African agriculture is witnessing a shift from physical to value chain collateral

While African financial institutions are still stuck with traditional banking models invented in the West, African agricultural value chains have shifted in ways that threaten to render banks irrelevant to agriculture.  Rural and agricultural finance modeling is being forced to consider value chain collateral and the existence of a market as opposed to physical forms of collateral. In the majority of African countries with a growing informal sector, informal agriculture markets now play the role of farmer characterization and verification for loan access. The existence of a market constitutes 80% of the collateral.  Production factors like availability of suitable land, water draught power, labour and others constitute 10% of the collateral. The other 10% goes to skills and relationships.


It is also no longer about the person but agricultural commodities that can be financed from the market.  Assessing an individual in terms of skills, credit history and other personal issues is inadequate without understanding a particular commodity’s performance on the market, especially where farmers are specializing. Financing models from agricultural markets have to be commodity focused rather than focusing on a piece of land, a house or the farmer’s experience. Gone are the days where financial institutions left everything to the borrower without gathering all the insights that ensure a complete picture.  You can’t just get comfort from holding onto someone’s title deeds.

Starting from the other end

For a very long time agricultural financing has started from the production side. The new era demands financing should start from markets, traders and processors who pull commodities from production zones.  This calls for a balancing act along the value chain. If $100 million is invested in production, more than that figure should be invested on the demand side.  The $100 million injected into an agricultural value chain becomes $120 million at the end of the value chain since it accrues profit along the way.  The $20 million profit should be shared along the value chain.  If farmers produce commodities worth $100 million, they sell to traders and markets for $110 million, earning $10 million profit (10% profit).  Traders and the markets should then sell to vendors and processors for $120 million, enabling them to earn $10 million profit (10% profit). Processors and vendors can also put a mark up to the end-users.

But if you inject $100 million in production, without considering the demand side, where will traders get $110 million to buy commodities from farmers?  At any given time, before $100 million is injected into production, if the market has its own $200 million worth of commodities, the $200 million is a ratio of 1:1.  But if you inject $100 million worth of production, you end up with $100 production against $200 million in the market.  Where a farmer was supposed to be paid $1, s/he is paid $0.60.  In other words, $300 million worth of commodities negatively affect farmers if production financing is increased without supporting the market with the same amount for purchasing the commodities.

The bottom line is that when banks finance production, they should have adequate finance models on the market. Development organisations and government schemes tend to be major culprits in distorting the market. Injecting fertilizer and other inputs worth $500 million into production can increase market supply by 60%.  There should be an equivalent amount of money on the market to buy those commodities. If development organisations inject $100 million into production, 40% of the commodities will cover subsistence, the remaining 60% worth $60 million end up on the market.  It means the same amount of money is needed to buy those commodities. Gluts are a result of more goods for a given amount of money.  At a given time, Mbare agricultural market in Harare  has  $2 million in circulation. Indiscriminately bringing agricultural commodities into this market, automatically distorts market dynamics.

The supremacy of data

In order to cope with new trends, banks and other financial institutions have to harness the power of advanced analytics to provide deeper business insights. They have to invest in analytics and data-science expertise.  This can rapidly provide knowledge for continuous performance improvement in the agriculture sector.  As the pace of change increases, so does the need to transform and rethink current agricultural finance models. The following graphic, based on data gathered in Mbare agriculture market in Harare during the month of May 2016, is an example of insights that should be at the fingertips of financial institutions and other value chain actors:

Chart 1: Top ten highest revenue earning commodities – May 2016

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Traditional ways of building financial models are rapidly getting out of date. Financial institutions should embrace the big data revolution spawned by ICTs.   Tracking commodities through gathering and analysing data can enable financial institutions and other value chain actors to optimize their performance.  In a fast moving economy, it is dangerous for financial institutions to think that they cannot be disrupted by technology and consumer preferences. They have to be always on the edge of innovating and moving fast.   A knowledge ecosystem around farming areas is an ideal starting point.  Other actors should be part of this ecosystem. For instance, seed companies and other service providers have outlets in rural business centres and growth points.

Markets as sources of knowledge

Informal agriculture markets and traders are reliable sources of knowledge on who to finance, when and where.  They know which farmers have been producing for the past years and other related issues.  The markets also fulfil an intermediary role.  On one hand, the markets have processors and vendors who extend their services to end users.  On the other end, the market is in touch with farmers and transporters.  This means markets pull produce from farmers and push to processors and vendors.

Building finance models should be directed and advised by each agricultural market and its catchment. That should inform construction of a specific financing model.  Each market has its own dynamics, performance pattern, incomes and actors. There are always many finance models ready for scaling up. In most cases, financial institutions do not need to pilot but scale up what exists. It is difficult to get any useful lessons from a pilot because most pilots are not demand-driven. Since financial institutions first of all tailor-make a product and consult end-users before thinking of piloting, it may be ideal to just start implementing from a smaller area.  / /

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eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

How can agricultural policy makers stay ahead of trends?

The way public and private institutions have been set up in most developing countries does not create space for adequately absorbing feedback from many people. Bureaucratic structures such as government ministries continue to privilege certain sources of information and knowledge at the exclusion of what is coming from outside.  However, in the prevailing digital era, this arrangement is preventing these institutions from shaping and staying ahead of socio-economic trends. The situation is worse in agriculture-driven African economies. In the absence of digital and other capabilities, formal institutions are struggling to interpret and make sense of important data from markets and other sources.

The explosion of digital technology is leading to consistent sprouting of unexpected pockets of knowledge and expertise which used to lie dormant in African communities. For instance, a lot of information is being generated by farmers, vendors, consumers, transporters, processors and many other actors. However, there is less capacity to convert these sources of insight into solutions.

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Work by eMKambo is beginning to show that data from interactions in agricultural markets are fundamental grist for analytics that can guide the development and design of appropriate agricultural interventions. This can reduce complexity and ultimately boost value in agricultural economies. Unfortunately, there does not seem to be high levels of preparedness in taking advantage of data among actors like financial institutions and manufacturing companies. These institutions have to urgently forge smart partnerships if they are to access the best talent and gain new capabilities.

Examples of trends from people’s agriculture markets

Embracing the big data revolution can see easily African agricultural policy makers obtaining trends from informal markets whose activities were previously unrecorded and unknown.

January to May 2016  price trends for particular commodities in Mbare Market of Harare, Zimbabwe



 The average price of apples was $10.00 per 20-kilogramme box. Apple supply was high in January but supply decreased in the following month leading to an increase in price to around $13.00.  Supply increased around May, leading to a downward trend in prices.


There was no significant change in the price of butternut ($2.50 to just above $3.00) for a 10-kilogramme pocket.  Usually, the price increases during major events such as holiday weeks which also drive consumption.

Cow peas

Besides ordinary consumers, some farmers also drive price trends in cow peas. Many farmers buy cow pea seed for planting. The price is seen to decrease in February as new harvests start tricking in. From March to May, prices are almost constant since the commodity will be flowing into the market in constant supplies.

Green Mealies

The price of green mealies did not fluctuate much from January to May 2016. The supply of green mealies tends to increase during this period as there will be new harvest from the farming season, complemented with the irrigated crop.


Onion price has been on an increasing trend due to low supply. Since onion produced in Zimbabwe does not have a long shelf life, farmers are always in a hurry to get rid of the product once harvested.  This often happens towards the rainy season which often causes the commodity to sprout especially when exposed to excessive moisture. The bulk of onions sold in the market from around January to June are imported from South Africa. As a result, the price is higher than that produced locally.


During the month of January, the price of potatoes was relatively low due to more supplies against demand.  However, the increased in February as supply decreased.  Most farmers do not grow potatoes during the rainy season and that affects supply in the following months. The price increased towards the end of the rainy season since many farmers had started producing.

Birth of a new career

Against the background of lack capacity to handle masses information being generated through mobile technology, knowledge mobilisation is becoming a legitimate career choice. Knowledge mobilisation relates to processes of moving knowledge to where it can be most useful. Knowledge mobilisers are people who move knowledge into action. Unfortunately African schools and universities are not teaching knowledge mobilisation skills like making sense of diverse definitions of knowledge as well as identifying useful models and tools.  There should be mechanisms for developing a new generation of knowledge mobilisers – individuals with the skills and practical abilities to move knowledge into action.  Since knowledge mobilisation means different things to different people, it remains difficult for institutions to identify and clarify new associated roles.  / /

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How informal markets are redefining agricultural extension

Given their openness and competitive nature, informal agriculture markets enable farmers to see their knowledge gaps. This shows up in a comparative sense where farmers use consumer choices, quality and prices to compare their commodities with those from their peers. If a fellow farmer gets a better price, one who receives an inferior price strikes a dialogue with the one who is doing well.  That is how face to face knowledge sharing begins before it is sustained by ICTs and trust. Besides being a seller, in the market farmers are also knowledge buyers who can identify and buy commodities that do better.  In most cases, observation is a powerful knowledge gathering method.


From ordinary farmers to advisors

Following active market participation, some farmers become advisors, especially after two to three cycles in the market.  Consumer preferences and patterns are picked from the market.  For instance, in Zimbabwe, chicken farmers who do not visit the market may not know that most consumers now prefer small portions like chicken feet which are becoming more affordable than other pieces of meat. Someone can simply buy chicken portions worthy 50c and still be able to eat meat with vegetables. On the other hand, you can’t buy beef for as low as 50c.

Learning through comparison

The market enables farmers to see the scale of some marketing challenges.  For instance, a farmer who loses five crates of tomatoes due to a glut in the market can compare his situation with a fellow farmer who losses more than two tons.  That is a learning point in its own right. Through the market, a farmer can see the performance of a crop that looked very good on the land when it starts competing with commodities from other areas. Field days and agricultural shows are incomplete learning platforms without markets.

In conventional field days, knowledge sharing is more on the agronomic side (fertilizer application, pest control, yield, etc..,.).  On the other hand, the market enables farmers to share knowledge about varieties, climatic conditions and rainfall patterns.  The can ask the following questions and get answers: In what soils do you produce these butternuts?  What are your rainfall patterns?  How much water do you have?  When do you actually plant?.  Farmers take this knowledge and use it to compare with what they are doing.  New relationships are formed and mobile phones are then used to continue the dialogue when famers go back to their farming areas. The farmers make arrangements to meet again in the market again.  Seeing a crop in the field is different from seeing it on the market.  The market also exposes farmers to other alternative forms of extension from traders and vendors. Traders can provide genuine reasons for lower commodity grades and prices by looking at what is on the market.

 Learning from good and bad practices

Niche markets like food chain stores and supermarkets do not provide opportunities for farmers to compare and seek advice from consumers and other actors.  On the other hand, informal markets enable farmers to get first – hand information which is often more valuable and reliable than second-hand information which is often stale and distorted. The market also enables sharing of both best and bad practices so that preventive measures can be devised.  Farmers who do not often visit the market have inadequate knowledge.  Without market participation, some information is not useful for farmers. For instance, market prices have less meaning to farmers who do not take their commodities to the market. That is why look and learn visits to agriculture markets are a very valuable process.

The market also provides a lot of wisdom around standards, varieties, crop calendars and opportunities for credit facilities.  In the market, farmers are able to build relationships with traders who can help them deal with market failure and constraints such as cash shortages.  Such relationships enable traders to sell commodities on behalf of farmers while the farmers go back to the farm rather than waiting for market prices to improve.

The importance of community knowledge centres in farmer to farmer extension

Every community has keen learners with capacity to borrow knowledge intelligently. Given the increase in the amount of information that farmers and other rural people require in order to participate in mainstream economic activities, community knowledge centres are becoming more important. In conventional extension models, the knowledge hierarchy has been entrenched in such a way that most farmers find it difficult to contradict official extension officers by providing contrary evidence. It takes enterprising farmers to acquire private knowledge and implement quietly.  These are leaders by experimentation who are not interested in consensus-building for its sake but producing good results. Developing local markets should be considered an important investment in knowledge sharing. Markets bring a certain dimension to knowledge generation and sharing. By visiting and understanding markets, farmers get a grasp of the economics of knowledge.

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eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

From acronyms and buzzwords to building local institutions

In spite of promises surrounding mobile technology, African communities still face enormous barriers to accessing reliable, relevant and usable information and knowledge. Over the past decades, international organisations like the United Nations Food and Agriculture Organisation (FAO) and the Consultative Group on International Agriculture Research (CGIAR) have generated and shared remarkable knowledge. While these institutions have done commendable work, for how long are they going to continue influencing agriculture research and development in developing countries?  When are they going to build local institutions to be able to demand and absorb knowledge?  Rather than continue coming up with this and that new methodology and tool, how about the FAO and CGIAR stimulating knowledge and research uptake among local institutions in developing countries?

Invisible barriers and issues

Although international institutions continue to use knowledge supply-driven models, there are enormous limitations around pushing information to extension officers, lead farmers and ordinary farmers.  Most supply-driven approaches are not supported by empirical evidence. For instance, in Zimbabwe there is a growing urgency for Zimbabwean institutions such as government departments, chambers of commerce and development agencies to make better use of data in informing their decisions and evaluating their performance. Lack of an evidence-based culture is impeding the collection of meaningful data.

Besides having a potentially large membership from which useful economic development data can be gathered, institutions such as the Zimbabwe National Chamber of Commerce and Confederation of Zimbabwe Industries seem interested in annual business awards than thorough economic trends analysis. Without a culture of data and evidence, it is very easy to reward mediocre performance. For most organisations, data collection is still considered a domain of national statistical agencies like ZIMSTAT yet everyone should collect data in order to make sensible decisions.

A growing body of evidence suggests that access to information is necessary but not sufficient to change practice. Some of the barriers to using information in practice include: lack of awareness of what is available; lack of relevance of available information; lack of time and incentives to use information; and lack of interpretation skills. Attempts to overcome these barriers should be based on good research into the nature of the barriers and evaluations of planned interventions.

As the amount of information increases, agricultural professionals and farmers need critical appraisal skills to be able to distinguish unreliable from reliable sources of information. Librarians and producers of agricultural materials such as local champions need searching, critical appraisal and computer skills. Researchers and systematic reviewers need to understand research design and to have skills in searching, critical appraisal, writing and editing. Software and interface designers need to empower users so that they can exploit technologies to combine and mediate information and knowledge.

The importance of investing in local institutions and communities

More initiatives are showing the wisdom of acting locally and investing in local institutions. For instance, building local markets makes more sense than trying to grapple with the export market where the stakes are too high for many local people.  A critical solution is building local information cycles or communities of practice. These have great potential to increase the relevance and reliability of information as well as enhance skills and ownership.

Creating reliable, relevant, and usable information for socio-economic progress requires a series of activities. Unfortunately, there is lack of understanding about how various actors can work together more effectively. There is need for business models that distribute revenue more evenly along agricultural value chains. Supporting local information cycles would bring greater understanding of how to make the knowledge system work better in different settings and for different groups of people, and so improve the quality of information reaching farmers and other value chain actors.




The role of ICTs and how the radio has lost its feathers

The explosion of ICT platforms such as WhatsApp and other social networks is yet to translate into advancement of human knowledge. At the moment most platforms focus on the lowest common denominator such as rumour, innuendo, entertainment and prurient topics that distract people from more considered concerns.  In the same vein, in many African countries, radio stations are failing to become meaningful sources of socio-economic development knowledge.  From a content point of view, radio focuses mainly on music, news, sports, weather and many other conveniences.

In a recent survey conducted in Zimbabwe by eMKambo, the majority of farmers and traders said they had stopped listening to radio the way they used to. The main reason cited was lack of appropriate content. “Most radio stations have become an extension of prosperity gospel prophets. Economic hardships in Zimbabwe have resulted in radio stations selling their souls to Pentecostal churches.  A few years back, more farmers listened to radio than those who read newspapers,” said one farmer leader.

“There is now too much religious noise.  You don’t hear anything related to agriculture yet we are an agro-based economy,” lamented one horticulture farmer.  “We wish policy makers could do something about this pollution. No country has ever developed or moved out of poverty through religion or false prophets.  No miracle or prophecy will create a market for our agricultural commodities if we do not go out and create relationships with the outside world,” added one trader.

To make it worse, many poor Zimbabweans are losing their hard earned money and resources such as livestock to unscrupulous prophets, most of them based in urban areas.  By encouraging and allowing this to happen under their nose, radio stations and policy makers are complicit in the impoverishment of poor people. By not putting a disclaimer on religious messages, radio stations are actually endorsing false prophecy, thus misleading masses of people to part with their hard-earned cash for salvation.

Riding on smart use of ICTs

The ubiquity of smartphones in African countries is poised to make data collection much easier, quicker, more reliable and less expensive than ever before. Data collection for evaluation purposes will soon stop being an activity done at the end of a multi-year project. The ability to collect data digitally, instead of on paper, is one benefit made possible by digital devices like the smartphone.

Institutions in developing countries should be supported to change the way they think and operate in order to become data-driven. Besides collecting data they never collected before, they need new sets of skills.  For example, institutions which used to collect production information only will have to see sense in collecting geographic and location-specific details because all this has a bearing on successful outcomes. Ironically, many funders are demanding evidence of impact without a willingness to invest in the costly and time-consuming work of gathering that evidence.  For instance, financial institutions want to understand their clients without paying for baseline information. If they really want to take advantage of the data revolution, they have to pay for data.

Every serious institution has to invest in obtaining better data for action. Chambers of commerce and farmer organizations will have to collect data that respond to the urgent needs of their members. They cannot continue guessing. Without data they cannot ask better questions or provide informed answers.  Rather than generalized information at national level, communities are beginning to ask for data that speak to their context. The graphic below shows some of the information that farmers in different districts of Zimbabwe are asking eMKambo to provide on a regular basis. Knowing the position of their districts in terms of market participation reveals opportunities for improving production and marketing as well as situations where available resources are being under-utilized.



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eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6