Accelerating Digital Transformation in Agriculture

Author: Sander Janssen

Publish Date: 11 October 2021

Digital technologies have strong potential to support the transformation of agriculture, building a resilient, sustainable and inclusive agrifood system [1]. As key enablers, digital innovations can play a catalytic role – especially in the wake of COVID-19 – by improving the capacity of small-scale producers (SSPs) to adapt to external shocks and increasing productivity and profitability. With more than 33 million smallholder farmers and pastoralists [2] already registered on such platforms, sub-Saharan Africa alone has seen a rapid increase in the adoption of digital solutions, recording an annual growth of 44 per cent over the three-year period ending in 2018. Despite a rapid expansion of the digitalisation for agriculture (D4Ag) sector across low-and-middle income countries, the reach and sustainable use of D4Ag solutions remains fairly low, especially among SSPs. Only 13 per cent of smallholders in sub-Saharan Africa are registered for any digital service and far fewer are actively using such services [3]. Inadequate access to the Internet and digital services, coupled with issues of affordability, disability and a growing digital divide, are among factors that have widened the disconnect. One of the main barriers holding back investment in D4Ag solutions and their impact at scale is lack of cost-effective ways of comparing and contrasting solutions, and making informed decisions on which ones will really work.

Promoting alliances and investments

Despite a highly complex and fragmented digital sector, there is significant potential for establishing sustainable partnerships and investments. For this reason, there is a growing need for greater coordination of D4Ag solutions and their overarching ecosystem, but how best to achieve this?

Stewart Collis from the Bill & Melinda Gates Foundation (BMGF), says that Digital Agri Hub (the Hub) can play an important role in driving D4Ag solutions for small-scale producers: “Evidence suggests bundled digital farmer services positively impact small-scale producers’ livelihoods by improving access to inputs, information on managing crops and livestock, obtaining climate mitigating finance and insurance and accessing markets. Digital Agri Hub will collate the essential data necessary to understand which combinations of services are reaching men and women small-scale producers at scale with impact, and act as a guide for investment and adoption of the most impactful digital agriculture products, solutions and services.”

Josh Woodard from The United States Agency for International Development (USAID) adds: "As the number of digital solutions in the agricultural sector continues to grow, the Digital Agri Hub will allow practitioners to make more informed decisions and bring clarity to a fragmented information landscape. We're excited by the potential for greater impact as a result of a more cohesive digital agriculture space."

Convinced of the scope for digital technologies in the agriculture sector, FCDO, BMGF and the United States Agency for International Development (USAID) are co-funding the Hub to monitor and track the development of digital for agriculture solutions, and their impact in helping to achieve a climate-resilient, sustainable and inclusive food system. Responding to the direct needs of the diverse stakeholder groups that play an active role in D4Ag will be an important focus for the Hub. To this end, it has conducted a needs assessment, with the aim of identifying, unpacking and addressing the major needs for each of the different actors on the pathway towards the sustainable growth of the sector.

The emerging issues

Across the nine identified stakeholder groups, made up of donors, (impact) investors, D4Ag solution providers, agri-food value chain actors, agritech companies, innovation repositories, policy makers and direct implementers (farmers’ organizations and non-governmental organisations), a broad range of issues has emerged. Tomaso Ceccarelli, the lead coordinator on this Ecosystem coordination activity from the Digital Agri Hub team, observes that: “Stakeholders have different perspectives and goals. But there is one trait that unites most of them, and this is the need for a structured overview on initiatives and reliable insights on the impact of D4Ag.”

Gigi Gatti from Grameen Foundation USA – one of the Digital Agri Hub partners – says that: “It is essential to work with existing D4Ag networks and Communities of Practice to understand how to best connect them to the Hub.”

Responding to these diverse needs is a key success parameter for the Hub, integrating such crucial and different perspectives in its programme of work. Simona Benvenuti from the Netherlands Advisory Board on Impact Investing (NAB) – a Digital Agri Hub partner – experiences that "to accelerate the mobilization of private-sector capital into D4Ag it is critical to provide impact-based data on existing D4Ag solutions and insights to mitigate investment risk, thus facilitating collaboration amongst the different types of capital providers and knowledge exchange globally across the value chain".

Daniele Tricarico, from GSMA, also a Digital Agri Hub partner, has closely assessed the development of the D4Ag sector and worked with a number of different solution providers in collaboration with mobile operators. From his perspective, "it is exciting to see a growing number of D4AG services coming to market, but this fast-paced sector also experiences a high level of fragmentation and many short-lived initiatives. It is therefore crucial to quickly identify emerging best practices and highlight the operational and business models that can support truly sustainable, scalable solutions".

Inclusion for all stands out as a critical prerequisite for the sustainable development of D4Ag. In support, Eunice Likoko, from Wageningen University and Research (WUR), adds that: “For women and marginalised groups, improved access to D4Ag solutions will be stimulated by understanding and addressing the barriers they face in accessing digital solutions. Intervention strategies need to go beyond minimal participation of excluded groups, to adopt more empowering approaches that address underlying barriers to promote sustainable and realistic adoption of digital solutions for these groups’’.

A hub for inclusive agricultural transformation

To ensure the strong and sustainable growth of the D4Ag sector, a better tracking mechanism will be central to the success of Digital Agri Hub, while supporting the everyday decision-making process of D4Ag actors across the agrifood system. Whether the decision is to partner with another D4Ag solution provider, to invest in a D4Ag solution, to create awareness and stimulate the development of the sector in a particular country, or to invest in digital developments for societal impact, access to insights, data and knowledge is crucial. It is Digital Agri Hub’s firm intention to truly act as a hub, bringing partners together, creating capacity and connecting actors to one another, helping them to share their insights and best practices towards inclusive agricultural transformation.

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[1] World Bank, 2019. Future of Food: Harnessing Digital Technologies to Improve Food System Outcomes (available here).
[2] 13% of all sub-Saharan African smallholders and pastoralists and up to 45% of smallholder households, depending on assumptions used to calculate penetration.
[3] D4Ag solutions refer to the digitally enabled business models and technologies to address farmers and food system actors’ constraints (e.g. around market access, inputs, financing and climate).

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Author: Simona Benvenuti

Publish Date: 17 February 2022

In January, Digital Agri Hub organised the first in a series of webinars designed to help accelerate private sector investment in digitalisation for agriculture (D4Ag) solutions. The event offered an opportunity for a peer-to-peer conversation among seasoned impact investors, analysing the current landscape, together with the financing gaps and solutions required to increase the pace of investments. The conversations focused on the scaleability of the solutions provided, as well as opportunities for incentivising behavioural change in small-scale producers through Digital Climate Advisory Services (DCAS). Also, under discussion was the scope for investing in smart farming to generate impact beyond yield improvement. The event was well attended with more than 150 participants, including investors who shared valuable insights during panels and presentations.

Setting the scene

The world's 600 million small-scale producers are critical to food and nutrition security for billions of people globally; in most low- and middle-income countries (LMICs), agriculture is the largest employer and the principle source of income and livelihoods. Small-scale producers face a range of challenges, including low crop and livestock productivity, limited information on the most appropriate agronomic practices for their particular context, inadequate access to inputs at affordable prices, limited collateral to access finance and invest in upgrading their practices and limited, if any, linkages to markets. In addition, women and other marginalised groups, including people with disabilities and those with low literacy levels, are subject to particular constraints in accessing sources to improve their productivity and adaptive capacity.

Rapid advancements in digital technology and innovation provide a sound foundation for accelerating progress and addressing the challenges faced by small-scale producers. However, to achieve any impactful change – especially given the repercussions of the COVID-19 pandemic and the growing effects of climate change – these solutions need to be delivered at scale. For that to happen, more investment is needed in the digital agriculture sector from philanthropic, public and private sector sources.

Scaleability of solutions can be hampered by local specificities

D4Ag solution providers face challenges in raising the capital needed to grow and sustain their proposals. For them, it is critical to identify small-scale producers’ needs and offer integrated solutions that respond to these and enable more efficient farm management. Adopting a farmer-centric approach and building strong relationships with investors are some of the key success factors that can enable D4Ag solution providers to take their ideas to scale.

However, scaling up requires a local approach that acknowledges the varying geographical, demographic and socio-political factors at play in each country. Potential solutions to support local capacity-building and digital growth include raising awareness about existing initiatives in a specific area. Other promising approaches include helping digital platforms to facilitate connections among the diverse sectors’ stakeholders and encouraging accelerator programmes to offer ad-hoc mentorships and promote interactions between early stage and later stage solution providers.

Digital Climate Advisory Services incentivise behavioural change in farmers

The provision of Digital Climate Advisory Services is one of the emerging areas in the programme of work of Digital Agri Hub. Globally, the vast majority of small-scale producers have limited access to climate-smart information, whether it be in the form of simple early warning alerts or more sophisticated yield forecasts. Based on local weather data collection, DCAS provide tailored advice to farmers to incentivise behavioural change and, in so doing, improve climate resilience. While it is broadly recognised that DCAS are critical to building the resilience of small-scale producers to climate change, and an increasing number of solutions are available to farmers, the business models for these services are yet to become sustainable, and the financing gap is still wide. The investment required by public and private actors to build the resilience of an additional 300 million small-scale producers via DCAS by 2030 is estimated at US$7 billion.

Stepping up the scaleability of private sector investments in DCAS is becoming increasingly urgent and will require structuring flexible financial instruments and realistic return expectations. The adoption of behavioural change by small-scale producers is a slow process that can take up to five seasons to materialise, and producers have shown hesitation in paying for these services on a stand-alone basis, pointing towards a business model based on bundling DCAS services with other digital products that provide access to markets, insurance or finance.

Smart farming solutions can generate downstream impact beyond yield improvement

A sector that is growing rapidly in terms of innovation and investments is smart farming, where on-farm and remote sensors generate and transmit data about a specific crop, animal or practice to enable the mechanisation and automation of on-farm practices. Smart farming solutions can power the transformation of the agriculture sector and assist in the professionalisation of smallholder farming by automating decision-making at farm level. They can help smallholder farmers in LMICs to increase their productivity and disaster resilience by giving them access to assets and mechanisation, optimising the use of inputs, labour and natural resources and reducing crop and animal losses and waste. In addition, smart farming solutions have the potential to help solve core problems within a given region and the technology can generate downstream impact beyond yield improvements, such as long-term soil health and land regeneration.

Countries such as India, Indonesia Kenya and Nigeria have become vibrant tech innovation hubs, with smart farming solution providers attracting significant investments. For example, in India the D4Ag sector has shown resilience to the economic fallout from COVID-19 and experienced substantial growth in funding, with a proliferation of accelerators and incubator programmes dedicated to smart farming. A case in point is the increase in investment witnessed following the relaxation of drone regulations by the Government of India, which resulted in geospatial data becoming available to start-ups.

Call to action

Digital Agri Hub aims to provide support to (impact) investors and digital solution providers in the D4Ag sector. To further accelerate the digital transformation and bridge existing gaps, the Hub provides impact-driven data, facilitating cooperation among market actors in the public and private sectors, including the option of exploring blended finance and technical assistance to accelerate successful climate enterprise and pipeline development.

For more information, please contact us at info@digitalagrihub.org

We would like to thank the following for their valuable contributions: Albert Boogaard, Rabobank Partnerships; Danny O’Brien, SVG Ventures I THRIVE; Mathias Brink Lorenz, Rockstart; Vidya Chandy, Chiratae Ventures; Victoria Clause, Mercy Corps AgriFin; the United Kingdom’s Foreign, Commonwealth and Development Office; Kenrick Kambo, Bamboo Capital Partners; Naeem Lakhani, Future Foodways; Panos Loukos, GSMA AgriTech Programme; Janavi Papriwal, Aavishkaar Capital; Maurice Scheepens, FMO; Leesa Shrader, digital agriculture & financial inclusion expert; Chris Wayne, Acumen; Laure Wessemius-Chibrac, Netherlands Advisory Board on Impact Investing.