Why the Future Is Bright for the World’s Poorest Farmers

I have probably learned more about farming in Africa from Sam Dryden than from any other person. Sam has spent decades working in agriculture, including a stint at the Gates Foundation, and he is passionate about improving the lives of the poorest. So when he asked me to contribute to a series of articles in Foreign Affairs on the future of farming and its role in fighting poverty, I was happy to do it. My essay is below. You can download the whole series—which includes authors like Kofi Annan and Sir Gordon Conway—here.

One thing I’ve learned in my work with Microsoft is that the process of innovation tends to take longer than many people expect, but it also tends to be more revolutionary than they imagine. We are seeing this dynamic play out right now in the way digital technology is fundamentally reorganizing life for the poorest people in the world.

Twenty years ago, when the Internet was brand new, a lot of people thought computers would quickly become part of daily life in developing countries. And when I say “a lot of people,” I include myself. But those people weren’t thinking about all the facts.

In 1997, I traveled to South Africa for the first time. I spent most of my time in big office buildings in downtown Johannesburg. One day, though, I took a side trip to Soweto, where Microsoft was donating computers and software to a community center—the same kind of thing we did in the United States.

But it became clear to me very quickly that Soweto was not like the United States. I had seen statistics on poverty, and I had seen a lot of poor communities, but this was the first time I had ever really seen true poverty. I was struck by what I didn’t see. No electricity. No running water. No toilets. No roads.

The community center had no consistent source of power, so they had rigged up an extension cord that ran about 200 feet from the center to a diesel generator outside. Looking at the setup, I knew right away that the minute I left, the generator would get moved to a more urgent task, and the people who used the community center would go back to worrying about challenges that couldn't be solved by a PC.

When I gave my prepared remarks to the press, I said: “Soweto is a milestone. There are major decisions ahead about whether technology will leave the developing world behind. This is to close the gap.”

But as I was reading those words, I knew there was much more to the story. What I didn't say was: “By the way, we're not focused on the fact that three quarters of the people in this region are eking out a living on tiny farms that don’t produce enough food. But we're sure going to bring you computers.”

In the past 20 years, however, digital technology has gradually insinuated itself into poor people’s lives in ways I never could have predicted. For example, about two-thirds of Africans now have mobile phones, and pretty soon cellular coverage will be more or less universal. The power of a phone in every pocket is turning out to be extremely disruptive in exciting ways—and the poor finally have a chance to use technology in ways that solve the real problems they face in their lives.

CELL PHONES AND THE FINANCIAL SERVICES REVOLUTION

Mobile phones have recreated the economics of providing financial services to the poor. In an analog era when banking required buildings, piles of paperwork, security guards, and tellers, the cost per transaction was high enough that no company could even conceive of profiting by serving poor people who transacted in tiny amounts. As a result, the poor led their financial lives informally, paying exorbitant amounts in fees and interest to borrow, save, and send money.

But phones get rid of all that expensive infrastructure. Transaction costs are so low that companies can make money by serving the poor. And in the process of competing for poor people’s business, these companies will develop new financial products that meet poor people’s unique needs. One example is a new company called M-KOPA, which lets 250,000 customers in three African countries pay for solar electricity (instead of kerosene) in small daily installments through their cell phones. In short, digital financial services can create one thriving formal economy that includes everyone.

In fact, since developing countries aren’t stuck with a legacy analog banking system, I believe that for the foreseeable future the boldest ideas in financial services will be coming from upstart companies in poor places instead of the big companies we’ve all heard of.

DIGITAL AGRICULTURE

If there is another example of a market that simply does not work for the poor, it’s agriculture. But digital technology can change that, too.

Right now, hundreds of millions of Africans rely on farming for a living, but they don’t grow as much—and they don’t sell as much of their surplus—as they could. As a result, Africa had to import $40 billion worth of food last year. Something is not functioning properly when half of the continent’s labor produces food, and the continent still buys its food from somewhere else!

So what is going wrong? Why aren’t African smallholders tapping into that $40 billion market?

The main problem stems from the fact that agricultural markets, like banks, exist on a formal plane, whereas smallholders exist on an informal one. So farmers and markets cannot communicate effectively. Smallholders don’t know what the market will pay. They can’t grow crops according to the market’s specifications because they don’t know the specifications. They have no way to learn the farm-management practices that would let them double or even triple their yields. Instead, they grow mostly what they can eat or trade locally, the way they’ve always grown it.

As long as this information disconnect exists, there will be a related physical disconnect. The rails and roads that would take crops from the farm gate to the market don’t exist, because the market doesn’t want the crops the farmers are growing in the ways and volumes they’re growing them. So farmers are isolated, stuck with no money and no voice that the marketplace can hear.

But digital technology can act almost like a secret decoder ring that links the formal and informal sectors. Smallholders are already using mobile phones to communicate within their networks, to talk to family and friends. The institutions that make up the formal marketplace communicate in much the same way. So it is now possible to generate a two-way conversation between Africa’s producers and Africa’s consumers—and this is an entirely new conversation. Each party will be able to express its needs to the other for the first time ever.

Imagine a smallholder farmer who can discover, easily, that yams are expected to fetch a high price this year. She can also contact a local cooperative to combine her yams with those of her neighbor, satisfying the buyers’ volume requirements. Because she is assured of sale at harvest, she can afford to take out a loan, using her phone, to buy fertilizer or better storage or whatever else she needs to maximize her yield. In the meantime, instead of waiting for a visit from an extension worker who may or may not know about yams and the soil in this particular region, she can get advice tailored by crop and soil type via digital video or text.

When information can flow easily, when data is democratized, the cost of doing business in agriculture goes way down, just as transaction costs go way down when financial transactions are digital. The excessive time and money farmers, agribusinesses, and cooperatives spend managing the risk of doing business with unknown partners is a drag on efficiency. When these partners can know each other easily—can function as nodes in a single marketplace—agriculture will thrive.

It’s not as easy as the above paragraphs may make it seem. Building a digital agriculture system that actually accomplishes these goals will take innovation and investment. But the point is that before it wasn’t possible, and now it is. The added variable of digital technology has changed the agricultural development equation.

OTHER DIGITAL APPLICATIONS FOR AGRICULTURE

While mobile phone technology—and the way it can collapse the formal and the informal—is perhaps the most revolutionary of the digital opportunities in agriculture, there are many others.

Take seeds. Advances in genomics are fundamentally changing the way breeders do their work. It took researchers 13 years to sequence the human genome. Now they can do it in 27 hours. The cost of sequencing a genome has been reduced more than 10-fold in the past five years.

Cassava is a powerful example of what breeding—powered by the revolution in genomics—can do. It’s hard to breed cassava, and every breeding cycle takes five years, which means it usually takes a full decade to release a new variety.

But scientists can now use computer algorithms to link sequence data from the cassava genome to the performance of cassava plants in the field. This technique was first developed to predict levels of milk production in cows.

Breeders in developing countries will be able to predict how a tiny cassava seedling will perform. Consequently, the breeding cycle can be shortened from five years to two years. And it’s not just a shorter cycle. It’s also higher-quality, because breeders can focus on the most desirable traits early in the process. This will also allow for more participatory breeding, a process in which farmers themselves have input into the development of the new varieties they’ll be growing.

The digital revolution also provides opportunities to collect better data. In an age when a satellite can determine instantly how much wheat is in a field, it is a shame that we ask countries to use limited resources to send enumerators around with pen, paper, and tape measure. What we get is a lot of wasted time and inaccurate or incomplete data. The digital revolution can improve the quality of critical data while freeing up people to do other high-impact work.

CONCLUSION

I still can’t predict precisely how—or when—these changes will take hold. The beauty of innovation is that once the technology and tools are widely available, people with every possible insight and point of view start working on solutions to problems others can’t even see. Ultimately, it’s the way human beings, with our vast stores of ingenuity, deploy the power of the technology and tools that makes the biggest difference.

This was originally published at gatesnotes.com.