Commission-based agent networks

What is this document and why does it matter?

This guide contains actionable steps on how to design and implement a Commission-based Agent Network. Our insights on last mile delivery demonstrate how leveraging intermediaries such as agents can reduce costs and help scale a business model. At the same time, we highlight the trade-offs when it comes to risk and value creation at farm-level and argue that these trade-offs can be managed with a well-functioning agent network. To access our aggregate insights, click the relevant links below:

This guide serves as a practical counterpart to help you apply the lessons and insights from the above analyses and is based on the evidence and direct experience of companies who have implemented agent networks in a range of contexts. This guide is primarily for companies implementing or looking to implement agent networks and/or support organizations that help companies to strengthen their agent networks.

What is a commission-based agent network?

An agent network refers to a system whereby an organization engages a series of individuals as intermediaries to provide goods and services to farmers on their behalf. These agents facilitate the last mile delivery of a broad range of agricultural services and products. These can include inputs, technology, finance, knowledge, and produce off-take.

The agent network is often referred to as ‘commission-based’ because agents usually receive commissions based on the volume and/or value of transactions they provide to farmers rather than a fixed salary. The commissions can be based on a percentage of sales, a (fixed or variable) reimbursement depending on volumes sourced, a fixed fee per service provided (such as farmers trained), or a combination.

Agents are also referred to as rural promoters, last mile deliverers, local intermediary agents, village-based agents, village agents and agripreneurs.

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How does it typically work?

While there is no one-size-fits-all approach, we provide an illustrative overview of how a commission-based agent network operates and its key functions below. This guide’s “How to implement a commission-based agent network” section provides more detailed information on how to design, set up and operate such a model.

Agent networks v3
  1. Business model design. The company designs its agent business model. This can include the following components: commission and incentive structure, services to be provided through agents, targets for the season (no. of farmers reached, no. of agents, transaction volume and/or value per agent, etc.)
  2. Agent selection. The company identifies and selects agents. Agents can be recruited among farmers the company already knows and/or from within the community. The company and agents agree on contractual agreements (incentives, commissions, targets, etc.)
  3. Agent capacity building. The company trains and equips agents. Training typically includes both upfront training when an agent is recruited and periodic training to ensure agents keep maintain and grow their capabilities. Equipment can include motorcycles, mobile phones, and even in some cases buildings for warehousing
  4. Farmer engagement. The agents engage with farmers. The exact type of engagement depends on their mandate but can include farmer acquisition, farm mapping and data collection, training, provision of inputs, loans, equipment and produce procurement
  5. Agent-company coordination. Agents coordinate with the company on the distribution of goods and services. The specific coordination varies depending on the context and the company’s goals
  6. Payment of commissions. The company pays commissions to the agents according to the type and quantity of services delivered. In some cases, agents may receive working capital advances at the start of the season to help them cover their expenses (fuel, airtime)
  7. Monitoring and evaluation. The company evaluates the results of the agent network, and adjusts its strategy for the following season as necessary (agent numbers, targets, commission structure)

Why implement it?

Please click below for more detail on the benefits that commission-based agent networks can bring for different actors in the value chain:

Context matters: What are enabling conditions for agent networks?

Context plays a major role in the viability of a commission-based agent network. From implementing innovations across businesses in different contexts, we can identify the conditions in which agent network innovations enable businesses and farmers to flourish:

  • Value chain
  • Perishability
  • Geographical dispersion of farmers
  • Degree of Farmer Organization
  • Policy environment
  • Digital infrastructure
  • Rural infrastructure

Why not? Key limitations, risks and unintended consequences

From the perspective of the implementing organization, there are a number of limitations that should be taken into consideration before you implement a commission-based agent network, including:

  • Agent misconduct
  • Identification of capable agents
  • Cash constraints
  • Agent turnover

Similarly, there are unintended consequences that can emerge as a result of commission-based agent networks. These can impact (certain segments of) farmers, the environment, local community, partner organizations and other stakeholders. For instance:

  • Social conflict
  • Social exclusion
  • Misuse and oversale of products

Smarter design choices can help mitigate some of the limitations, risks and unintended consequences of implementing commission-based agent networks. Read on further to see how you can smartly design your intervention.

How to design a commission-based agent network?

This section first outlines the steps involved in establishing an agent network, before providing key recommendations on key optimizations for the improvement of performance outcomes. Click on the sub-headings below to reveal details. 

How to get started? 

From FarmFIt’s work supporting companies in the design and initial implementation of agent networks, we propose the following five steps:

How to optimize your commission-based agent network?

FarmFit’s work supporting companies on the ground has identified several enhancements that can be implemented to improve outcomes for businesses, farmers and agents.

How to complement your commission-based agent network?

The successful implementation of innovations can often be supported by other innovations being implemented simultaneously. From our experiences, the following innovations work well alongside a commission-based agent network:

  • Farm Management Information System (FMIS). The implementation of FMIS allows companies to monitor, manage, and evaluate the agent network and farmer base more effectively. It automates and digitizes data collection and monitoring of KPIs. As such, it limits capacity for human error in data management and grants decision makers faster access to such data. Click here to access a guide on implementing FMIS
  • Mobile Aggregation Centers (MACs). MACs can support agents in purchasing and aggregating produce more effectively. Since MACs are compact and highly mobile units, they can be ideal when working in remote and difficult to access areas. Click here to learn about how Smart Logistics embedded MACs into their model
  • Service Coalition. By participating in a service coalition, multiple companies can benefit from a common agent network. The network’s value is enriched by the complementary services that agents can offer (inputs, finance, training, etc.), while the organizations invest more cost-effectively in pooled resources for the network (shared data, equipment, facilities, etc.). 

What is the impact of a commission-based agent network?

There are several ways in which employing agent networks can lead to better business outcomes: 

Where to find further inspiration?