individual is frequently a loan to an extended family with diverse sources of income. So, although a loan might ostensibly be made to purchase seeds and fertilizers, repayment of that loan might come from a range of sources such as salaried or daily employment and from non-agricultural enterprise activities such as trading and small-scale manufacturing. Household income is taken into consideration in assessing the risk of lending, and offers possibilities to families that might otherwise not be considered creditworthy.
processes such as traceability of agricultural products, tracking of warehouse goods, and consolidation of products for sale. With reference to fi nance, MIS allow portfolio and client management, structured fi nance instruments, com- modity trading, analysis of risk, and fraud detection and control. Thus, MIS provide numerous facilities that increase access to needed information, sup- port sound decision-making that encompasses analysis of client risk, product security, potential for trade and profi tability, and so on.
A second aspect of MIS that is signifi cant is the increasing level of sophis- tication of the fi nancial and portfolio management systems of both fi nancial and non-fi nancial institutions to track loans, investments and cash, and in- kind accounts receivable. With suffi cient ‘back-offi ce’ systems of this nature, many of the value chain fi nance tools and processes can now be applied.
Networks and exchanges
Developments in Internet access along with reach into rural areas have en- abled the creation of networks and exchanges that benefi t agricultural value chains. This happens in two main ways: the delivery of critical information to farming communities such as market demand, pricing and technical advice;
and the creation of exchanges that support the trade of agricultural outputs.
The example from India in Box 5.3, describes an Internet application that Box 5.2 Integrated information management, BASIX, India
BASIX India is promoting the use of information management technologies in its holistic approach to development. Their initiatives and experience focus on providing a package of livelihood services that are both fi nancial and agricultural. BASIX makes extensive use of information and communication technology in its integration of microfi nance, busi- ness development and institutional development services which form part of its livelihood promotion programme. This includes value chain fi nance and marketing services, such as warehousing, forward contracts and insurance, as well as loans and training.
Source: Ramana (2007a)
Box 5.3 Electronic network for fruit and vegetable trade, India
India is the world’s second largest producer of fruits and vegetables. With the emergence of futures commodity exchanges in India and a signifi cant increase in telecommunications and Internet access in rural India, the conditions for an electronic exchange became pos- sible to better enable and connect large numbers of buyers and sellers. The Safal National Exchange (SNX) was developed through a joint venture between Mother Dairy Fruit and Veg- etable Private Limited (MDFPL), a wholly-owned subsidiary of the National Dairy Develop- ment Board of India (NDDB), Multi-Commodity Exchange of India Ltd (MCX) and Financial Technologies India Ltd (FTIL). The exchange provides on-line price information to farmers who then plant and sell accordingly. The trading of standardized, graded produce through the exchange catalyses agribusiness activity, processing and export, due to the assurance of an uninterrupted supply of raw materials. Loans, as needed, which are linked to recovery, can be structured through banks and guaranteed with the futures contracts.
Source: Natarajan (2007)
serves both as an information network for farmers as well as an electronic exchange for trading of fruits and vegetables.
Mobile phones and mobile banking
Luis Corrales of the Banco Nacional de Costa Rica observed, ‘We hear much talk these days about a gap between the “info-rich” and the “info-poor”, this is why Costa Rica’s low penetration of Internet is a critical issue.’ (Corrales, 2006). Indeed, Internet, mobile phones and handheld devices have been im- portant for the adaptation of new opportunities in value chain fi nancing. As described in Box 5.4, India, with growing rural Internet capacity, and Kenya, with cell phones, are among those countries leading the way for such use in agriculture and agricultural fi nance.
In the case of implementing MIS solutions, mobile phone and handheld de- vices may be used at the point of data collection, and set up to transfer timely information to the larger MIS. For example, in traceability applications, fi eld agents can track individual farmers, capture the data on a handheld device and remotely transfer the information to a central database. In turn, this cen- tral database can track availability of compliant crops and monitor expected volumes and time of market availability. In the other direction, information can be pushed out from an MIS to mobile phones and handheld devices. For example, farmers may be set up to receive alerts on changing prices for com- modities and preferred market locations or buyers.
In Case 4 described at the end of this chapter, DrumNet, a project of Pride Africa in Kenya, combines mobile phones and a dedicated management infor- mation system. The MIS, developed and managed by DrumNet, captures and processes data on fi nancing and transactions between players: farmer groups and banks, farmers and buyers, farmers and suppliers. The project works with Equity Bank and M-Pesa, a wallet service offered by Safaricom.
The fast-growing popularity of technology for use in fi nancial transactions is evident in Kenya where the M-Pesa service has attracted 7 million registered users who are making US$2 million a day in transfers in a country where fewer
Box 5.4 E-choupal information centres, India
ITC introduced the concept of e-choupal, a network of IT enabled agriculture information and resource centres. Originally created for more effi cient procurement of agricultural commodities in India, it has become a business platform from which a host of products and services are provided, linking the farmer to global markets, building village-level ca- pabilities and creating economic and social value for stakeholders. Some of the real-time benefi ts include the enhanced decision-making power of farmers, as they know the sale price for the produce even before it leaves the village. This is done through online real- time information which bundles knowledge and information with the transactions. This knowledge is free of cost and once established in the villages or through mobile Internet kiosks is able to serve large numbers of farmers – not only with price information, but also by providing a facility to forward contract and mitigate price risks.
Source: E-choupal (2008)
than 4 million bank accounts exist (CGAP, 2009). Users can exchange cash at a retail agent in return for an electronic record of the transaction value. This virtual account is stored on the server of a non-bank service provider, such as a mobile network operator or an issuer of stored-value cards. The use of cellular devices can play a central role in both fi nancial and value chain activities, as when mobile phones are used for remittance transfers, loan repayments, and other fi nancial transactions with important identifi cation data stored on the phone. This innovation goes beyond the hardware itself, and includes new kinds of relationships between banks, clients, agribusinesses and communica- tion companies.
Point-of-sale outlets at markets or farm service centres, use of smart cards, and Internet outlets can also be used to facilitate fi nancial transactions for input purchases and commodity sales. An example of such an application is shown in the YES Bank Agro-Food (Case Study 5) at the end of this chapter.