technical impact. However, the full potentials of precision farming cannot be exploited without appropriate expertise to integrate the different sensors and sensor networks into one functioning system (Elsäßer, 2017).

The use of GIS and remote sensing technology can empower farmers, resulting in even higher yields, better incomes and lower risks if farmers as well benefit from advice on the identification of best practices to obtain the highest yield (Elsäßer, 2017).

Farmer registry

The farmer registry is a database or an umbrella application for contract farming most ICT services rely on. The farmer registry accumulates information important for planning and management, such as farmers’ phone numbers, bank account details, water consumption, the size and location of their parcels. Such a database makes it easy to keep this information up to date to support traceability, more accurate statistics, prognoses and planning. Technically, the solution has to be integrated into a (possibly) existing IT environment which can be simply an Excel sheet or database of a varying degree of sophistication or even its free alternatives (Elsäßer, 2017).

Service-based information technology and data collection by SMS

The Unstructured Supplementary Service Data (USSD) technology is commonly used by prepaid cellular phones to query the available balance. This technology allows to provide on demand more specific information. The farmer can dial a number and is then led through a menu to access the necessary information which can vary from weather forecast, early warnings (flood, storm, thunderstorm, heavy rain, etc.) to market prices. USSD technology, SMS, voice mail, Interactive Voice Response (IVR) technology support the information-driven service provision business model. The services provided by such solutions can help lead organization to maintain communication with the farmers in remote areas and keep them informed in contract farming but also to collect information for monitoring and analysis by extension workers, international cooperation and nonprofit organizations. Smartphones can further facilitate data collection and the capturing of visual data (Elsäßer, 2017).

Barcoding and traceability

Barcoding in the agricultural value chain is another way to improve traceability in order to be compliant with national or international standards and certifications. Introduction of barcoding helps to effectively collect, manage and analyse large amounts of information. Barcoding is, however, only feasible with an IT department and a professional procurement department, as it needs databases, servers, and reliable backup procedures. Therefore, the technology is not suitable for the informal model (Elsäßer, 2017).

Smallholder AgriTech Business Models

There has been a surge in AgriTech start-ups in recent years. They tap into the potential that technology offers and introduce innovative business models that accommodate the previously overlooked base of the pyramid (BOP) market segment.

The base of the pyramid (BOP) is a socio-economic group that consists of four billion people who live in relative poverty with annual incomes below $3,000 in local purchasing power. The food sector is valued at $2,900 billion for the BOP market, significantly larger than any other industry, such as water ($20 billion), information and communication technology or ICT ($51 billion), health ($158 billion), transportation ($179 billion), housing ($332 billion), and energy ($433 billion). Despite an overall large value of over $5 trillion, the BOP market is highly fragmented and unique, comprised of different cultures, languages, needs that are different from one location to the next (WE4F, 2019).

The Grow Asia AgriTech Business Models_FINAL_0.pdf publication identified five business models which appeared to show the greatest potential in reaching smallholder farmers at scale:

1. Digital Advisory services that provide customized advice and information to farmers over a social media platform and/or a mobile application.
2. Peer-to-Peer Lending platforms help de-risk the investments in the agricultural sector by allowing lenders to make individual loans to farmers over a digital platform.
3. Traceability solutions use a database or ledger to record the origin of commodities from farms.
4. Digital Marketplaces make transactions more efficient, open up new markets to farmers by connecting buyers and sellers online.
5. Mechanization Platforms allow owners of tractors, drones and other equipment to schedule-lend equipment to farmers on a digital platform (Voutier, 2020).

On the same note, the AGRA final report identified five key traits of sustainable business models:

1. Revenue models that involve agribusinesses or institutions covering the cost of smallholder farmers’ access to the service.
2. The use of low-cost digital delivery channels combined with more expensive face-to-face promotion and marketing.
3. Solutions that combine valued and focused services, offered in partnership with trusted organisations.
4. Key performance indicators and customer feedback loops to monitor the business.
5. Business models that have diversified sources of revenue (Waruingi & Muriithi, 2016).

On the same note, the WE4F Innovator Guidebook points out such solutions as pay-as-you-go, rent-to-own, leasing, cross-subsidisation, selling to an aggregated unit, and many others to overcome the challenges of limited ability to pay by farmers and to reduce distribution and optimise maintenance costs (WE4F, 2019).

Case Studies

Early warning system that integrates indigenous and scientific drought forecasting

Droughts remain the number one disaster in Africa. There is currently no appropriate drought-forecasting tool for small-scale farmers. Access to the media is also limited in many cases. Moreover, farmers find the scientific terminologies used hard to translate to their contexts and are not aware about available meteorological services. Therefore, they continue to rely on indigenous knowledge. To target farmers directly, the Central University of Technology of Free State (South Africa) has developed a drought early warning system that combines indigenous and scientific drought forecasting. The tool is possible to use through a mobile application, a web portal, and SMS service to pool weather information through a network of sensors that monitor weather conditions for small-scale farmers in Mozambique, South Africa, and Kenya. The system gives farmers a comprehensive information that differs from conventional predictions and resonates with them.

Costs and Benefits of Clean-Energy-Technologies in the Milk Value Chain

Despite the importance of the milk sector for income generation among small-scale farmers in Tanzania, Kenya, and Tunisia, only a reduced amount has access to extension services, which could improve their productivity. Raw milk is usually transported to milk collection facilities, where it is often rejected due to low quality, as it is not cooled during transportation. The lack of a reliable electricity grid hinders most rural households from using adequate refrigeration systems. Cooling technologies can significantly improve milk quality and add value along the milk value chain. Since grid electricity does not reach many rural areas, off-grid renewable energy (RE) solutions to cool milk can be a viable option. Biogas domestic milk chillers and solar milk coolers are attractive from a financial point of view and have socio-economic and environmental net co-benefits. Policies, financing mechanisms and capacity building activities to facilitate the adoption of renewable energy cooling solutions for milk include: the development of a clear national strategy for the milk sector, strict milk quality standards and a price premium for quality refrigerated milk, the establishment of controls and fines against illegal milk commercialization, eradication of counterfeit RE products, financial incentives, extension services, technical assistance, information programmes and training. Costs and Benefits of Clean-Energy-Technologies in Kenya’s Vegetable Value Chain Horticulture is the third leading agricultural subsector in Kenya (after dairy and tea), and it is a growing market. However, small-scale producers in the vegetable sector face many challenges such as erratic rainfall, high and volatile energy prices, low crop yields, post-harvest losses of perishable crops, seasonal variations in product prices, poor access to market information, weak transportation infrastructure, and lack of access to modern energy for productive uses. Overcoming them could help achieve a more constant level of production and income. Both solar cold storage and small solar-powered water pumping technologies, assessed here as case studies, showed positive financial and economic returns. Adoption of such clean energy technologies in the vegetable value chain can be facilitated by establishing guarantee schemes as well as specific micro-credit lines and support services for farmers and cooperatives; setting minimum performance standards for renewable energy (RE) equipment; educating and training practitioners on the benefits and effective use of solar technologies and raising awareness of technological and financing opportunities. Read more…

Costs and Benefits of Clean Energy Technologies in the Philippines’ Rice Value Chain

Small-scale rice farmers from the Global South often face difficulties in reaching milling services and usually do not have access to grid electricity. Local renewable energy systems can provide electricity and heat for productive activities, hence improving production and reducing food losses in remote rural areas. In off-grid areas the gasification of rice husks and solar-powered domestic rice milling interventions, assessed here as case studies, can be financially viable as well as provide social and environmental co-benefits. Adoption of clean energy technologies in the rice value chain can be facilitated through targets and strategies for rural electrification, the introduction of financing and insurance products, technical assistance to manufacturers and consumers, capacity building and improving energy literacy. Costs and Benefits of Clean Energy Technologies in the Philippines' Rice Value Chain.pdf

Publications & Tools

Excel-based or online available tools allow assessing the viability and the environmental impact of such interventions. However, as these can be unfriendly to a non-professional audience, several online tools are available to support small and medium businesses in performing a cost-benefit evaluation of their investment in an energy-food context.Read more…

WinDASI: A Software for Cost Benefit Analysis of Investment Projects

Developed for current or future practitioners in Cost-Benefit Analysis (CBA) of investment projects, working in public administrations, in NGO’s, professional organizations or consulting firms, WinDASI allows calculating a) flows of physical quantities of outputs, inputs and investment items; b) flows of current, discounted and cumulative costs, benefits and net benefits; c) flows of incremental (With-Without project) current, discounted and cumulative net benefits; and d) project indicators such as the Net Present Value (NPV), the Internal Rate of Return (IRR), the Benefit/Cost Ratio (BCR), the Switching Values (SVs) and Sensitivity Analysis. The tool addresses normal and phased mode of calculation and comparisons of different projects alternative scenarios. Read more…

FAOVCA-Tool – A Software for Value Chain Analysis

Value chains act like socio-economic links between upstream and downstream agents, connected through technical, economic, territorial, institutional and social relationships. Value chain analysis explores the structure of these links and relationships, building accounts for the different agents and analysing their revenues, costs, value added and profits. This enables a consistent accounting framework for the whole value chain and identifies bottlenecks and opportunities for value chain development. It is suitable to assess evidence-based policy options and monitoring of their impact. The FAO VCA-tool 3.1 is particularly useful to store and organize data for different agents, structure the value chain accounting framework, calibrate and compute flows, shadow prices, competitiveness and protection indicators. Further, it allows building and comparing alternative value chains scenarios for policy impact assessment and performance monitoring. Tool and manuals are freely available online on FAO’s EASYPol platform. Read more…

Toolbox on Solar Powered Irrigation Systems – Payback Tool

The SPIS Toolbox is designed to enable advisors, service providers and practitioners in the field of solar irrigation to provide broad hands-on guidance to end-users, policy makers and financiers. Risks related to system efficiency, financial viability and the unsustainable use of water resources can thus be minimized. The Payback Tool evaluates economic, environmental and social aspects of different energy sources for irrigation in order to help operators to assess the economic viability of different power supply options and water pumping technologies. The tool assesses the economics associated with different energy sources for irrigation including the cost, price, and payback time. Read more…

RuralInvest – A Participatory Approach to Identifying and Preparing Small/Medium Scale Agricultural and Rural Investments

RuralInvest, developed by the FAO Investment Centre, answers the need for support to local investment by offering a series of modules. These provide a range of materials and training courses such as technical manuals, custom developed software, user guides and instructor’s materials. The modules include guidelines to assist local technicians working with communities and other rural groups to assess their investment needs. Further, the modules provide a simplified methodology and approach to facilitate the conversion of general ideas into specific investment profiles. For large investments, a detailed project formulation and analysis including all information concerning the viability can be compiled using the software which allows calculating working capital requirements and annual cash flows, as well as Net Present Value (NPV) and Internal Rate of Return (IRR). The software can generate a variety of reports in either electronic or printed form. The complete report is typically of 15-20 pages, depending upon the complexity of the investment. The RuralInvest software is designed to be operable on the Internet but can also be installed directly on computers of field technicians. It is applicable for any agency, project, organization or private investor managing funds for small and medium scale agricultural and rural investments. Read more…