1. Mobile Applications for Rural Development Presented by: Steve Esselaar

2. 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

3. Summary of select m-app benefits Application Country Increased 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

4. Summary of select m-app benefits Application Country Increased 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

5. 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)

6. Lessons learnt Mobile App Country Lessons Development 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, B2BPrice now.com GoogleTr ader 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)

7. Lessons learnt Mobile 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.

8. 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.

9. Lessons learnt (selection) M-appDevelopment 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)

10. 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 yield  Potential to protect rural inhabitants against other forms of unexpected life events M-app Development impact Ecosystem players  Identifying 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 model  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  A win-win result in the early stage of implementation creates trust

11. Lessons learnt (selection) M-appDevelopment 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)

12. Ecosystems – Selected players PlayersAssets & CapabilitiesRoles Incentives & Business Model Limitations, Constraints & Threats MNOs  Mobile infrastructure  Extensive retail outlets / agent networks  Large customer base  Strong branding  Customer trust  Ability 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 customers  Manage churn  Increase ARPUs  Capture additional revenue opportunities  Meet 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 applications  In 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-scale  Require platforms or partnerships to distribute applications Extension workers  Knowledge  Presence 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

13. Ecosystems – Selected players PlayersAssets & CapabilitiesRoles Incentives & Business Model Limitations, Constraints & Threats IFIs & Donors  Financial resources  Best practices expertise  Provide financing  Provide business development assistance  Technical 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 awareness  Limited mobile literacy  Cultural 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 reach  Reduce customer acquisition costs  Strategic focus that may not include using RD oriented apps

14. Business models - Costs Case Current or Target market USD Incremental Cost per user (or transaction) - USD Cost per user as % of HH income CapexOpexCapexOpex KACE 1 million0.400.500.07%0.8% B2BPriceNow 26,0003122.51% 0.15% / trans Reuters Market Lite 250,000840.94%0.47% 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) ActivityYear 1Year 2 Promotion of Soko Hewani and SMS Trading platform – radio & tv, workshops, field days, networking with farmer organizations, etc. KSH 17 million USD 212,525 KSH 9 million USD 112,481 KACE: Costs of expansion

15. 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

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

17. Assisting Development impact Platform Hyperlocal (yet challenging) Financing Areas of intervention in the m-app environment Enabling: Policy & regulation

18. Thank you Steve Esselaar sesselaar@inteleconresearch.com