Growing Prosperity

The adoption of new innovations such as irrigation systems, drought-resistant hybrid seeds or gaining access to asset-backed micro loans by smallholder farmers is a complicated issue. Nearly 60% of the global population live on less that $4 a day. Of this, 80% live in rural areas and agriculture is the primary source of income for over 80% of this huge rural population.

Adopting suitable innovations could improve the lives of the 2.5 billion people that rely on agriculture for their livelihoods. However, many innovative technologies remain widely inaccessible, typically in remote rural areas where governments and traditional aid has fallen short. In response to this, there has been an upsurge of start-up companies aiming to connect farmers to new innovations. By offering new products, services and markets to smallholder-farmers, farmers can increase their incomes and enjoy an improved quality of life.

Connecting farmers to innovations

Growing Prosperity coverReleased on the 17th of November, managing consultancy Bain & Company and investment company Acumen have co-authored their new report “Growing Prosperity: Developing Repeatable Models to Scale the Adoption of Agricultural Innovations” that focuses on the interaction between farmers and firms to discover what drives the adoption of innovations.

By interviewing over 320 farmers in four countries and using examples from eleven start-up firms including One Acre Fund (OAF), Global Easy Water Products (GEWP) Juhudi Kilimo, Sidai and SV Agri to name a few, the report examines what needs to happen to drive adoption of innovations by smallholder farmers and how a firm should achieve scale, sustainably. Finally, the report explores the relationship between company and farmer in the wider socio-political context, considering how stakeholders ranging from NGO’s to development agencies, governments to investors can influence adoption and support the successful scaling of “pioneer firms”.

The Four A’s

To successfully drive adoption of agricultural innovations, the report finds that companies must systematically manage the ‘Four A’s’; how to raise awareness of new products and services, how to communicate the advantage the farmer will gain by adopting innovations, how to ensure the affordability of these innovations and how to provide easy and timely access to them.  Whilst this is nothing new, the report found that few firms are able to systematically address each of these elements in a sustained way as they grow. Whilst some are found to carry more weight than others and play a pivotal role in the adoption of services by smallholder farmers, failing to address the Four A’s in a sustained way can prevent the scaling-up of a start-up firm in a sustainable and effective manner.

Awareness

Although company officials are the primary influencers of early adoption, the influence they have over time drops from 65% to 25%, gradually being overtaken by the influence of friends or relatives. Therefore, it is beneficial for firms to support the work of company officials throughout, to maintain the level of adoption.

Advantage

The drive by company representatives needs to be accompanied by displaying a clear advantage gained by farmers if they adopt the innovation. In fact, the report finds that the advantage provided to the smallholder farmer is the biggest driver of product uptake; more than 60% of farmers surveyed said they tried a new product or service because it would increase their wealth. Mitigating risks or receiving a better service were cited less frequently as primary drivers of adoption.

Not surprisingly, the value placed on increased wealth is related to the farmers poverty levels. Farmers who had more than an 80% chance of being in poverty are more likely to reference wealth increase as an important factor when deciding whether or not to adopt a product or service. Interestingly,  trying the product or service to experience the advantage is crucial to adoption. 80% of the farmers surveyed trialed a product or service and of those, 60% used only half their land or less to test the product or service.

Affordability

Smallholder farmers in the developing world face challenges that both magnify their need for capital and also create more hurdles to accessing it. The June 2014 Montpellier Panel Report ‘Small & Growing: Entrepreneurship in African Agriculture’ supports this, finding that small businesses are more likely to list “access to finance” as a significant barrier to growth. Access to finance can help farmers avoid the burden of making a large, lump-sum payment to purchase a product or service. Moreover, one-third of the farmers who cited cost savings as the primary reason for product or service adoption emphasized the importance of deferred payment.  For example, many of the farmers that Bain & Company interviewed in Kenya readily pay 20% more for the OAF package that also includes training, insurance and deferred payment, versus the basic package they would get at a local store.

Access

It may sound obvious, but a product or service must be timely as well as accessible. Providing a service at the wrong time of year is useless even if it is accessible and brought straight to the farmers gate. The report provides several examples of this, including SV Agri who have built up a distribution network of  individuals with solid social connections in their village. Distributing their products and services this way not only reaches more farmers in remote villages, but also raises awareness of their products using individuals who are known and trusted.

The report finds that none of the Four A’s are sufficient alone to drive adoption of an innovation. However, ‘advantage’ carries the most weight, as if farmers do not consistently perceive that a product or service offers benefits beyond their current practices, they will not adopt it. Furthermore, if the advantage is perceived to be large enough, farmers will negate other barriers such as affordability, often borrowing money to access the service.

The report concludes by stating that corporations, development agencies, impact investors, NGOs and the government are all central to the dissemination and adoption of agricultural innovations for smallholder farmers. Although there is evidence of the positive impact that has come from the work of pioneer firms, this must be a collective effort to support their work into the future.

Click here to download the report

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