Strength of Relationship 3/5
- Weak relationship between driver and outcome variables
- Results are consistent across analytical models used
- Few limitations regarding sample or indicator
Working with intermediaries is strongly associated with higher efficiency (due to the lower
For last mile delivery, companies that combine intermediaries and their own staff charge farmers a higher percentage of costs than those relying exclusively on their own staff.
Our data suggests this is due to four main reasons:
Breadth of service offering Choice of which services to charge for Proximity to farmers Trust building and willingness of farmers to pay
Understanding the role of last mile delivery in direct cost recovery
Leveraging intermediaries for
The trade-off is that the company sacrifices a degree of control compared to exclusively working with its own staff. But does the higher efficiency (or lower cost) of mediated options also translate to a proportionally higher
Our analyses demonstrate that businesses taking a fully intermediated approach for last mile delivery tend to recover a much smaller proportion of their service costs through service revenues. In fact, more than half of the organizations that rely solely on intermediaries do not charge farmers at all for goods and services provided. Our modelling results, in which we control for the estimated relationships between direct cost recovery and all other drivers analysed, confirm this relationship.
While our analysis indicates that businesses taking a fully intermediated approach have, on average, a lower direct cost recovery, they also show that those taking a combined approach are associated with higher direct cost recovery compared to those only relying on their own staff. In addition, there is a big spread of direct cost recovery percentages within each of the three categories. Therefore, the data suggests that it is not only whether intermediaries are used for last mile delivery that is the key driving factor, but the degree to which they are used, as well as the method a company employs. We need to dive deeper and look beyond just the data to gain a fuller understanding of what is happening and what this means.
Link to other outcomes
Understanding the trade-offs between direct cost recovery and other outcomes is particularly important when looking at last mile delivery. Our research shows that:
Service Delivery Cost per Farmer, a company that uses only its own staff is associated with a higher farmer service delivery cost. Click here to read more
Farmer Value Created, businesses that rely solely on their own staff for last mile delivery show higher levels of value creation, on average, compared to those that use intermediaries – whether partially or fully. Click here to read more
Diving deeper: what do we think explains these results?
When observing the relationship between direct cost recovery and last mile delivery, we observe two trends. Firstly, fully intermediated approaches are associated with lower direct cost recovery, despite their on average lower cost. This can be explained by the:
Breadth of the service offering– Businesses taking intermediated approaches tend to offer a narrower range of services, either offering training alone, or a combination of training and inputs. Narrow models such as these are often not designed as revenue-generating business models and therefore have low direct cost recovery. Choice of which services to charge for– Businesses that charge for services such as inputs are more likely to involve their own staff in last mile delivery. Services such as training on the other hand are almost always provided to farmers for free – and are more often delegated to intermediaries. More complex services such as mechanization and irrigation tend to be delivered by a company’s own staff. These services are almost always charged for.
Secondly, business models working with a combination of own staff and intermediaries are associated with higher direct cost recovery due to the supportive role that intermediaries can have in collecting service revenue – and therefore recovering costs. For example:
Proximity to farmers– Locally-situated intermediaries can support with recovering costs through increasing input sales and supporting the loan repayment process Trust building and willingness of farmers to pay– Intermediaries can often be a conduit for new technologies and innovations. For instance, lead farmers and agents often run demonstration farms, which are, in turn, used to convince farmers to invest in certain technologies and carry out particular practices.
Implications – so what does this mean for you?
Based on our findings on this topic, we see the following implications for different audiences:
- Benchmark your direct cost recovery against comparable peers. Could you be charging more for services?
- Take a look at this commission-based Agent Innovation Guide to see how you can implement or improve your model.
- Reach out to FarmFit Business Support. We can analyze your business and work with you to find opportunities to optimize your last mile delivery approach. Specifically, our team will help you identify opportunities to drive revenue generation through different last mile delivery options, as well as best practices on how to build community-level trust and credibility through a well-designed intermediary approach.
- Consider the role that local intermediaries can play in your business to drive revenue generation, such as input distribution support and following up for loan repayments.
- Ensure intermediaries can deliver the specific services you want them to execute. If a certain skill level is required, then either rely on your own staff, or train and resource intermediaries.
- If you’re not able to trust intermediaries with significant amounts of cash in hand, there are steps you can take. You can use your own staff to provide oversight of cash transactions, or leverage technology, such as farmer management systems and digital receipts, to improve transparency and oversight over processes.
- Use the Data Explorer to benchmark companies currently in your portfolio and work with your investees to boost understanding of financial and impact performance, as well as ways to improve them. We can help you conduct a more detailed portfolio analysis of your investees and/or pipeline, create comparable insights, and identify relevant investment opportunities and risks.
- Invite us to work with your investees to help you understand how they have balanced certain factors – including incentives, risks, opportunities, oversight and governance – when working with intermediaries. Are your investees able to reap the benefits of working with intermediaries while mitigating risk?
- Discuss last mile delivery with your investees, helping them to consider their business model, scale up and generate revenue. Scaling and revenue generation are both key to long-term commercial viability and therefore your investment. Working with intermediaries can help improve revenue generation, and lead to lower-cost and lower-cost recovery models. Link to Data Explorer
- Continue to support with capacity-building and governance of intermediaries. These are both key influencers for successfully increasing the ability of intermediaries to provide more numerous and complex services. Donors and support organizations are already very involved in building and scaling agent models and we recommend to continue investing in ways of building capabilities and governance. Empowered intermediaries with active roles in service delivery can also be foundational to enhanced local economic activity in rural communities – providing income-generating opportunities in agriculture beyond primary production.
- Promote the development, refinement, and usage of tools to standardize assessment of intermediary capabilities (e.g. SCOPEinsight)
- Invest in the research and development of business models of intermediaries to create incentives for high-potential individuals to become rural entrepreneurs and work as intermediaries – either directly for a company or as independent providers of goods and services.
- Many organizations are either supporting companies to implement agent models or investing in agent models directly. We invite knowledge exchange on best practices around how agent models can be well-structured and incentivized.
- Assess the legal framework to determine whether relationships between intermediaries and companies protect their respective rights and ensure responsible business practices.
- Invest in infrastructure that supports last mile delivery networks. For instance, consider digital infrastructure in addition to rural roads storage facilities.
Reflections on data limitations and further research
The is a living document which we are constantly updating with new findings, with support from our partners. For the results on this page, we would like to emphasize the following:
Major caveats and limitations of our current approach
Although we believe our analyses and insights offer findings that can already be used to inform decision-making, we are aware of a number of caveats.
Our analysis of direct cost recovery does not consider the commercial revenues generated from sourcing activities Our analyses only capture the presence of last mile delivery options
Next steps that we have planned to update these findings in the near future
Inclusion of sourcing profitability into future analyses Investigate more closely the relationship between context and last mile delivery
Suggestions for additional research by our peers and partners
Research on the enabling environment conditions that influence the cost of agent networks
Kansiime, Monica K., James Watiti, Abigael Mchana, Raymond Jumah, Richard Musebe and Harrison Rware. 2018. Achieving Scale of Farmer Reach with Improved Common Bean Technologies: The Role of Village-Based Advisors, The Journal of Agricultural Education and Extension
Palladium. (2018). The Village Agent Model Under NU-TEC MD. https://beamexchange.org/uploads/filer_public/aa/11/aa11ec1c-38f3-49b5-a2a0-d0b3ca9b544b/village-agent-model-nu-tec-md.pdf
USAID. (2016). Brief Intermediary Business Models for Improved Market System Processes and Relationships. Uganda. www.feedthefuture.gov
Mercy Corps Agrifin Accelerator. (2020). Field Force Models for Agriculture – Key Learnings and Insights.Nairobi. https://www.mercycorpsagrifin.org/wp-content/uploads/2020/09/Digital-Field-Force-Case-Study_FNL.pdf
60 Decibels. (2022).Syngenta Foundation India - Agri-Entrepreneur Insights. http://60decibels.com/wp-content/uploads/2023/05/Syngenta-Foundation-India_Agrientrepreneurs_Extrernal_60dB.pdf