February 27, 2021

Report Landscapes the Agritech Ecosystem for Smallholder Farmers in Latin America and the Caribbean

In 2009, I had the opportunity to lead a project that created a Short Message Service, a system that enables mobile phone users to send and receive text messages, for farmers in Peru. Those farmers who possessed a feature phone, which is a mobile phone that incorporates features such as the ability to access the Internet and store and play music but lacks the advanced functionality of a smartphone, received text messages containing valuable information such as localized weather information, up-to-date market prices for the crops being cultivated, and best practices for maximizing yields. It was through this experience where I learned the importance of the agriculture sector to the Peruvian economy as well as the Latin American economy as a whole. Over a decade later, the GSM Association (GSMA), a UK-based organization representing the interests of mobile operators worldwide, published a report that focuses on landscaping the agritech ecosystem for smallholder farmers in Latin America and the Caribbean.

Published as an output of a project funded by IDB Lab, the innovation laboratory of the Inter-American Development Bank (IDB) Group, for the benefit of smallholder farmers in Latin America and the Caribbean, the report points out that "Agriculture is an important source of employment in Latin America and the Caribbean, particularly in rural areas where 54.6 percent of the labor force is engaged in agricultural production." Furthermore, "The region is an important source of food globally, generating 13.6 percent of total agricultural exports. Thanks to a wealth of natural resources and a vast and varied topography capable of producing a range of crops, Latin America is becoming known as the breadbasket of the world."

What is more, "The study is part of this endeavor to better understand technological solutions and opportunities in agriculture that will allow IDB Lab to support strategies and investments with social and economic impact and expand the agritech ecosystem in the region. The report features innovations aimed at smallholder farming, particularly in countries of Central America and the Andean region, thus bridging the information gap left by much of the literature to date."

"Although much of Latin America shares the same language and cultural heritage," the report says "the structure and scale of the agriculture sector vary significantly from country to country. Southern Cone countries are characterized by capital-intensive, highly-mechanized farming of export crops, while Central American and Andean countries rely much more on smallholder farming for crop production."

In addition, "Several barriers have prevented the region's agriculture sector from achieving its full potential, including some of the world's lowest productivity levels, low financial inclusion and a lack of resilience to external shocks, such as those caused by climate change and the global COVID-19 pandemic. Recognizing the positive impact that digital agriculture tools can have on productivity, incomes and resilience to climate change, agriculture-sector stakeholders throughout Latin America are implementing a range of tools aimed at easing pain points and benefiting those in the agricultural value chain, both on the supply and the demand side."

Examining 131 digital agriculture tools deployed throughout Latin America that are addressing the challenges of smallholder farmers, the GSMA AgriTech team looked at five use cases: digital advisory, agri digital financial services (DFS), digital procurement, agri e-commerce and smart farming. Key trends emerging from this review include:
  • "Latin America's digital agriculture tools have failed to reach the scale of those in Asia and Africa. Most digital agriculture services available in Latin America today are led by governments or NGOs and have between 1,000 and 5,000 users, making them difficult to sustain long term.
  • "Smallholder farmers in Latin America are increasingly looking for holistic solutions that address a range of farmer challenges, from knowledge gaps and low productivity to financial exclusion, climate change and poor access to markets.
  • "New technologies, such as IoT sensors, drones, satellites, AI and big data, are increasingly underpinning digital agriculture tools in the region. IoT sensors, drones and satellites are automating data collection, making the process more efficient and accurate for ecosystem players. Meanwhile, AI and big data analytics are enabling richer, more personalized and actionable data for smallholder farmers to increase production and decrease costs.
  • "Blockchain is being used for agri DFS and digital procurement. Heifer International, EthicHub, COOPSOL and other organizations are taking advantage of the transparency, security, speed and low-cost offered by blockchain to facilitate loans between lenders and smallholder farmers, provide traceability to crop buyers and support land registration.
  • "Colombia has emerged as an agritech innovation hub for smallholder farmers in Latin America. This has been due to a confluence of factors, including a strong (by regional standards) DFS ecosystem, an enabling regulatory environment, a robust startup and investment culture, rising incomes and a relatively strong middle class. In Central American countries and Bolivia, where the opportunity for digital agriculture innovation is as strong due to the prevalence of smallholder farming, the sector has suffered from a less enabling and comparatively weaker environment."

Crucially, "The GSMA AgriTech team's research highlighted two opportunities in digital agriculture that could address farmers' low productivity and access to financial services in the short to medium term. These include:
  • "Smart farming tools: Over the last two years, smart farming pilots for smallholders in Latin America have shown promising results, with production increases as high as 50 to 80 percent, and cost reductions of 20 to 40 percent. Despite these benefits, few smart farming solutions have moved from the pilot phase to commercial viability. Implementation costs are the main barrier, including the cost of equipment (sensors, gateways, drones) and the cost of on-going connectivity (sensors powered by cellular data).
  • "Using farmer data from digital agriculture tools to extend financing to smallholders: Smallholder farmers in Latin America face significant gaps in short- and long-term financing, both for agricultural and non-agricultural financial needs. Access to credit from formal financial institutions requires an economic identity that most smallholder farmers do not have, but mobile-based digital agriculture tools can generate digital financial footprints populated with farm and farmer data. This data can be used to perform credit risk assessments thus offering a pathway to financial inclusion for farmers. This offers huge potential to bridge the data gap in smallholder financing and open a pathway to financial inclusion. Digital tools that enable farmers to access markets, such as digital procurement solutions and e-commerce services, are especially useful in generating rich data sets, such as transactional data from the sale of crops."

The report also presents the following seven enablers driving the adoption of digital agriculture solutions by smallholder farmers in Latin America and the Caribbean:
  1. Coverage for mobile internet services is nearly ubiquitous in Latin America, but there are gaps between urban and rural areas;
  2. Smartphone penetration in Latin America is the highest of all developing regions;
  3. Mobile money services are available in Latin America and the Caribbean, but have not been widely adopted outside Paraguay, Haiti and Honduras, limiting the potential of agritech tools;
  4. A growing middle class is changing consumption patterns;
  5. Investment in agritech is increasing;
  6. Latin America is a leading producer of crops that are well suited to digitization; and
  7. An enabling regulatory environment is key to the success of many digital interventions.
Lastly, "The GSMA AgriTech team has developed a set of 11 recommendations to support funding, product development and marketing for several key stakeholders in the digital agriculture ecosystem, including agritech companies, donors and investors."
  1. Support viable, private sector-led digital advisory services;
  2. Ensure that users are at the center of service design;
  3. Focus on developing a strong value proposition that offers an end-to-end solution and a clear revenue model;
  4. Build reliable partnerships;
  5. Carefully assess smart farming opportunities before launch;
  6. Do not approach the region with a one-size-fits all approach;
  7. Focus on value chains where digital interventions can have the greatest impact;
  8. Create an enabling regulatory environment, focusing on markets with the greatest need;
  9. Help address the financing gap;
  10. Support smallholder farmers to mitigate the impact of climate change; and
  11. Leverage existing mobile assets and explore partnerships to develop digital solutions for smallholders.

As noted in a blog post published just over a couple of months ago on GSMA's report about Latin America's mobile economy, the region's digital landscape is evolving rapidly. The report said that in "Latin America, mobile technology continues to play a key role in bringing unconnected populations online and providing a platform to create, distribute and consume life-enhancing digital services." This provides hope that the 11 aforementioned recommendations will be implemented to build and strengthen the region's digital agriculture ecosystem.

What are your recommendations for how to improve the agritech ecosystem for small farmers in Latin America and the Caribbean?
Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

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