In agricultural development, one of the toughest challenges is to find sustainable ways for smallholders to access quality advice and inputs. We are exploring ways to tackle the challenge of last mile distribution through research examining different actors' experiences in this area - as well as our own.
We have published two studies in this workstream so far:
FACILITATING LAST MILE DISTRIBUTION OF AGRO-INPUTS: An analysis of models for scale, outreach and sustainability
In 2018, we conducted a survey into how development actors and commercial entities have enhanced - or in some cases even established - distribution pathways. You can download the report by clicking here. Focusing on initiatives in sub-Saharan Africa that are operating sustainably at scale, we identified the importance of selecting a strategy that suits the maturity of a given agro-input market. We broadly categorised initiatives according to three different strategic approaches:
- INPUT SUPPLIER-LED STRATEGIES: In cases where input suppliers can readily see the commercial potential of last mile distribution, development actors are working directly with them to great effect. For example, the EU financially supported Meridian - the largest agri-dealer in Malawi - as the firm set up its Farm Services Unit, which offers hard-to-reach farmers technical advice; soil tests; and credit based on customer loyalty.
- WHOLESALE STRATEGIES: In cases where village-based agro-dealers are managing to operate despite weaknesses in the supply chain, development actors are working with distributors and/or wholesale agro-dealers to augment their downstream services and expand their reach. Recognising how the many established retailers in Kenya’s rural areas were poorly served and coordinated, Kenya Markets Trust (KMT) began trialling a range of mechanisms to raise the capacity of distributors and wholesale agro-dealers so that they could better support these small businesses. This has involved exploring “preferred stockist” and franchise models; linking stockists to technical and business advice and training; and developing local agro-input expos to attract suppliers to rural areas and expose stockists to new products and opportunities (you can see a comprehensive study of this work by clicking here).
- RETAIL-BASED STRATEGIES: In cases where there is very limited supply of inputs in rural areas and insufficient existing demand, development actors may have to work extensively at the retail level and help build - rather than just facilitate - an agro-inputs market system. Navigating thin markets, programmes such as ADAPT in Zambia and NAFAKA in Tanzania had to firstly identify individuals with entrepreneurial potential before working simultaneously on the demand side (i.e. raising awareness of good agricultural practices) and supply side (i.e. linking newly established village-based agro-dealers to input suppliers, transport and credit). As Fowler & White (2015) detail, in such contexts the commercial opportunity must be carefully cultivated and the attraction of influential players into the value chain takes time: “Where larger firms are unwilling to invest in new systems and business models to expand their outreach to smallholder farmers, microentrepreneurs can act as an initial driver. With time, they could potentially be linked to larger players as their capacity and sales volumes grow.”
In this case study, we examine the origins, evolution and impact of our own village-based agro-dealer (VBA) network in Tanzania’s Lake Zone. You can download the report by clicking here. The agro-inputs market is thin in this region and has therefore required us to adopt a predominantly retail-based strategy over the last five years, although large-scale wholesalers and suppliers are now beginning to see the opportunity of serving smallholders via the network we have established. At the end of this study, we draw out some lessons from our experience for other development actors working in the last mile distribution space.
What have we learned about last mile distribution through this work?
In thin agro-inputs markets like those in Tanzania’s Lake Zone, it can be extremely difficult to find partners to work with at the outset of a programme. We quickly recognised that the market system would have to be built from within rather than facilitated from without, and we therefore provided direct support to entice entrepreneurs into the retail space. We learned to accept that this bottom-up approach was unlikely to yield a quick win. As markets vary by country, region and even district, we do not think there is a universally applicable approach: since Kenya’s agro-inputs market is more sophisticated than Tanzania’s, our partners KMT were able to effectively start engaging with the sector at the wholesale rather than at the retail level.
In thin agro-inputs markets, development actors must simultaneously address both a lack of supply - as smallholders have limited access to goods and advice - and a lack of demand. Indeed, there is often little knowledge amongst smallholders about how high-quality products and good agricultural practices can enhance yields. In addition, even when farmers appreciate the value of agro-inputs and have access to them, they may not buy them as they are not aware of when and how to use different products and techniques.
Although our grant-funded Lead Farmer Training Programme was unsustainable, we did not want to lose our commitment to knowledge transfer as we began building a network of commercial VBAs. We took care to ensure Village-Based Agro-dealers (VBAs) attended agricultural trainings (administered by regulatory authorities) and business trainings which emphasised the value of good customer service.
While the ability of VBAs to share good advice at the point-of-sale is helping to cultivate demand, their business acumen is inspiring a commitment to procuring quality products and retaining loyal customers. Owing to the network’s level of knowledge, rejection of counterfeits and focus on customers, VBAs are starting to attract input suppliers into the region. This is stimulating an ongoing transfer of know-how, as sales reps from input suppliers deliver demonstration days in rural areas and offer promotions in a bid to look after their new business customers.
We soon realised that our intervention would only achieve scale and be sustainable over the long-term if we operated in line with commercial principles and made our direct support contingent on partners having “skin in the game”. Indeed, shortly after establishing the VBA network, we stopped delivering input packages at cost and opted to only work with those entrepreneurs who were willing to self-finance trainings and local licensing requirements.
As we explore the possibility of a commercial firm taking over our responsibilities in the market system, it is paramount that we are able to present a credible business case. We see the strength of this business case as a testament to our efforts to keep costs down and in line with the value market actors place on our suite of coordination services.
Our VBA network relies on “V-BASE”: a regularly updated digital database that records the business performance of individual entrepreneurs; the size of their customer base; the trainings they have attended; and the expiry dates of their licenses & permits. Our purpose-built app has streamlined the data collection process – our Business Advisors simply enter details into their tablet computers as they visit VBAs around the Lake Zone and this information is then analysed back at the office in Mwanza.
While we can use this data to estimate the impact we are having and build a credible business case for potential investors, we can also offer VBAs tailored advice and help them understand the value of optimising their sales and purchasing activities. In addition to maintaining accurate and up-to-date quantitative datasets, we have also invested in a number of Human-Centred Design studies over the last 5 years, which have helped our team to understand the complex circumstances of smallholders, VBAs and input suppliers, and respond to what different actors need from the market system.
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Research: What Trends are set to Shape the Future in East Africa?
We are supporting Horizon East Africa – a new research project dedicated to exploring the trends set to shape the future in the region.