Mobile Applications for Rural Development

Presented by:

Steve Esselaar

Introduction• 92 mobile applications were studied from Asia,

Africa & Latin America

• 15 in-depth case studies were conducted in Kenya, Sri Lanka & Philippines

• Key Messages:– Standard phones (non-smartphones) will

continue to dominate rural areas for the medium term (2015)

– There is a lack of appropriate funding, especially after the pilot phase

– Mobile money (or an equivalent) is a pre-requisite for commercial apps

– Rapidly evolving sector– Government m-apps lack clear objectives – Common platform would increase efficiency

and reduce the cost of customer acquisition

Non smartphone - developed coun-

tries16%

Smartphone de-veloped markets

18%

Smartphone - emerging markets

14%

Non-smartphone - emerging mar-

kets 52%

Smartphone vs. standard phone penetration - 2015

Indonesia GhanaChina

Senegal Bangladesh

CameroonPhilippines

Sri LankaTanzania

South Africa Uganda Kenya

India

0 2 4 6 8 10 12 14 16 18 20

Number of m-apps per studied country

Summary of select m-app benefits

Application CountryIncreased income

thru access to info/services

Higher-yield production

Improved efficiency in supply chain

Better access to finance

Virtual City AgriManagr

Kenya 9% increase in income for each small scale farmer due to improved measuring and recording of produce weights

Transaction time reduced from 3 mins to 22 seconds

Cost of delivery reduced by 75%

Minimised fraud

KACE Kenya 75% of farmers & 60% commodity traders report increased income

Market integration (linkage efficiency) improved for two commodities: maize & beans

Kilimo Salama Kenya $150 increase in income per smallholder farmer

50% improvement in production due to insurance on higher yield inputs

More efficient value chain leads to lower retail costs

Farmers in 1st year insured 10-20% of inputs, increased insurance to 50% of inputs in the next year

Summary of select m-app benefits

Application CountryIncreased income

thru access to info/services

Higher-yield production

Improved efficiency in supply chain

Better access to finance

Drumnet Kenya Farmers’ income increased by 32%

Easier access to agricultural inputs

Agro-suppliers gain economies of scale

Bank credit worthiness increased due to secure produce supply contracts

Reduced transaction costs

B2BPricenow Philippines Total volume of trade since inception (year 2000): $29.8 million

Direct access to buyers improves sales

More efficient payment to members via secure payment layer

Farmers texting centre (FTC)

Philippines Planting varieties with higher yields

20% reported increases in production

Tradenet Sri Lanka 23% premium on produce due to timely market price info

Lower information asymmetry between farmers and brokers

eDairy Sri Lanka Additional income of $262 per additional calf from timely access to veterinary services

Milk production can increase by 30%

Accurate prices at delivery point compared to prices confirmed days after delivery

Results Chain

Better access to information

Better access to rural extension and advisory services

Improved market linkages and distribution

(Better) access to finance

Market information

Climate, disease information

Agricultural techniques and good practices

Extension services

Linking farmers, supplier and buyers directly

Better recording, accounting & traceability

Credit

Insurance

Payment method

Better prices, more market-oriented produce

Greater efficiency and predictability

Higher yield production

Accurate assessment of pasture health

Minimize exploitation by middlemen

Better disaster/risk management

Reduced admin costs

Reduced fraud

Higher yield, more diversified production, less losses

Increased income for smallholder farmers

Reduced transaction, logistical and distributional costs for input suppliers

Improved traceability and quality standards for buyers

New opportunities for financial institutions

Reducing inefficiencies in the distribution chain (e.g. transporting goods to market)

Lessons learntMobile App Country

LessonsDevelopment Impact Ecosystem (players,

platform, hyper-local content / service)

Business Model (objectives, revenue, sustainability, scalability, financing)

Virtual City

Kenya Supply chain automation improvements (mobile & ICT) in specific market segments lead to reduced transactional and logistical costs

These benefits impact farmer (income), buyer (cost reduction) & market productivity for the segment

This model has relied on one major player (e.g., national scale buyer) financing an application that is deemed good for the buyer dominated ecosystem

Also improved farmer credit worthiness and can indirectly draw banks to the value chain

Applications focused on meeting/ automating specific customer needs without including full value chain can grow at a rate that matches need and capabilities

Manobi KACE, Drumnet, B2BPricenow.comGoogleTrader

Senegal, Ghana, Kenya Philippines Uganda

Better access to market information leads to increased income

Linking suppliers and buyers directly, cutting out the middlemen, removing information asymmetry leads to increased income.

Local content on market prices is responsible for KACE’s value creation

Market is supported using broadcast radio and linkages between buyer & seller

Platforms could ensure wider availability of apps & scalability.

Partnerships with MNOs are vital

Affordability can limit the entry of smallholder farmers, thus planned multi-level services are effective (market info at no cost, leading to value added market linkage assistance at a price can migrate beneficial participation)

Lessons learntMobile App Country

Lessons

Development Impact Ecosystem (players, platform, hyper-local content / service)

Business Model (objectives, revenue, sustainability, scalability, financing)

eDairy Farmers Txting Service, 1920

Philippines, Sri Lanka

Targeted relevant information, like expert advice, can result in increased production

Government information on productivity and sector issues combined with ICT implementing resources can generate practical m-ARD concepts

Clear objectives (such as increasing milk production by 30 percent) are correlated with apps that graduate from the pilot/ concept stage

Txteagle, Mobenzi

All countries, South Africa

Addition income streams thru microwork/microtasks such as market research and surveys

Access to flexible work opportunities as it can be conducted during spare time

Brings commercial companies & advertisers into the rural ecosystems

Companies interested in marketing amongst the poor

Txteagle could support m-ARD applications while creating income for the targeted rural end users

Kilimo Salama

Kenya Small scale farm input insurance can be transacted using mobile phones, and transaction cost can be reduced to cost of an SMS

Increased farmers’ security against crop losses, and more diversified crop types and higher yield

Identifying farmers and their crop types and farming methods (such as inputs) means that other extension services can be offered (incl. higher quality inputs)

Good extension services, such as training, are essential in order to educate the market about a product or new technique that could carry risk, to increase usage and adoption.

Lessons learnt (selection)

Supply chain automation improvements (mobile & ICT) in specific market segments lead to reduced transactional and logistical costs

These benefits, as well as greater accuracy of farm gate measurements impact farmer (income), buyer (cost reduction) & market productivity for the segment.

M-app

Development impact

Ecosystem players

This model has relied on one major player (e.g., national scale buyer) financing an application that is deemed good for the buyer dominated ecosystem

Also improved farmer credit worthiness and can indirectly draw banks to the value chain.

Business Model

Applications focused on meeting/ automating specific customer needs without including full value chain can grow at a rate that matches need and capabilities.

Lessons learnt (selection)M-app Development impact

Business model

Ecosystem players

Better access to market information leads to increased income.Linking suppliers and buyers directly, cutting out the middlemen, removing information asymmetry leads to increased income

Local content on market prices created by local staff in market resource centres (MRCs) is responsible for KACE’s value creation as well as supporting their virtual market using broadcast radio and linkages between buyer & seller

Platforms, such as Ovi Life Tools (OLT), could ensure wider availability of applications and therefore scalability

Partnerships with MNOs are vital

Affordability can limit the entry of smallholder farmers, thus planned multi-level services are effective (market info at no cost, leading to value added market linkage assistance at a price can migrate beneficial participation)

Lessons learnt (selection)

Small scale farm input insurance can be transacted using mobile phones, and transaction cost can be reduced to cost of an SMS

Increased farmers’ security against crop losses, and more diversified crop types and higher yieldPotential to protect rural inhabitants against other forms of unexpected life events

M-app

Development impact

Ecosystem playersIdentifying farmers and their crop types and farming methods (such as inputs) means that other extension services can be offered

Higher quality inputs, such as drought resistant crops, could potentially reduce potential losses

Business Model Index based automatic payout insurance modelGood extension services, such as training, are essential in order to educate the market about a product or new technique that could carry risk, to increase usage and adoption

A win-win result in the early stage of implementation creates trust

Lessons learnt (selection)M-app Development impact

Business model

Ecosystem players

Targeted relevant information, like expert advice, can result in increased production

Government information on productivity and sector issues combined with ICT implementing resources can generate practical m-ARD concepts

Clear objectives (such as increasing milk production by 30 percent) are correlated with apps that graduate from the pilot/ concept stage.

Main challenge is formulation of plan to migrate from Government led to effective PPP

Farmers’ Texting Service (FTC)

Ecosystems – Selected playersPlayers Assets & Capabilities Roles Incentives & Business

ModelLimitations , Constraints & Threats

MNOs Mobile infrastructureExtensive retail outlets /

agent networksLarge customer base Strong brandingCustomer trustAbility to make good

margins on low ARPUs

Provide infrastructure and communications service

Host applications, databases and/or take app development on board

Provide incentives to app developers & hosts in the form of bulk data discounts, etc.

Acquire customersManage churnIncrease ARPUsCapture additional revenue

opportunitiesMeet service obligations

and CSR goals

Regulatory limitations on providing financial services, e.g. issuing e-money, on-phone advertising, etc.

Shareholder pressure for faster, higher returns

Strategic focus that may not include some rural applications

Software/Application Developers

Creativity/Innovation, ideas

Technical skills to develop applications

Knowledge of a specific sector or part of society where need exists

Develop applicationsIn developing countries,

need to seek partnerships with platform developers, handset vendors, MNOs etc.

Earn revenue from selling the application

Meet a community need / development objective

Small-scaleRequire platforms or

partnerships to distribute applications

Extension workers

KnowledgePresence in rural areas

Provide training, advice via m-apps

Support rural users to learn the apps

Improve training, knowledge, skills of rural people

Lack of technical knowledge about mobile or ICT apps

Ecosystems – Selected playersPlayers Assets & Capabilities Roles Incentives & Business

ModelLimitations , Constraints & Threats

IFIs & Donors Financial resourcesBest practices expertise

Provide financingProvide business

development assistanceTechnical assistance

Support development objectives

Creation of profitable businesses

Lack of local knowledge, legal systems, etc.

Lack of integration with commercial communities

End users (farmers, householders, youth women)

Relevant needs Use m-apps to improve their lives

E.g. targets farmers through agri price information service & consumers thru Health, Enter. & Education

Facilitates scale, cross-subsidization, advertising

Lack of awarenessLimited mobile literacyCultural and psychological

resistance

Rural Produce Buyers/ Food Processing Plants

Warehouses Transfer points to end

buyer

Aggregation points and provide economies of scale

Lower cost of supply Increase quality of supply

by supporting apps that improve farmers’ position

May be short of funding (though Kenya & Sri Lanka example showed buyer willing to invest in improved quality and efficiency)

Product companies with interest in the rural market

Financial resources to spend on marketing & research

Participants Broaden customer reachReduce customer

acquisition costs

Strategic focus that may not include using RD oriented apps

Business models - CostsCase Current

or Target market

USD

Incremental Cost per user (or

transaction) - USD

Cost per user as % of

HH income

Capex Opex Capex Opex

KACE 1 million 0.40 0.50 0.07% 0.8%

B2BPriceNow 26,000 31 2 2.51% 0.15% / trans

Reuters Market Lite

250,000 8 4 0.94% 0.47%

Pilot -

Proof o

f con

cept

stage

Stage 1

- Sca

labilit

y stag

e

Stage 2

- Sus

taina

bility

stag

e0%

10%

20%

30%

40%

50%

60%

33%

51%

16%

M-app by business stage (% of 92 studied)Typical costs for commercial apps

Typical costs for non-commercial apps:• Similar to commercial m-apps, in that the

cost is relatively low • Non-commercial m-apps major challenge

is moving from information only to other value-add services (such as transactions)

Activity Year 1 Year 2

Promotion of Soko Hewani and SMS Trading platform – radio & tv, workshops, field days, networking with farmer organizations, etc.

KSH 17 millionUSD 212,525

KSH 9 millionUSD 112,481

KACE: Costs of expansion

Business models - Revenues• 29 percent of all the m-apps surveyed

receive some form of operating revenues from normal business activities through the share of SMS, transaction fees or membership fees

• 71 percent of m-apps are all partially or completely dependent upon external financing, such as government or donor funding, for continuing operations as they do not have sufficient operating revenues to sustain their operations

• Cost analysis seems to indicate that, so long as investment funding could be secured, pricing for viability does have possibilities

• Most common revenue stream for information services is a share of SMS revenue

1. Share SMS: Application owners typically receive only a small portion of SMS revenues, ranging from zero to approximately 18 percent ($0.016 per message)

2. Transactions fee: Both famers and buyers pay for services to expedite produce contracting, collection & delivery; payment, tracking and reporting on produce collection etc. Farmers have demonstrated willingness to pay a fee of 5% in various cases

3. Membership: One-time fee that provides farmers access to network of partners & basic services.

4. Other: Operating expenses covered by donor/Funder/Government

Share SMS Transactions Membership Other0%

10%

20%

30%

40%

50%

60%

70%

80%

All m-apps; 12% All m-apps;

7%All m-apps;

10%

All m-apps; 71%

KACE; 5%

KACE; 55%

KACE; 0%

KACE; 40%

Revenue source

Financing• Lack of appropriate funding is one of the major

findings

• Including some of the relatively successful cases such as Drumnet, KACE, Grundfos Lifelink, Kilimo Salama, Farmer’s Texting Center, and 1919

• The financing gap is particularly acute between the Pilot stage and Stage 1 (scalability); and during the transition from donor funded (Pilot stage) to either commercially funded or government funded

• The findings also indicate that while there is sufficient funding at the start-up stage, donors, who provide the most funds at this stage, are not operationally suited towards providing long term funding, particularly as m-apps attempt to scale up

Gov’t

Donor/

Cha

lleng

e Award CSR

Commerc

ial or

Priv

ate0%

10%

20%

30%

40%

50%

60%

12%

54%

19%15%

M-App Sources of Finance

Key challenges for commercial m-apps: • Lack of firm clustering• Lack of access to financing• Lack of healthy ecosystemKey challenges for non-commercial m-apps:• Lack of clear objectives• Difficulty in assessing costs vs. benefits

Assisting Development impact

Platform

Hyperlocal (yet challenging)

Financing

ScaleAreas of intervention in the m-app environment

Enabling: Policy & regulation

Thank you Steve Esselaar

sesselaar@inteleconresearch.com