Addressing the Digital Divide for Smallholder Farmers
Rose Stambuli, 54, sorts through her family's peanut harvest. * Credit: Heifer International / Olivier Asselin. * Copyright: 2018 Heifer International
The world is not on track to achieve “Zero Hunger,” as defined by Goal #2 of the UN (United Nations) Sustainable Development Goals (SDG) by 2030. In fact, since 2015, the number of people who suffer from hunger has been steadily increasing, with the COVID-19 pandemic further exacerbating the urgency of issues surrounding global food insecurity. In 2020, close to 12% of the global population was severely food insecure, which is about 19% more than in 2019. New projections confirm on the current trajectory, that hunger will not be eradicated by 2030 and that about 660 million people may still face hunger — 30 million more as a result of the COVID-19 pandemic.
To feed 7.9 billion people, we rely on 608 million farms. Smallholder farms (<2 hectares, one hectare is approximately 2.47 acres) account for 84% of all farms worldwide, operating about 12% of all agricultural land, and accountable for 35% of the world’s food supply. In lower-income regions, smallholder farmers operate a far greater share of agricultural land. In Sub-Saharan Africa, for example, the average farm size is only 1.6 hectares, yet these farms account for 35% of food production regionally. The task ahead for smallholder agriculture is enormous as food production must more than double in the next three decades to feed the world’s growing population. However, despite their critical role in establishing global food security, smallholder farmers are severely limited by external factors, such as climate change, conflict, global economic downturns, and internal factors, such as low productivity, inefficient food supply chains, and low incomes, which keep these farmers from feeding themselves and their families and turning enough profit to earn a living income.
Digital approaches are needed for accelerated and sustainable agricultural transformation that addresses these internal and external factors. At scale, digital disruption is driven by the collection, use, and analysis of massive amounts of agricultural data that can be digested and interpreted by advanced systems. Accessing data-driven digital transformation for smallholder farmers requires advancements in three areas: (1) last-mile infrastructure, (2) open standards, and (3) contextually relevant software services. By investing in these three key areas, plus “boots on the ground” who can train, troubleshoot, and support smallholder’s technical capacity and adoption lifecycle, digital innovation can address gaps and bottlenecks which keep smallholder farmers from high-quality, economically viable, and profitable production.
There have been significant efforts towards investment in last-mile infrastructure to support rural access to the internet, and connectivity has increased significantly over the past decade. By the end of 2020, mobile broadband coverage reached 94% of the world’s population — with the biggest increases in coverage occurring in Sub-Saharan Africa and other Low-to-Middle-Income countries. Based on a study conducted in 2021, 84% of global croplands have access to a 2G network connection or better, and radical innovations, like SpaceX’s Starlink and Google’s Loon, have emerged as promising solutions to global high-speed and low-latency internet connectivity. Even though internet connectivity gaps are being addressed, access to the internet is not enough to provide smallholder farmers with access to data-driven digital transformation.
Coupled with investments in physical infrastructure, investment in software infrastructure is also required to progress smallholder farmers towards accessing impactful agtech applications. AgStack, a Linux Foundation project, is a leader in developing open standards and securing a digital operating system for software applications that can cater to all agricultural stakeholders globally. In open-source development, open standards are considered to be the blueprint that underpins software applications and aligns development towards a common and interoperable architecture. Applications built on open standards are more useful to smallholder farmers because they reduce fees, eliminate vendor-imposed boundaries, and protect farmer data while still enabling useful data exchange for contextually relevant tools and services. By progressing the development of open standards, software applications for smallholder farmers can be advanced in a more streamlined, cost-effective, and value-driven way.
For smallholder farmers to fundamentally benefit from these advances, they require an ecosystem of contextually relevant software applications that can support them holistically in the management of their farming businesses and eliminate their barriers to success. For this ecosystem to be effective, it must support basic farm planning, good governance of land ownership, timely and specific production recommendations, risk management, access to affordable capital, accurate market information, supply chain transparency, sovereignty over personal data, and ultimately help smallholders keep up with technology innovation that has become ubiquitous within global agroeconomic supply chains. The potential for software applications to service smallholder farmers comprehensively has expanded due to advances in four key innovations: (1) data generation (in-field sensors, satellite imagery, and ‘farmers as sensors’), (2) data processing, predictive analytics (by using machine learning and artificial intelligence), (3) human-computer interactions (human-centric approaches to create experiences that improve the ease and use of insights through voice, text, and images), and (4) data transparency (enabling transparent data sharing, open banking, and decentralized operating models). By harnessing innovative approaches to data and by working in tandem with farmers to develop software that is relevant and useful for their contexts, digital agricultural development can be advanced at the smallholding farmer level.
Farm Planning
Without access to digital business management solutions, smallholder farming cooperatives are unable to scale effectively and compete in digitally enabled markets. This makes cooperatives vulnerable to insolvency and limits their ability to invest in critical infrastructure, labor, and services that could otherwise support their business growth. The provision of digital tools that can enable farm planning, such as management of production information, accounting, forecasting, and historical farm data, is critical for supporting cooperatives in their growth and enabling them to run effective and efficient businesses. Additionally, for data to fuel smallholder agricultural disruption, information needs to exist in a digital form that can be used and digested by advanced analysis tools and other applications that can benefit farmers. While leveraging digital data is straightforward for farms that use electronic records, it presents a challenge for smallholder farmers in rural communities who are currently disconnected from digital systems and electronic record keeping. Through the provision of these basic tools, farmers can benefit from data-driven agricultural digital services as their records transition from paper-based to electronic.
Land Registration/Land Title
Land registration or a land title is a key economic enabler. Most smallholders face insecure land tenure. Registries that do exist rely on paper-based documentation that are centrally stored. This makes them vulnerable to loss, corruption, or misuse. Improvements to land registration systems present an opportunity for farmers to feel more secure and increase investment in their land. Land registration also improves government management of land holdings, use, productivity, and value, helping to reduce ‘shadow prices’ for land and build more robust and equitable property markets. By working in partnership with government agencies, blockchain technology can be leveraged to make land registries more transparent and accountable to change. In adding a layer of transparency and enabling a verifiable proof of ownership, legitimacy can be confirmed or determined at the smallholder level, something they currently have extremely limited access to today.
Access to Advisory Services
Agriculture advisory plays a crucial role in applying innovations to improve production efficiency, yield, and quality.Government-sponsored extension programs are often in high demand and cannot service all farmers, especially those in remote regions. Compounding this issue is the limited availability to subject matter experts who can provide specific value-chain expertise. SMS-based advisories and alerts, and interactive voice response services that can run on low-end handsets, even if jointly owned or shared between community members, offer an important opportunity for addressing issues of productivity, input use, and within-season management across large areas of farming landscapes globally. These lean front-end solutions can be built on sophisticated back-end services that interface with the internet and integrate remote sensing, ancillary data sets, and mechanistic and statistical prediction tools. While SMS-based advisory is not groundbreaking innovation, most existing services provide generalized recommendations which are lacking the contextual specificity of location and value chain that is required to make a truly valuable product for smallholder farmers. Smallholder farmers are empirical by nature and are understandably hesitant to change their production practices, and in doing so take on the risks associated with change, without seeing that a recommended solution actually works. Traditionally, demonstration plots run by agricultural organizations and their extension officers help introduce smallholders to new production techniques and inputs, and while these should be facilitated to support the adoption of a digital advisory service, there should also be considerations for ongoing incentivization mechanisms that can reward farmers for their behavioral change and adoption of new advisory services and recommended techniques.
Risk Management and Reduction
Risk management for smallholder farmers is necessary to their ability to be resilient and maintain agricultural production through boom-and-bust cycles of production, increasingly intensified by climate change. The effects of weather shocks can adversely affect a farmer’s income and ability to repay loans, trapping farmers in poverty. Research indicates that it takes farmers without insurance four years longer to recover from a bad season as compared to those with insurance. Blockchain-based weather index insurance has become an increasingly accessible option thanks to decentralized oracle networks (Chainlink) and Smart Contract Weather Index Insurance innovation (Etherisc) which is catering to smallholders and helping them cover losses due to unpredictable and unfavorable weather. Recent experiments include DAO-based crop insurance models, e.g. Lemonade Foundation, which has potential to provide even more access to insurance services at the smallholder level through crowd-funded liquidity and crypto economic incentivization models which invite support by the wider Web3 community. With crop insurance policies being integrated directly with smart contracts and indexed to local weather, during extreme events, policies can be automatically triggered facilitating fair, transparent, and timely payouts to smallholder farmers. Since transaction costs are streamlined via the blockchain, it is estimated that using blockchain can reduce the cost of issuing insurance by 41% and the cost of insurance by 30%.
Access to Working Capital and Credit
Access to capital at affordable rates, appropriate timing, and efficiency of delivery is critical to maximizing economic benefits to smallholder farmers. Without access to affordable capital, farmers are caught in cycles of poverty whereby investments into their production processes are so costly that they cannot turn a profit from their yield or, the more common occurrence, farmers are simply unable to invest in their production, bearing the consequences of lower yields and lower quality product. To address systemic barriers around access to affordable financing, farmers require a digital representation of their experience, production history, assets, and choices, in other words, a digital “reputation” or a “credit score” that is transparent and verifiable by local financial institutions. The recent proliferation of Decentralized Autonomous Organization (DAO) operating systems (like Colony) and open-source smart contracts is enabling experimentation of token-based incentive mechanisms and blockchain-based reputation systems that can be trusted by local financial institutions and enable smallholder farmers to access more affordable working capital and credit over time. Blockchain, and associated innovations like DAOs, also present an opportunity for additional innovations in microfinance, crowdfunding (EthicHub), and impact investment at the smallholder agribusiness level.
Access to Markets
Most smallholder farmers cannot effectively engage formal markets. This means that most farmers still carry on producing with little or no clarity on where they will sell their final product. This has created a business opportunity for traders, or “middlemen,” who buy smallholder farmers’ produce at farmgate or marketplace and aggregate for resale to processors or exporters. Farmers who sell individually to such traders often lack bargaining power as the traders usually set the buying price. Even though they do not offer better prices, traders offer a readily available market for farmers, saving them from incurring transportation costs. The limited flow of market information and lack of organization of individual farmers into member organizations (like cooperatives) limit their ability to effectively engage markets at scale and to make rational and informed selling decisions. By supporting individual farmers to join collectives and providing these collectives with relatively low-tech access to real-time market information, such as seed or crop prices via SMS, they can combine individual production and engage in more effective negotiation with buyers who would otherwise not be interested in buying from individual smallholders. It is through both aggregation and the provision of access to formal and competitive markets that cooperatives, and thereby their smallholder members, can make enough profits to run successful agribusinesses and afford costs associated with market access, like farm-to-market transportation. Pushing the solution further, smart contracts could be leveraged to facilitate market transactions so that contractual obligations, which are often subverted by buyers, can be transparent, secure, and most importantly immutable.
Supply Chain Transparency
Understanding the location of origin and flow of products is critical in supply chain management as demand is increasing for transparency on where and how the products are produced. Supply chain transparency on the blockchain can enable a transparent and verifiable system for smallholder farmers that can reward farmers with premium prices for high-quality products. While supply chain transparency has been one of the most popularized use-cases for blockchain, only more recently has its potential been unlocked for smallholder farmers. Applications like IBM Food Trust and Farmer Connect can support smallholder cooperatives with supply chain traceability, which has had recent success in Latin America earning coffee and cocoa smallholder cooperatives access to new and more profitable markets thanks to their ability to provide provenance and supply chain traceability data to buyers.
Self-Sovereign ID (SSID)
The currently accepted model for digital identity is siloed in nature, however, considering ever-increasing data privacy concerns and liabilities to theft, self-sovereign identity on the blockchain has been signaled as an alternative to compensate for the shortcomings evident in the siloed model. A self-sovereign identity translates into an identity that is under your ownership. Self-sovereign identities empower users with comprehensive control and consent over the personal information they are sharing and the parties they are sharing the information with. While enabling self-sovereign identity for smallholder farmers presents its own set of contextual challenges, farmers’ control over their data should be respected and protected as a fundamental right as their engagement with digital infrastructure increases. The viability of SSID is contingent on an operating model which can account for groups who do not have access to smartphones nor have reliable access to internet. Innovative concepts such as “Guardianship” (e.g. Kiva Protocol) enables SSID for these populations and contexts where self-management is not viable by appointing a trusted entity who can act as a fiduciary for wallets under an agreed-upon governance framework.
Smallholder farmers are hardworking and desperate for progress and modernization of their local business environment. They are willing and able to learn, adapt, and adopt technological innovation so that they can address barriers, improve their incomes, and move themselves and their communities out of hunger. For smallholder farmers to feed their families, communities, and contribute towards progress on SDG #2, they need to run their farms efficiently and competitively. To do so, they require an ecosystem of digital tools and services that can enable them to transition from paper-based to electronic records and leverage data to ameliorate their farming practices, reduce their costs, and increase the amount and value of their outputs, while reducing uncontrollable risks as a result of climate change. However, the provision of technology is only part of the challenge. For successful digital enablement, smallholder farmers require support to organize and access resources and training which helps them understand and adopt recent technologies.
An important consideration in managing smallholder’s adoption of recent technologies is affordability and access to support services. For this, NGOs with “boots-on-the-ground” and entrenchment in local communities have a critical role to play. Heifer International pioneered the concept of values-based community development where one empowered farmer can go further as part of an organized group who can combine resources to leverage economics of scale, increase bargaining power, and access more profitable markets. This proven model for working with smallholder farmers can be replicated to enable farmer groups to share the cost of business management, including costs associated with technology adoption (like internet and licenses) and coordinate among members to encourage participation in digital transformation (like attending trainings and focus group discussions). NGOs can contextualize new innovations for smallholder farmers and take these innovations further by connecting them to existing local services (like SMS-based cash transfer programs), adding value, and reducing the risk of building something that already exists and works. NGOs are also important for facilitating human-centric development approaches whereby the unique input, ideas, and perspectives of smallholder farmers are embedded in the development of the software applications for their use. By involving farmers in these earliest stages, their technical capacity to understand and use new tools will also grow in parallel with development and create early leaders who can positively impact more rapid adoption among their communities.
COVID-19 has exacerbated challenges in the agricultural sector, and for millions of smallholder farmers worldwide. It has demonstrated the importance of access to a digital economy for business and commerce and accelerated digital adoption worldwide. This accelerated digital adoption is putting smallholder farmers at a greater risk of being left behind in a digital divide where they are not equipped or able to participate in an ever-increasing digital economy. Helping farmers cross this divide is paramount to addressing SDG #2 and enabling smallholder farmers and their families to build lives free from poverty. However, accomplishing advancements in the provision of last-mile infrastructure, Open Standards, software applications, and boots-on-the-ground to support all the above clearly requires strong collaboration and a multi-stakeholder approach. Only by working in coordination on these fast and slow development needs can sustainable long-term technology adoption by smallholder farmers be possible, and, in doing so, get the world back on track to tackle the challenge of “Zero Hunger.”
About the Author:
Antoinette Marie is a product manager at Heifer International, as part of the Heifer Labs team, where she supports strategic technology development and in-country interventions that help smallholder farmers overcome systemic barriers and limitations to achieving a sustainable living income. Heifer Labs serves Heifer International by monitoring disruptive digital trends and developing interventions that can be scaled across Heifer’s offices globally, thereby accelerating Heifer’s impact and strengthening intervention efficacy. Heifer Labs is mandated with facilitating real-world testing and development processes for applying digital technologies to smallholder operations, supply chain functions, and business growth around the globe.
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Acknowledgements:
A special thanks to Elizabeth Magombo-Kabaghe, David Gill, Jesús Pizarro, and Micah McLain for the support and collaboration on this piece.