Agribusiness Management and Trade

Lesson-23 ICT In Agribusiness

23.2   WHAT IS ICT

One definition of ICT is: an umbrella term that includes any communication device or application, encompassing: radio, television, mobile phones, computers and network hardware and software, satellite systems and so on, as well as the various services and applications associated with them, such as video-conferencing and distance learning. (Lewis, 2009)

ICT is simply an electronic means of capturing, processing, storing and disseminating information (Duncombe & Heeks)

There are mainly three components of ICT viz, computer technology, communication technology, and information management technology.

23.3  BENEFITS OF ICT APPLICATION IN INDUSTRY

Some of the benefits of ICT for the improvement and strengthening of agricultural sector in India include;

• Timely information on weather forecasts and calamities

• Better and spontaneous agricultural practices

• Better marketing exposure and pricing

• Reduction of agricultural risks and enhanced incomes

• Better awareness and information

• Improved networking and communication

• Facility of online trading and e-commerce

• Better representation at various forum, authorities and platform, etc

23.4  APPLICATION OF ICT IN AGRIBUSINESS

This section provides examples of three types of ICT solution, categorized in terms of the end result for the consumer: ICT for production systems management, ICT for market access services, and ICT for financial inclusion.

23.4.1  ICT FOR PRODUCTION SYSTEMS MANAGEMENT

Information services provide data that are tied to helping farmers improve their productivity, yields and profitability during the course of their normal business of growing agricultural produce. They are broken down into sub-categories of information services that involve short-term and long-term productivity enhancements; those that minimize the negative effects of crisis events, and those that improve field-based risk management, for example, by guiding the implementation of crop rotation to preserve the soil in the long term.

Short-term productivity: Typically, information such as weather updates is readily available at low or no cost (often subsidized by the local government). However, farmers do not have access to these data, or at least not timely access. Short-term productivity and crisis management information services attempt to fill this void, and are typically the easiest and most commonly offered by service providers. Short-term productivity and crisis management services are often offered conjointly, with significant overlap. An example of short-term productivity services is the e-Dairy project in Sri Lanka in which milk yields were improved by informing dairy farmers about the most opportune times for artificial insemination.

Crisis management: Crisis management information services essentially help prevent losses (rather than raising productivity). Often these services serve as an alert system enabling farmers to react quickly before an oncoming event (often weather- or disease-based). For example, the Radio and Internet for the Communication of Hydro-Meteorological Information (RANET) project in Kenya uses FrontlineSMS technology to collect weather data from local farmers and push out warnings to them of potential weather-related risks. In India one of the example is mKRISHI of TATA group.

Long-term productivity: Long-term productivity enhancements and risk management ICT services can have a more significant impact on customers’ livelihoods, through higher income or lower risk of loss. As with shorter-term services, long-term productivity and risk management services are often offered together and overlap. Long-term productivity information services cover topics that take longer to learn and are often offered with other technologies and channels, such as face-to-face training or extension agent support. Benefits from such services are generally realized at a much later date. Many such services are delivered in conjunction with in-person and continuing training, extension services, demonstrations and field visits. These services are typically education-focused, often with a distance learning aspect, and serve as a way to monitor the progress of beneficiaries.

Risk management: Risk management information services are also long-term in scope, but as with crisis management, they help farmers avoid losses rather than increasing productivity. These types of service differ from crisis management services in that they take a longer time to absorb and implement, and the benefits are realized much later than are those of crisis management. For example, the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) in India created its Virtual Academy to train local women through Internet-based video conferences so they could act as extension agents and help women farmers change their cultivation and harvesting techniques to reduce long-term risks. In one case, the Virtual Academy taught women farmers how to experiment with drought-resistant crops.

23.4.2 ICT FOR MARKET ACCESS

Market access ICT services comprise any service that provides beneficiaries, especially farmers, with access to information on pricing of agricultural products (inputs and outputs) and on finding and connecting to suppliers, buyers or logistics providers, such as storage facilities and transport companies. Such services include simple pricing services, virtual trading floors (matching services or full commodity exchanges) and holistic trading services. Market access services also cover ICT solutions that help the typically larger upstream and downstream firms, such as processors or exporters, to manage their operations and the quality of their produce better – here called downstream administration.

Pricing: The most common ICT intervention for the agricultural value chain is a pricing service in which commodity price information is pushed out to customers on a regular basis. These data are often national or regional in scope, and so may not be entirely relevant for the farmer in the field, depending on his/her proximity to markets. Users (mainly farmers) generally have little interaction with providers, and must digest the information to find and negotiate with buyers. This type of service simply replaces (or enhances) services that are often provided through print, radio or television. The most common advantages to such services are price transparency and improved negotiating leverage for the often disempowered seller (farmer). For example, the Northwest Agricultural Marketing Association (NAMA) in Cambodia provides farmers with timely pricing data on agricultural produce such as maize, soybeans and cassava and on agricultural inputs such as seed and fertilizer.

Virtual trading floors: Virtual trading floors (VTFs) are electronic market places where buyers and sellers connect through an electronic network (as opposed to pricing services, which mostly only provide static information). The important difference between VTFs and more traditional trading floors is that the buyers and sellers on a VTF do not have to be physically in the same location to make an exchange. There are two basic kinds of VTF: matching services, and commodity exchanges.

Holistic trading services: Holistic trading services essentially provide the same services as pricing information services and VTFs, with additional assistance beyond the simple transactions of purchasing and buying agricultural products. Such assistance can include weather information, technical information on agricultural practices, and long-term education. These holistic service packages can not only link suppliers and buyers but can also connect parties for logistics, transportation, processing and storage needs. Often, holistic trading providers also offer access to financial services (payments, credit, etc.). For example, e-Choupal in India reduces transaction costs by connecting buyers – primarily e-Choupal’s parent ITC Ltd – with farmers, using Internet kiosks to procure agricultural and aquaculture products such as soybeans, wheat, coffee and prawns. Through its ICT-kiosk platform, e-Choupal also offers farmers many other value chain development services, such as sharing of best practices to improve productivity, and price benchmarking to increase sales prices.

23.4.3  ICT FOR FINANCIAL INCLUSION

The primary types of financial services offered through ICT solutions for value chains are transfers and payments, credit, savings, insurance and financial derivatives. ICT can help improve rural communities’ access primarily by convincing financial institutions to enter potential rural markets through unconventional methods.

Transfers and payments: In recent years, money transfers through ICT solutions, notably through mobile phones, have become a much-discussed solution. This service is typically called direct or person-to-person (P2P) service. These types of solution are often offered by mobile network operators (MNOs) rather than banks, as they provide a simple cash transfer service, similar to that of Western Union. It is difficult to talk about such solutions without mentioning the highly successful M-PESA in Kenya, which enables urban Kenyans to send money home easily to their families in rural areas. Many providers in Kenya and throughout the world want to replicate M-PESA’s success. Ideally, this new way of transferring money reduces costs, improves efficiency and, most important, reduces graft and waste.

Credit: Large credit programmes through governments have often failed, but in recent decades there has been a significant increase in access to private credit providers, such as input suppliers, lead buyer firms, speciality lenders, microfinance institutions and banks, which all require at least sustainability if not profitability. This trend has encouraged a search for higher efficiency, improved (credit) risk monitoring, and better delivery to farmer and institutional customers – ICT has played a significant part in achieving all three of these aims. For example, DrumNet in Kenya helped link financial institutions, smallholder farmers, retail providers and agricultural product buyers through a cashless microcredit programme. Farmers obtained access to inputs (e.g., seeds, fertilizers, pesticides) at local input providers by using a pre-established line of credit from banks, with collateral from the fixed-purchase-price contracts of a large buyer. DrumNet provided the bank with a credit rating score for each farmer, based on whether or not the farmer had paid her/his loans and delivered the promised agricultural product on time. The farmers benefited from increased access to financial services without the need to visit a distant branch or undergo an extended underwriting and disbursement process.

Savings: More compelling solutions may be found in other financial services, such as savings and insurance, both of which are often ignored in the preference for credit. The rural poor need financial services that are convenient, flexible and secure, especially for their own money, i.e., savings. The most common ways for rural farmers to save are informal, such as in kind and through savings groups, and generally meet the first two criteria – convenience and flexibility – very well. However, the third point, security, is a major constraint of informal mechanisms: money guards may run away with the money; in-kind savings such as stored rice may spoil or diminish in value; and money left under the mattress may be lost in a house fire. By either making informal methods more secure or improving formal financial institutions’ convenience and flexibility, ICT can help solve the savings puzzle for rural farmers. For example, the Cooperative for Assistance and Relief Everywhere (CARE) in East Africa is experimenting with connecting its village savings and loan associations (VSLAs) to the formal banking system.

Insurance: ICT can be a significant contributor to improvements in the adoption and administration of insurance, as policy renewals are historically very poor (potential solution: short message service [SMS] reminders), trust between customers and insurance companies is generally low (potential solution: improved claim processing times), and the level of data for appropriate pricing of policies and monitoring of potential risk events is inadequate (potential solution: put in place remote rainfall sensors connected to a database via a satellite connection).

23.5   CHALLENGES FOR ICT APPLICATION IN INDIA

Most important constraints faced in India for ICT application are; shortage of telephone lines, operating costs, band width, connectivity problems, Internet Service Provider, Power problems, computer literacy etc.

23.6   ICT INITIATIVES FOR AGRICULTURAL DEVELOPMENT IN INDIA

• Following are the some of the ICT initiative for agricultural development in India.

• Gyandoot project (Madhya Pradesh);

• Warana Wired Village project (Maharashtra);

• Information Village project of the M S Swaminathan Research Foundation (MSSRF) (Pondicherry);

• iKisan project of the Nagarjuna group of companies (Andhra Pradesh);

• Automated Milk Collection Centres of Amul dairy cooperatives (Gujarat);

• Land Record Computerisation (Bhoomi) (Karnataka);

• Computer-Aided Online Registration Department (Andhra Pradesh);

• Online Marketing and CAD in Northern Karnataka (Karnataka);

• Knowledge Network for Grass Root Innovations – Society for Research and Initiatives (SRISTI) (Gujarat)

• Application of Satellite Communication for Training Field Extension Workers in Rural Areas (Indian Space Research Organisation);

• In addition to the above, a few non-governmental organisations (NGOs) have initiated ICT projects such as:

• Tarahaat.com by Development Alternatives (Uttar Pradesh and Punjab);

• Mahitiz-samuha (Karnataka);

• VOICES – Madhyam Communications (Karnataka);

• Centre for Alternative Agriculture Media (CAAM);

Some exclusive agricultural portals are also available, such as:

Haritgyan.com; Krishiworld.net; TOEHOLDINDIA.com; Agriwatch.com; ITC‟s Soyachoupal.com; Acquachoupal.com; Plantersnet.com, kisanschool.org,  etc

REFERENCES

Mukesh Pandey and Deepali Tewari. 2010. Agribusiness Book: A Marketing & Value-Chain Perspective: Analysing South Asia Textbook Student Edition. International Book Distributing Company

Anwesha Banerjee. 2011. The ICT in Agricutture: Bridging Bharat with India. Global Media Journal – Indian Edition/ISSN 2249-5835. Winter Issue / December 2011. Vol. 2/No.2. PP. 1-16.