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
- Service Delivery Cost and Last Mile Delivery
- Farmer Value Created and Last Mile Delivery
- Direct Cost Recovery and Last Mile Delivery
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
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.
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.
- 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.)
- 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.)
- 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
- 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
- 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
- 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)
- 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:
- More scale. Companies can scale better by reaching more farmers while preserving customer intimacy, thanks to the agents’ proximity to farmers and their communities. This helps companies achieve bigger scale with their models. However, agents’ incentives need to be well-aligned with the companies to ensure better relationships with farmers are created and maintained
- Reduced cost to serve. Service delivery and produce aggregation can be more cost-efficient than using a company’s own staff and/or running localized branches. Locally situated agents tend to result in lower travel and human resource costs compared to using a company’s own staff
- Reduced side-selling risk. Farmers may be less likely to side-sell due to agents’ frequent farm monitoring and timelier produce collection
- Better data collection. More touchpoints between agents and farmers can facilitate improved data collection to inform business decisions
- Improved access to services. Agent proximity to farmers can facilitate timelier access to context-specific agricultural services such as inputs, extension, equipment and finance
- Travel-related savings. Farmers can save time and money by having services closer to their own communities and therefore reducing the need to travel
- Reduced quality losses. Farmers’ post-harvest and quality losses are often reduced due to timelier produce collection and adequate storage
- Improved communication. Farmers enjoy better communication with companies due to the mediation of, and closer relationship with agents
- Flexible arrangements. Due to familiarity and proximity with agents, farmers may have better access to personalized and flexible arrangements for payment terms, farm monitoring, pest control, etc.
- Higher incomes. Agents can generate higher, more stable, and/or more diversified sources of income. If successful, agents can eventually provide employment opportunities to other members of the community
- More empowerment and autonomy. By becoming microentrepreneurs, agents can take their own business decisions. For agents that are also farmers but have non-farming ambitions, an agent model and the entrepreneurship and business skills acquired create opportunities for economic pathways out of farming
- Upskilling. Agents can develop professional capabilities from training provided by companies and via practical experiences in their work. These capabilities can be used to continue growth, either as agents or in setting up other businesses
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:
- Set objectives for the agent network, including the services to be delivered by the agents and the target farmer segment to engage. For each service, determine whether you are happy to have agents deliver alone or whether they need supervision and support from your own staff
- Align objectives with short and mid-term business goals. Expected targets of the business (e.g., procurement targets, input sales etc.) must be the cornerstone of all network planning
- Decide whether to share your agent network with other companies. Analyze the pros and cons: sharing the network may reduce your costs, but shared agents can create conflicts of interest or result in misuse of shared resources
- Establish a clear commission structure. Decide on commission levels based on percentage of sales, fixed fees per service, or a combination of both. Consider factors such as the complexity of services, number of farmers managed, profit margins, market dynamics, and macroeconomic dynamics. For services and activities that aren't charged for, such as training and data gathering, companies can either provide flat fee payments for the activity or base it on the number of farmers trained or registered
- Decide whether to offer additional, performance-based incentives to agents. Consider tiered financial bonuses, nonfinancial rewards (e.g., agent of the month awards, branded goods and merchandise), social recognition events, and agent graduation mechanisms (e.g., agent supervisor, or super-agents)
- Ensure a properly balanced structure that strives for agents’ satisfaction while assuring company profitability goals
- Develop a clear and transparent system for the identification, evaluation, and selection of agents. Define the profile(s) you are seeking in your agent network
- Establish an effective approach to identifying candidates for the positions. Consider local media, social networks, word-of-mouth, and third parties (e.g., NGOs, development agencies, farming cooperatives)
- Evaluate candidates as objectively and consistently as possible to avoid biases or discrimination. Include evaluation instruments such as checklists, initial screenings, semi-structured interviews, and tests
- Include selection criteria such as gender, business acumen, leadership, knowledge of farming practices, knowledge of the agricultural sector and/or specific value chain, local networks within specific farming communities, communication skills, self-management capacities
- Assess the needs of selected agents in terms of skills, knowledge, and assets
- Provide onboarding and comprehensive training to selected agents based on identified needs
- Training topics might include financial literacy, business management, sales techniques, customer relationship management, produce quality control, and good agricultural practices. Provide agents with ongoing training and assessment to ensure their capabilities and skills remain up to date
- Map the geographic area of intervention. Divide it into manageable territories for agent deployment. Consider factors such as geographical proximity, farmer density, service complexity, agricultural potential, infrastructure, and sociocultural factors (language, social etiquette, leadership)
- Assign clearly defined territories. Competition through agents can be encouraged through incentives but avoid overlapping agents’ areas of operation as this can create ambiguity, confusion for both agents and farmers, and possible conflict. Ensure enough farmers to serve per area without exceeding agents’ logistical capacities
- Decide whether to support agents through the provision of additional resources for their work. These may include provision of equipment (e.g., moisture meters, scales, tablets, etc.), infrastructure (e.g., improved storage facilities), working capital, marketing materials, and periodic training updates
- Establish an agent reporting system, which includes data collection requirements, reporting formats and cadence, and communication channels. Assign specific staff to maintain communication with agents.
- Define key performance indicators (KPIs) to monitor and evaluate agents’ performance. Consider metrics such as services sales and aggregation targets, profitability, and farmer satisfaction. Typical metrics might include sales per farmer, non-performing loans, training attendance, volume sourced, contract compliance levels, and can be based on a per-season or a year-on-year or season-on-season growth basis
- Adjust the network’s design based on agent performance, farmer feedback, company goals, and market dynamics. If necessary, retrain agents, discipline or remove bad agents, enlarge or reduce your agent base, review targets for service delivery and produce sourcing, and restructure commissions and incentives. Restructure your network by graduating outperforming agents
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.
- Streamline and automate processes. Assess all the activities involved in your network, from agent recruitment and training to service delivery, reporting, and evaluation. Automate tasks where possible and implement standardized procedures. Evaluate the cost benefit of integrating digital technologies (tablets, dedicated software, digital platforms) to support the automation of processes. Examples of such streamlining are standardized training programs cascaded down to agents and farmers, and digitized data management and analyses
- Agent selection. Where agents require specific capabilities, knowledge, or assets, focus recruitment efforts on agents with a strong background in those capabilities, knowledge and/or assets. This reduces the cost of capacity building and equipping of agents with assets (such as motorcycles or storage)
- Monitor agent activities for efficiency. Monitor agent activities over time to identify opportunities for efficiency. For example, reorganizing agent deployment in-territory can help balance workloads and minimize agent travel distances. Where possible, use analytics to extract insights from collected data, including feedback from farmers and agents. Identify patterns and trends to regularly evaluate and make decisions to refine the network (e.g., assessing how age, gender, geography and farmer characteristics influence costs)
- Partnerships. Explore partnerships to find synergies (e.g., sharing data), and drive efficiencies. Potential partners for your agent network include agricultural organizations, NGOs, financial institutions, or government agencies that provide resources and expertise. In Uganda, FarmFit is supporting a company who is sharing agents with other service providers that it collaborates with. This helps reduce the costs incurred by each company as well as increasing the sources of income for the agents. Similarly, in several contexts we have seen how agents can support loan administration for tripartite financing agreements where financial service providers, input providers and off-takers need to collaborate effectively.
- Align with farmer needs. Leverage agents’ local knowledge and relationships to recruit farmers more efficiently. Collect farmer feedback through the agents to understand better your farmers’ needs. Align the services provided through the agent network to address those needs and to create a more compelling value proposition to farmers
- Gender-sensitive network. Consider that women are often more sensitive to and can better cater to the needs of women farmers. This is especially important if trying to reach more farmers A company we support in Uganda deliberately recruits female agents as the company has seen better performance when they engage with women farmers. Similarly, if trying to reach youth or other specific communities, be strategic about how you build your network
- Knowledge sharing. Facilitate collaboration among agents in your network. Establish regular meetings where agents can learn by exchanging best practices, success stories, and lessons learned. Several companies that we support conduct roaming training sessions where agents from an area learn from those working in other, comparable territories
- Market linkages. Provide farmers with important market information through the agent network. This information might include demand, pricing and quality standards. By strengthening market linkages, farmers can improve their access to premium markets. In various situations we have observed how agents can provide farmers with transparent information on the prices the companies are willing to pay. This is vitally helpful for farmers to avoid non-transparent middleman pricing and procurement practices that may try to take advantage of a farmer’s lack of knowledge on current market rates
- Monitoring farm performance. Leverage the agent’s frequent touchpoints with farmers to collect more farm data on an ongoing basis. Define KPIs to monitor the impact of the agent network at farm level. Measure increased productivity, improved income, reduced post-harvest losses, and adoption of sustainable practices; this will contribute to the population of a farm management information system
- Agent integrity. Wherever possible, perform a reference check to assess the agent’s risk of misconduct. Ask former employers, farmers, and farmer groups for the performance, leadership capabilities, and integrity of the agent. For example, in one model in Indonesia, agents have a strong link to – and understanding of – local farmer communities and their needs because they are recruited from local farmer communities. It is critical for the farmers to trust agents, in order to ensure adoption of practices and technology. Similarly, some companies ask for candidate recommendations from other companies, governments, and NGOs
- Contractual agreements. If the regulatory context allows, develop clear contractual agreements that outline agents’ roles, responsibilities and obligations. Include confidentiality terms, likely responses to changes in market conditions, and dispute resolution. Companies that FarmFit supports across Nigeria and Uganda use contractual arrangements to add a degree of formality to the relationship with their agents, and to build trust in their expected work
- Performance monitoring and auditing. Track agent performance based on set targets. Make adjustments as necessary: retrain, reward, graduate, downgrade or dismiss agents. Ensure that well-performing agents are well rewarded to avoid attrition. Conduct regular audits to verify the accuracy of data, sales records, and adherence to processes. Monitor financial transactions to identify irregularities
- Safeguards for input sales. Make sure you have checks and balances in place to ensure that agents are not overselling or mis-selling inputs that can have detrimental effects on the farmer, farm, or local environment. Many agents are incentivized to sell as much as possible and may not directly experience the consequences of overselling and selling inappropriate products. Therefore, companies must ensure the protection of their farmers and local communities by including safeguards such as tracking product sales per farmer, bundling input sales with training on responsible agrochemical management and following up through visitations or spot checks to gather further information on the impact of input sales
- Technology support. Implement digital solutions to improve the traceability and management of flows of goods, financial resources, and operational data. Examples of this are the use of moisture meters, digital scales, Farm Management Information Systems, and digital payment platforms. For example, several companies working with Farm Management systems have GPS tracking that allows them to observe if agents are attending farms when they enter data. One company even reported having to fire an agent who was repeatedly entering data from home without having visited farms. One Kenyan agribusiness we partner with uses digital receipt systems to ensure transparency over the procurement process
- Insurance support. Explore available insurance options in your area to mitigate risks in your agent network: no repayment of inputs given on credit, misuse and damage of equipment, liability for damages. This is particularly important if agents are provided with expensive assets such as vehicles and processing machinery
- Plan for scalability. Design your agent network with scaling objectives in mind. Set objectives considering current and future market demand, operational capacity, resource allocation, and organizational readiness. Determine whether expansion should involve more agents or an increase in farmer to agent ratios. Plan when and under which conditions to implement new design options for your network. For example, determine the point of growth at which it is worth investing in technology and digital platforms to better track agents’ performance. Update your network’s goals and attainable targets as you expand
- Standardization. Whilst expanding your network, utilize standardization processes and procedures to ensure consistency. In larger scale models, such standardization is important to keep the same quality of operations across regions or markets. Develop a manual of operations for agents which detail processes, roles, and responsibilities. Several companies to whom FarmFit provides technical assistance reported reaching a much larger farmer base by implementing replicable training standards through trainer-of-trainers and trainer-of-farmers models
- Technology enablement. Implement digital solutions to streamline operations and automate tasks like training and reporting. These enhancements are key to managing a larger network more efficiently. We have supported a number of companies in Nigeria, Kenya and Uganda through mobile payment systems and Farm Management platforms. Through such digital implementations, those companies have built more streamlined and reliable communication and payment channels between agents and farmers. They have reported an increase in efficiency of operations and a higher satisfaction rating among farmers
- Provide working capital. Provide your agents with capital and assets as needed to help them get started at the start of their engagement with you and as each season commences. Providing them with working capital to finance fuel and airtime expenses or directly equipping them with assets such as motorcycles and warehouses can prove helpful. Adequate and timely financing enables agents to deliver services and source produce effectively – and in turn for you to generate more revenue. Where you want to invest in assets for your agents such as motorcycles and storage, establish loan structures that ensure the (partial) recovery of your costs
- Incentivize performance. Design your commission and incentive structure to reward target-based performance. Recognize agents who consistently demonstrate good performance and loyalty, especially when it comes to input sales and loan recovery that help you generate revenues and cover costs. Provide support to help agents improve their performance through training on knowledge and capabilities.
- Cross-selling. Encourage agents to offer additional services to farmers. Train them in promoting complementary and/or higher-value packages to increase the average transaction value and generate additional returns. Some companies have decided to partner with other businesses to enrich their offer and generate more revenue streams
How to complement your commission-based agent network?
The successful implementation of
- 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:
Last mile delivery is one of the main drivers influencing the
Businesses relying solely on agents or other intermediaries for last mile delivery see lower
A key improvement opportunity lies in increasing the capabilities of intermediaries to take on more complex service delivery - and to play a significant role in both revenue-generating services and business models. Click here for our detailed analyses on the link between last mile delivery and cost recovery.
Companies that partially or fully rely on agent networks or other types of intermediaries show lower
To safeguard against lower quality service provision, companies need to ensure that intermediaries have the appropriate capabilities and resources to deliver services effectively to farmers. Click here for detailed analyses on the link between last mile delivery and value creation at farm-level.
Where to find further inspiration?
- Village Agent Model Study: Likely effects on the Ugandan agricultural sector: https://agrilinks.org/sites/default/files/resources/dlec_village_agent_model_study.pdf
- Engaging Young Agripreneurs: Options to Include Youth in Private Sector Extension and Advisory Services in Rwanda and Uganda: https://www.digitalgreen.org/wp-content/uploads/2017/09/DLEC-Study-on-Engaging-Young-Agripreneurs_Lessons-from-Rwanda-and-Uganda.pdf
- THE VILLAGE AGENT MODEL. Experiences and Lessons from CARE International’s work on Financial Inclusion for the marginalised. https://care.ca/wp-content/uploads/2018/12/Village-Agent-Model-Learning-Document.pdf
- The Village Agent model under NU-TEC MD: https://beamexchange.org/resources/1356/
- Agent Networks at the Last Mile: Implications for Financial Service Providers: https://www.cgap.org/research/reading-deck/agent-networks-last-mile-implications-for-financial-service-providers