AGRICuLTuRE & RuRAL DEvELOpmENT 48922 NOTES Improving Agricultural productivity and markets: The Role of Information and Communication Technologies ISSuE 47 ApRIL 2009 By KERRy mCNAmARA STRENGTHENING THE as news reports or early warning communications about INfORmATION ECONOmy Of weather, pest outbreaks, and other seasonal risks, and SmALLHOLDER AGRICuLTuRE about services that could help address them. Raising the productivity of smallholders is a neces- The smallholder agricultural economy is in crucial ways sary condition for increasing incomes and improving an information and service economy. The physical isola- livelihoods among the rural poor in most developing tion of smallholders imposes high information costs that countries. This increased productivity is essential to compound the high transport and transaction costs of both household food security and to agriculture-based obtaining inputs and marketing outputs. Improving growth and poverty reduction in the larger economy. the information, communication, transaction, and net- Smallholder productivity is limited by a variety of con- working resources available to farmers--and to the straints including poor soils, unpredictable rainfall, and markets, organizations, and institutions they interact imperfect markets, as well as lack of access to produc- with--is essential to making smallholder agriculture tive resources, financial services, or infrastructure. It is more productive. The appropriate deployment and use also critically limited, for example, by lack of information of information and communication technologies (ICT) about market prices, available crop varieties, production is central to this improvement. techniques, and methods of disease management-- Information and communication technologies are also information that pertains specifically to local conditions. vitally important to commercial and large-scale agri- Smallholders also lack timely information sources such culture, and to agriculture-related services and infra- structure such as weather monitoring and irrigation. This note focuses on the sometimes less-obvious importance of ICT in improving the information, com- munication, transaction, and networking elements of smallholder agriculture in developing countries. ImpROvING INfORmATION AND COmmuNICATION fOR SmALLHOLDER AGRICuLTuRE Improving smallholder agriculture is an information- and communication-intensive process throughout the value chain from farm to market and beyond. Smallholders face higher information costs, both as producers and sellers, as a result of their typically greater isolation and the poor state of rural information and communica- tion infrastructure. They require information to make informed decisions at each stage of the production cycle, from crop selection, to planting, to harvesting, to selling. Timely information about prices and consumer preferences not only informs production decisions about crop mix and the need for inputs, but enables farmers to balance their investment of family labor in farm and non-farm activities during the growing season. Photo: Curt Carnemark THE WORLD BANK Crop quality and yield also depend heavily on producers' STRENGTHENING THE SERvICE access to information and networks. Given the diverse ECONOmy Of DEvELOpING agro-ecology of smallholder agriculture (particularly in COuNTRy AGRICuLTuRE Africa) and the growing diversity of national and global Many cooperatives, producer and trader organizations, food product markets, the information and advice that extension agencies, and other intermediaries and service farmers need is increasingly diverse and context-specific. providers are subject to the same impediments as the At harvest, this same knowledge helps farmers negotiate farmers they serve. Improving their ability to aggregate a better price from traders and other middlemen, and and share information and knowledge, and to con- even to access a wider variety of markets, middlemen, nect people and foster collective action will increase and transport opportunities for their products. The ability their effectiveness in serving members and communities. to pool output and increase negotiating leverage through Recognizing the importance of these intermediaries, cooperatives and producer associations, for example, can donors such as the Gates and Rockefeller Foundations also help farmers earn higher incomes. are increasing efforts to expand and support networks The costs of searching for information can represent a sub- of rural agro-dealers. Providing appropriate ICT tools and stantial proportion of farmers' total costs, and a substantial connectivity to these networks, and building their capac- majority of their transaction-related costs. In Sri Lanka, for ity to use ICT should be an important element in develop- instance, de Silva and Ratnadiwakara (2008) documented ing vital links in the rural service economy. evidence that these information costs can represent 11 per- ICT can extend the reach of financial services in rural areas cent of farmers' total costs, and up to 70 percent of their in two ways. It can help traditional financial institutions transaction costs. Because the cost of information does not reduce the costs and inefficiencies of reaching, assessing, vary with the size of a farmer's crop, smaller farmers are and servicing rural clients. In Ghana, for example, ICT has particularly burdened by high information costs. helped an extensive network of independent rural banks, to both increase their efficiency and extend their services This information will increasingly come not only from to a wider population. ICT can also facilitate new busi- traditional sources such as national agricultural research ness models for providing financial services to the poor, systems and agricultural advisory services, but from fel- helping them to afford higher-quality inputs and to secure low farmers, the private sector, and other local sources. prompt payment for their outputs.. As agricultural innovation systems adapt to meet more ICT can serve a similar function in strengthening public diverse information needs, ICT can play a key role in services for the rural poor, from land registration, exten- strengthening the more complex and time-urgent path- sion, and advisory services to health and social services, ways of information and knowledge-sharing on which and public support payments. Yet the poor often have this new form of agricultural innovation depends. very limited information about those services, or about Mobile phones, rural ICT kiosks, and ICT-equipped inter- their own eligibility to access them. Even among those mediary organizations can all serve as pathways for this who are aware, accessing public services often entails information exchange and collective action. In particular, considerable time and money to travel to towns where mobile phones have recently enjoyed increasing attention the responsible institutions are located. Local government as a result of their availability, affordability, and versatility, services are, moreover, often prone to corruption. as platforms for a broad range of information and trans- ICT can increase information about government services, action services. and facilitate collective action to increase effective demand The Impact of Improved Communication Services: Evidence from the field In Kerala, Robert Jensen demonstrated that the rollout of mobile phone service had a pronounced impact on the sardine fisheries along the coast. While still off shore, fishers phone a number of landing points to learn about current prices at different locations. Based on this information, and factoring in the transport costs of travelling to each location, they decide where to "land" their catch of the day.The effects were dramatic. Price volatility and variation dropped dramatically; average price paid to fishermen rose by 8 percent; consumer prices dropped an average of 5 percent; and wastage was eliminated. In Niger, Jenny Aker has studied the impact of the mobile phone rollout on grain markets, and has shown that mobile phone service has reduced grain price dispersion across markets by a minimum of 6.4 percent and reduced intra-annual price variation by 10 percent, primarily by reducing search costs for traders. 2 The promise and Limits of mobile phones Mobile phone service has become widely affordable and now covers between 80 and 90 percent of the popu- lation in many developing countries. Private sector innovators--such asTradeNet--are developing adaptable and affordable software solutions for mobile phone-based price information and market transaction systems for cooperatives and individual farmers. More broadly, the widespread use of SMS text messaging services in developing countries is leading to an explosion of SMS-based information and transaction services, ranging from market information and extension services to mobile banking. The affordability and flexibility of mobile phones makes them a promising platform for innovation in rural ser- vice delivery, and they are likely to be an important focus of pro-poor ICT innovation in the coming years.Yet it will be some time before they reach the poorest and most isolated farmers, who will probably see greater impact from ICT-enabled improvements in the performance and transparency of the institutions and markets with which they interact, and from better communication access by key intermediaries such as cooperatives and traders.The measure of the value of mobile phones to the rural poor is how well they improve the lives and livelihoods of those who do not have them as well those who do. for them. It can make services and the institutions that a variety of shared-use models that have already shown provide them more efficient and transparent, and decrease great promise. Perhaps the best-known shared-use model opportunities for corruption. A trailblazing example took is the Village Phone model first launched in Bangladesh, place during the Bhoomi project in Karnataka, India. The wherein micro-loans enable women in poor villages to project involved the computerization of several million purchase a mobile phone and re-sell phone service at land records which were documented and made publicly per-call rates to their neighbors. The increasing afford- available through a network of rural ICT-linked kiosks. This ability of mobile handsets and pre-paid service, combined process reduced opportunities for corruption, eased farm- with innovations such as multi-account mobile phones, ers' access to documentation needed for land transactions are permitting greater local innovation in sharing phone and loans, and demonstrated that farmers are willing to service among those who cannot afford their own phone. pay higher use fees for quicker, more reliable access. Technical innovations such as cell phone signal amplifiers are extending the range of mobile services, and many LINKING fARmERS TO telecommunication providers are extending communica- CHANGING uRBAN AND tions infrastructure further into rural areas to respond to GLOBAL mARKETS new market opportunities. Consumption patterns among urban populations are The competitive markets needed to stimulate this innova- changing and generally diversifying. Demand for meat, tion and expanded access will require effective legal, policy, fish, dairy, horticultural, and processed products in partic- and regulatory frameworks. Government policies, regula- ular is increasing. Here too, ICT can play an important role tions, and (where appropriate) public investments, can cre- in enabling smallholders to produce high-value commodi- ate incentives for private investment in adapting ICT tools, ties and to capitalize on opportunities to participate in infrastructure, and service models to those in low-income, these markets. Supply chains leading to these urban and isolated, and often-rugged environments. Governments global markets are highly integrated, and require timely and donors can play a vital role in encouraging innovations information and impose exacting quality standards. ICT appropriate for local conditions, among other things by can be instrumental in improving smallholders' access to improving the investment climate for new businesses. In information about these markets and what is required to addition to their role as facilitators of extended informa- produce for them. It can also greatly facilitate networking tion and communication networks, governments also use among smallholders, and provide new ways to commu- these networks to improve and extend public services. nicate with institutions that are involved in carrying out These "supply side" initiatives need to be complemented transactions in these markets. by measures to stimulate demand for ICT among farmers mAKING ICT WORK fOR and the organizations and institutions that serve them. AGRICuLTuRE Part of this "demand side" work entails raising awareness of the ICT services and resources that are available, and Extending affordable access to ICT will depend on inno- showing how they can be used to improve farmers' liveli- vation in technological and business models, including hoods and the operations of local organizations. 3 Thinking about the Gender Dimensions of ICT Interventions Women have a substantial role in smallholder farming throughout the developing world, and constitute the majority of farmers in Sub-Saharan Africa.Yet the ability of women to access and use resources such as ICT, and the innovations they enable,is often hampered by household gender relations,asset endowments,and cul- tural constraints. Given the key role of women both in household food security and in improving agricultural productivity, ICT-for-agriculture interventions should include explicit strategies for assuring access by women, and for strengthening the information, communication, and networking resources of women. Organizations such as theWomen of Uganda Network (www.wougnet.org) and the Self-EmployedWomen's Organization in India (www.sewa.org) have been leaders in developing strategies to use ICT to empower women economically and socially, both by promoting better information access for women and by using ICT to help women and women's groups engage more effectively in policy advocacy and joint action. It is important to distinguish between access to ICT and Network (www.farmradio.org), a pioneer in using radio access to the services, resources, networks, and capaci- to support farmers, is now exploring how content can ties that ICT enables. In many cases, the most sustainable be distributed creatively through a variety of technolo- and transformative impact of ICT in rural areas will come gies ranging from radio and mobile phones to portable from its effect on the markets and institutions with which audio players. the poor interact. Improving the capacity of these insti- The specific character of local demand for ICT, and the tutions to use a broad range of technologies, including local economic, social and physical context, will deter- Web-based technologies, will increase their effectiveness mine the mix of technologies and services that are most as sources of local service delivery. At the same time, appropriate and most likely to be sustainable. Detailed increasing rural access to newer ICT should not obscure assessment of this demand and context, and of any fac- the continued value of more established communica- tors that might be impinging on the local agricultural tion tools such as radio. Some of the most creative and information economy is, therefore, an early priority in the sustainable innovations for information, communication design of ICT interventions. In general, ICT-for-agriculture and transaction services in rural areas will come from interventions should be embedded in, and subordinate to, integrated mixes of technologies that are adapted for locally-appropriate strategies for improving the agricultural local contexts. The Developing Countries Farm Radio information economy more broadly. Selected Readings Aker, J. 2008. Does Digital Divide or Provide? The Impact of Cell Information for Development Program. 2008. Enhancing the Phones on Grain Markets in Niger. http://are.berkeley.edu/~aker/ Livelihoods of the Rural Poor through Information and Communication Bhavnani, A., Chiu, R., Janakiram, W. and Silarsky, P. 2008. The Role Technologies: Knowledge Map, infoDev Working Paper #9, available of Mobile Phones in Sustainable Rural Poverty Reduction, ICT Policy for download at http://www.infodev.org/en/publication.510.html Division, Global Information and Communications Department, Information for Development Program. 2007. Using Information World Bank, Washington, DC and Communication Technologies to Support Rural Livelihoods: Evidence, Strategies, Tools. Report on a one-day workshop for de Silva, H. and Ratnadiwakara, D. 2008. Using ICT to reduce World Bank Staff, June 5, 2007. http://www.infodev.org/en/publica- transaction costs in agriculture through better communication: A tion.358.html case-study from Sri Lanka, LIRNEasia, http://www.lirneasia.net/wp- content/uploads/2008/11/transactioncosts.pdf Jensen, R. 2007. "The Digital Provide: Information (Technology), Market Performance and Welfare in the South India Fisheries Sector," Goyal, A. 2008. Information Technology and Rural Markets: Theory Quarterly Journal of Economics, Vol. CXXII, Issue 3, August 2007 and Evidence from a Unique Intervention in Central India, mimeo. University of Maryland Shepherd, A.W. 2008. Approaches to linking producers to markets: A review of experiences to date. FAO Agricultural Management, Foster, V. 2008. African Infrastructure Country Diagnostic: Marketing and Finance Occasional Paper No. 13: Rome: FAO Overhauling the Engine of Growth: Infrastructure in Africa. World Bank, Washington, DC World Bank. 2008. Enhancing Rural Development through Improved Infrastructure and Innovative Information Applications. Regional International Telecommunication Union. 2008. Measuring ESW Report No. 45438-EAP, East Asia and Pacific Region Sustainable Information and Communication Technology available in villag- Development Department and Policy Unit, Telcom and Infrastructure, es and rural areas. Market, Information and Statistics Division, Global Information and Communication Technology Department. Telecommunication Development Bureau, ITU, Geneva World Bank, Washington DC This note was prepared by Kerry McNamara and edited by Gunnar Larson and Riikka Rajalahti of the Agriculture and Rural Development Department in the World Bank. THE WORLD BANK 1818 H Street. NW Washington, DC 20433 www.worldbank.org/rural