Innovation Guide
Service Delivery
Service Coalitions
9 Jan 2025
•
4 minutes read
by
Larissa Shnayder
What is this document and why does it matter?
This guide contains actionable steps on how to design and implement
We first introduced the concept of Service coalitions in Shifting Gears. The information in this guide is based on evidence and the direct experience of companies that have set up or joined service coalitions in a range of contexts.
We believe that service coalitions – alliances between two or more organizations formed to collaboratively provide services to smallholder farmers – can encourage the sharing of costs, risks, and revenue opportunities in a way that benefits all parties while also creating value for the farmers through a more complete and integrated service offering.
This guide is primarily written for companies implementing or looking to implement service coalitions. It can also provide helpful information to support organizations and donors working with companies to strengthen their business models.
What is a Service Coalition?
Service coalitions aim to meet the needs of smallholder farmers by engaging several organizations to provide services and markets in a coordinated manner. By working together, partners can provide a range of services to the same cohort of farmers that may not be possible or commercially viable for an organization to provide alone. By each specializing in what they do best, partners can also provide higher quality services at a lower cost.
Underpinning any service coalition is a degree of coordination and formalization among partners. This can either be via a contractual agreement, through clear strategies to share data, resources, and risks, among multiple parties, or more simply through a set of well-defined roles and responsibilities between the different actors in their smallholder engagement.
When exploring service coalitions, it is important to be aware that comparable concepts exist, in research and practice, under different names. Two actively used synonyms for service coalitions are “consortia” and “project-based alliances.”
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How does this typically work?
Service coalitions come in many forms. While there is no on-size-fits-all approach, below is an illustration of a common service coalition configuration.
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A service coalition can emerge in different ways. An individual service provider can engage partners when farmers need more services or more specialized services than the single actor is able to provide. For example:
- One actor seeking to add new services and/or off-take: An off-taker currently offers training and fertilizer to farmers. It wants to add seeds and mechanization so it partners with an input provider and a mechanization rental company.
- An actor trying to outsource some services: A single actor may be able and willing to provide all of the services at first, but may be unwilling to do so in the long term. For example, if an input provider is working with farmers that are in need of input credit, they may provide credit from their own resources initially, but decide to collaborate with a Financial Service Provider (FSP) in order to scale.
- Several actors brought together at once by a lead member or third party: A prospective lead coalition member or a third party, such as a support organization brings together complementary service providers to form a service coalition to provide a holistic range of services to farmers. For example, a support organization identifies that a target group of farmers need seeds, capacity building, market access, and finance. As a result, the support organization brings together an off-taker, training institute, input provider, and bank to provide services through a coalition.
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Once formed, the service coalition members align on objectives and divide responsibilities for service provision. The service coalition partners have the opportunity to optimize the knowledge and resources of each partner by offering complementary services to small-holder farmers based on the competencies they possess. For example:
- An off-taker provides market access and may also provide post-harvest services
- An input provider ensures access to seeds, fertilizers, and crop protection, and may also provide training on how to use them
- A Financial Service Provider (FSP) can facilitate loans and crop insurance
- Because service coalitions provide complementary services, they depend on one another for success. As a way to manage risk, partners may choose to formalize their collaboration through agreements that define governance and specify the roles and responsibilities of each actor. This could start as an informal alignment document and transition to Memoranda of Understanding (MoU) between partners or, when necessary, legally binding contracts, as the service coalition matures.
- In a hierarchical service coalition structure, one partner may see value in taking on a heavy facilitation role or taking on more service provision for the benefit of themselves and the coalition. This could include hiring a service coalition manager or supporting other coalition members in the services that they provide. In a flat structure, duties and responsibilities are more equally shared.
Why implement it?
Please click below for more detail on the benefits that service coalitions can bring for different actors in the value chain:
Companies
Companies
- Cost reduction by:
- Sharing a farmer base, reducing customer acquisition costs.
- Lower human resource and transportation costs as these can be shared across coalition members.
- Sharing real (physical) assets such as storage capacity or machinery between coalition partners.
- Reduced costs for data collection and additional data availability through the sharing of data between service coalition partners.
- Risk reduction. Coalition partners can share and even reduce risks by working together. For example:
- An off-taker can share credit risk by partnering with Financial Service Providers (FSPs) in a tripartite financing agreement. Additionally, overall credit risk can be reduced due to market certainty, crop insurance, and sharing of creditworthiness data.
- Production risk can be reduced by partnering with input providers, who can ensure the availability of high-quality seeds, fertilizers, and crop protection.
- Supply risks can be reduced by partnering with aggregators or logistics companies, who can ensure that farmers have better access to market.
- Operating Synergies. For some companies, the operational complexity and expertise required for providing certain services or combinations of services are too high to provide services independently. By working within a service coalition, companies are able to combine their capacities to become more than the sum of their parts, providing more and better services to farmers. This allows those companies to enjoy more of the benefits such as increased sourcing volume or the additional sale of inputs. For example:
- An off-taker may not have the capacity or expertise to support farmers with agronomy services. An input provider may already have field agronomists in those regions for providing training on their products. However, that input provider may experience strong competition from other input providers in those regions and struggle to grow their customer base. By partnering with one another, the input provider’s field agronomists can also deliver services to and collect data from the off-taker’s farmers, who become additional customers for the input provider. Meanwhile, the off-taker can enjoy higher volumes and improved predictability of procurement.
- Improvement in volume and reliability of sourcing or sales. The added value of a wider range of complementary services to smallholder farmers can improve the efficiency and effectiveness of those farmers. These improvements can lead to more predictable produce quality and higher yields. Off-takers can thereby enjoy more reliable sourcing, an important factor for scaling. If the company manages to maintain or scale up demand, cash flow for the farmer improves, which benefits all coalition members. Possible results include higher sales volumes for input providers and increased investment in other farm activities.
- Ability to invest in assets. By working collaboratively, companies may gain the ability to jointly invest in infrastructure – physical and/or digital – that they would not be able to afford on their own. For example, a company that we supported in India is offering emission-reducing technology. They have partnered with off-takers to take on part of that cost. This reduces the off-takers’ Scope 3 emissions and allows them to meet the necessary regulations and internal ambitions.
- Access to shared data and insights. Sharing data and insights allows all parties to gain a deeper understanding of processes, challenges, and outcomes that directly or indirectly influence them. This can range from creditworthiness data on individual farmers to aggregated procurement and sales data that can help to predict supply or demand for different coalition partners.
- Improved reputation. Service coalitions can create greater impact at farm level, which companies can use to showcase their inclusivity and sustainability credentials to consumers and downstream value chain partners.
Farmers
Farmers
- Improved access to services. Service coalitions typically broaden the number, type, and reach of services available to smallholder farmers. The mechanism for this is described in Operating Synergy in the section above.
- Facilitation of complementary service packages. The combined services package provided by a service coalition offers a compounded benefit when those services complement one another. Farmers not only gain access to more services but also to better services that work together to equal more than the sum of their individual parts. For example:
- Farmers benefit from input loans that are large enough to cover their input needs, distributed in time with their farming activities, and with repayment after harvest. The combination of finance, inputs, and off-take offered by a service coalition can mean farmers enjoy more coordinated services.
- Improved access to higher risk services. Higher risk services can become more financially viable for service providers within a service coalition to provide because of opportunities for risk reduction and risk sharing. For example:
- The sharing of due diligence duties and creditworthiness data lowers loan administration costs for FSPs, whereas assurance of off-take markets works as a de-risking mechanism. By improving the unit economics for FSPs, they are more willing to provide loans to farmers
- As a standalone service, the adoption of crop insurance is often inhibited by cost, complexity and claims processes. Bundling crop insurance with input credit (i.e., with premiums as a % of loan value) is often used to integrate insurance more effectively. Furthermore, the staff of coalition partners can play a role in supporting claims process in a service coalition
Support Organizations
Support Organizations
- Cross-value chain collaboration. Support organizations increasingly recognize that in order to have impact, they need to work across multiple value chains or landscapes. While many companies (especially off-takers) may only target a single value chain, service coalitions provide an efficient means for support organizations to engage multiple companies to better serve the needs of the same cohort of farmers. This can open opportunities to access additional value chains, enabling the support of income diversification at farm level.
- Increased capacity and opportunity for impact. Support organizations aiming to stimulate impact-driven activities in the private sector can use service coalitions to better develop the overarching ecosystem for services and off-take. For example:
- Support organizations can facilitate the creation and design of service coalitions according to their impact goals
- Support organizations can take advantage of the increased capacity of a coalition to provide more services at a reduced cost. This can facilitate the inclusion of more complex services such as irrigation, insurance and mechanization where the business case for individual service providers may be prohibitive
- Support organizations can take advantage of their role as an independent third party to build trust in the partnership – particularly when it comes to activities that are perceived as risky or competitive such as data sharing
Context matters: what are enabling conditions for Service Coalitions?
Context determines the form that a service coalition takes but service coalitions are adaptable and can be successful in many different contexts. Even so, some contextual factors can play a significant role in the success of a service coalition.From implementing innovations across businesses in different contexts, we are able to identify the conditions in which service coalitions 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
There are a number of risks and limitations that should be taken into consideration before implementing a service coalition, including:
Poor alignment on a value proposition Free rider problem Over-dependency on a single partner Service-poor regions Disagreements on cost/revenue distribution Hesitance around data sharing
Similarly, there are unintended consequences that can emerge as a result of service coalitions. These can impact (certain segments of) farmers, the environment, local community, partner organizations and other stakeholders. For instance:
Reduced access to standalone services Inefficient compromising Reduced market competition
Smarter design choices can help mitigate some of the limitations, risks and unintended consequences of implementing service coalitions. Read on further to see how you can smartly design your intervention.
How to design a Service Coalition?
This section first outlines the steps involved in establishing service coalitions, before providing key recommendations on how existing service coalitions can be optimized to improve key performance outcomes. Click on each of the sub-headings below to reveal more details.
How to get started?
Service Coalitions may emerge from different needs and starting points including:
- One actor seeking to add new services and/or off-take
- An actor trying to outsource some services
- Several actors brought together at once by a lead member or third party
From our work supporting companies in the design and initial implementation of service coalitions, we propose the following four steps. The order of these steps may vary depending on the starting point:
Identify objectives and required services
Identify objectives and required services
- Identify your objectives. Identify what improvements, at company level and beyond, you want to achieve from providing services to smallholder farmers. For an off-taker, this might be more consistent produce quality and higher procurement volumes. For an input provider, this might be increased sales revenue. In this step, it is important to assess your starting point and determine what you want from a service coalition to help you reach those objectives. For example:
- Your company is offering a narrow set of services but looking to complement them with new services and/or off-take. Objectives may include:
- Reducing risks through complementarity of services (e.g., irrigation reducing production risks)
- Responding to farmer needs (e.g., finding off-takers for other crops cultivated)
- Your company is already offering multiple services and looking to share the burden by outsourcing some services. Objectives may include:
- Cost reduction (e.g., sharing the cost of training and extension)
- Risk reduction (e.g., offloading financial service provision to a bank)
- Reduction of operational burden
- Your company is among a number of companies being brought together by a lead member or third party to start a brand new service coalition. Objectives may include:
- Impact-driven goals, facilitated by a support organization
- Your company is offering a narrow set of services but looking to complement them with new services and/or off-take. Objectives may include:
- Compile a wish list of services. Identify the service needs and challenges of the farmers that you serve. If you are already offering services, a gap analysis can help to identify additional service needs to help you reach your objectives and your farmers to reach theirs. Based on this analysis, it can be useful to visualize the big picture by grouping complementary services together and assigning each service a priority score. This scoring system can be used to prioritize partnerships and services moving forward. If you are already providing a holistic set of services, this step may not apply.
- Evaluate the business case of providing those services yourself. The commercial viability of providing services yourself can vary greatly depending on short-term and long-term costs, direct cost recovery, indirect profitability, and number of farmers accessing those services. It is important to consider all of these factors when determining how providing these services will affect your company’s short-term or long-term revenue. Understanding the business case (or lack thereof) for providing these services yourself will help to shed light on which services may be better left to a partner.
Identify partners and establish a coalition
Identify partners and establish a coalition
- Survey your value chain for partners with complementary objectives. It is likely that others in your value chain already interact with farmers or aspire to do so. Some may even already be offering services to smallholder farmers. Finding partners with complementary objectives can help you to determine for whom it is mutually beneficial to participate in your service coalition. For example, if you are an off-taker, there could be Financial Service Providers (FSPs) in your area that would like to serve farmers but need support overcoming the risks. Or there may be input providers in your area that are already serving an overlapping cohort of farmers and can coordinate with you through a service coalition for a more comprehensive and complementary service offering.
- Verify that potential partners have sufficient reach and capacity. Once it is confirmed that objectives are aligned, it is important to verify that potential partners possess the ability to reach the relevant cohort of farmers and the capacity to provide them with the services in question. This means evaluating if the potential partners can meet the needs of the farmers and the coalition. Some questions to guide this evaluation can include:
- How much volume is the off-taker able to purchase?
- How much money is the FSP able to lend, and under what requirements and stipulations?
- Does the input provider have distributors in the required regions?
- Is the input provider dealing with shortages? For example, of the certified seed varieties that the off-takers require?
- If any component of reach or capacity is currently lacking, is there potential to fill those gaps within a timeframe that suits your objectives?
- Pitch the partnership. Reach out to potential coalition partners to pitch the collaboration. Show the ways in which the service coalition can be more than the sum of its parts by reducing cost and risk for everyone, allowing coalition members to benefit from data sharing, and improving the viability of the smallholder inclusive business model. For more ideas on how to pitch the partnerships, please refer to the section above, titled “Why implement it?”
- Align on a value proposition. To unify fragmented service provision via a service coalition, the coalition itself should also align around its joint value proposition. Misalignment can cause services provided by different coalition partners to lack cohesion or even hinder each other. For example, if one partner is focused on preparing farmers for access to organic markets and another is focused exclusively on access to inputs for higher yields, the combination of services provided may prevent some farmers from meeting organic standards for one partner and prevent some farmers from optimizing their yields for the other.
- Onboard partners with a formalized agreement. Decide on formalized agreements between partners to prevent miscommunication. Putting things on paper is best for proof of alignment. In many cases, an MoU may be sufficient. For high risk services with a lot of interdependency, legally binding contracts should be considered. Examples of situations where a legally binding contract is advisable include financial arrangements with significant sums of money moving between partners and any collaboration involving the sharing of sensitive data.
- Create a collaboration strategy that includes convening. Organize a kick-off meeting with all partners to design a strategy within the boundaries of all inter-partner agreements. Include a convening strategy, as described in the fourth step: Convene Partners Regularly; not only for accountability but also for strategy adjustments and fine-tuning.
Design a strategy and implement services
Design a strategy and implement services
- Identify service gaps. Compare the service wish list to the existing services offered by (prospective) coalition members to identify service gaps.
- Select a final list of services and an implementation timeline. Based on the gaps identified above, prioritize services for implementation. Consider whether the service complements existing services, can reach the desired (number of) farmers, is achievable in a measurable time frame, is financially viable, and works towards the objectives of the partners in the coalition.
- Decide which partner will take ownership of which service. The division of responsibility and accountability for services should be explicit and clear to all partners and documented in writing for reference. Frameworks exist to help facilitate this process, such as the
RASCI framework, which can be found here. Responsibility for too many services should not sit with a single partner, especially in the long term. The cost, risk, and liability of being a sole driver and facilitator of too many services can make the system unsustainable. Additionally, partners should focus on the services that they are most qualified to perform. This is key to getting the most “bang for your buck” as well as to maximizing service quality, both of which make it easier to achieve coalition targets. - Manage persisting service gaps. It is likely that not all services offered by the coalition members will cover all farmers, either due to geographic accessibility, capacity of the partners, or risks associated with the service. Some service gaps can be mitigated. For example, when geographic accessibility is the cause, a local partner in the relevant region can be onboarded to the coalition. Other gaps cannot be mitigated but can be managed when they arise. For example, if an FSP is only be able to provide a fraction of the total loan demand, they could either (i) establish clear set of criteria to only provide loans to a portion of the demand or (ii) reduce the overall loan amount per farmer.
- Create a system of accountability. In line with your collaboration strategy in the step “Identify partners and establish a coalition,” check in on progress and outcomes of ongoing service delivery regularly. Examples of accountability processes can include coalition-wide progress check-ins and the sharing of progress and outcome data.
- Share data where possible. Beyond accountability, making efficient use of data and insights across all partners in the coalition can benefit everyone. It prevents partners from wasting resources on duplicating each other’s data collection efforts and allows partners to make decisions based on more up to date information, thereby improving the overall quality of service provision. This makes it easier and more cost effective to achieve desired outcomes. Be mindful that data management needs to be in full compliance with relevant national legislation on the collection and processing of personal data.
Convene partners regularly
Convene partners regularly
- Identify objectives for convening. The overarching goal of convening is to adapt to new learnings and changing priorities together as a coalition. With this in mind, and in line with your systems of accountability and data sharing, identify objectives for each touch point. Sometimes, the focus may be tactical – focused on direct implementation and practice. Other times, the focus may be more strategic – focused on means for achieving longer-term aims.
- Create a schedule for touch points. Coalition partners should meet regularly – for example, on a quarterly basis. Additionally, there should be protocols in place for when to convene the team ad hoc – for example, in case of a major failure or an unexpected event.
- Structure touch points in a streamlined way. Each touch point should begin before the partners actually meet. Meetings should always have a chairperson, who is responsible for sharing an agenda in advance, giving everyone a chance to prepare and to add agenda items. The chairperson should begin the meeting with an alignment moment from the previous period between touch points. Minutes should be taken during each meeting and shared with all partners after the fact. Additionally, all partners should walk away with clear action points for the next period.
How to optimize your Service Coalition?
From our work supporting companies on the ground, we have identified a number of enhancements that can be made to improve outcomes for businesses, farmers, other coalition partners, and support organizations.
Improving Efficiency
Improving Efficiency
- Evaluate a need for a service coalition manager. In some instances, the lead company in the coalition or a rotating chair can suffice in managing a service coalition. On the other hand, a service coalition manager (SCM) is most suited when service needs are broad or many partners are involved, as more coordination is required. Additionally, an SCM can be useful when partners’ relationships with farmers or with each other can benefit from facilitation by an external party. For example, as part of their Mavuno Zaidi program in the potato and tomato value chains in Kenya, Syngenta makes use of an SCM to help with the price negotiation between farmers and off-takers by pre-negotiating a floor price with the off-taker and educating the farmer on the current market.
- Define the mandate of the SCM. The service coalition manager can align coalition members on a common strategy, coordinate division of roles and responsibilities, and facilitate data sharing. Other roles can be added to create synergy in joint service delivery to smallholders, facilitate complex relationships, and manage a sustainable service coalition. Appoint an SCM with competencies that match the mandate.
- Consider sharing staff or agents. Sometimes, staff or commission-based agents are hired by multiple partners separately but have overlapping mandates. For example, an input provider may hire field agronomists to support farmers in using their products, while an off-taker from the same service coalition may also hire a field agronomist to ensure good agricultural practices. In this case, it would be more efficient for the two partners to share staff and broaden the field agronomists’ mandates to include both functions.
- Coordinate shared activities. Some activities may be offered by multiple coalition members and it is often more efficient to coordinate these activities to offer them jointly. For example, there may be two coalition members training farmers: an FSP offering financial literacy training and an off-taker offering GAP training. It may suit them to coordinate their efforts to convene farmers and run both trainings as part of a single curriculum. Through coordination, they only need to advertise their training once, they can arrange space rental and transportation together, and everyone is present in the same place at the same time to distribute materials or share information.
- Take advantage of each other for customer acquisition. A benefit of service coalition membership is that each partner comes into the coalition with their own customers. When offering complementary services, it makes sense to use each other for customer acquisition, offering services jointly whenever relevant and possible.
- Create a structured system of sharing data and insights. Partners should identify a list of data points and insights to share and define standards and policies for doing so. If there are technical requirements for data sharing, IT teams should align. All coalition partners should fulfil legally mandated and mutually agreed upon conditions for privacy and transparency. In an ideal structure, partners should be able to access information directly and without delay. This eliminates direct costs associated with duplicating data collection and inefficiencies related to waiting for cooperation from other partners to obtain information.
Increasing Impact
Increasing Impact
- Build a broad service offering. When coalitions offer a broad range of services, farmers are more likely to have access to the specific services that they require. A choice of services gives farmers more autonomy over how they improve or scale their business.
- Ensure services are complementary. Partners should pay special attention to how services can work together to achieve impact. For example, farmers may be offered inputs or credit but no financial literacy training to understand how credit works. Without the complementary service of financial literacy training, fewer farmers may take advantage of credit services or more farmers may default.
- Monitor your impact. Monitor and survey farmers regularly to better understand the impact of your services as well as outstanding barriers, challenges, and needs. Use (shared) data to regularly gauge the impact achieved on farm level and adapt your service offering or delivery model as needed.
Mitigating Risk
Mitigating Risk
- Continuously unify your strategy. Partner organizations can have changing individual objectives or dynamics but the coalition must be consistently unified on service provision, due diligence, resource sharing, and data sharing. Ensuring that your strategy remains unified increases predictability and reduces the risk of erratic behavior from coalition partners.
- Employ formal contracts. Financial agreements, roles, and responsibilities should be formalized to hold each partner accountable for their role in the service coalition. For example, in a tripartite financing agreement between an FSP and an off-taker, without formalized clarity on who pays whom and when, one or more parties may end up with significant financial difficulties due to delays in cash flow.
- Build resilience. A coalition that is too reliant on the strongest partner to facilitate coalition activities is not resilient. If this partner suffers a setback or leaves the coalition, it could lead to, at best, gaps in services and slowed momentum and at worst, the collapse of the coalition – with potentially disastrous implications for farmers that rely on the coalition for access to goods, services and markets. This can be mitigated by ensuring that partners are set up to assist with each other’s responsibilities for a definite period, if needed. For example, if an off-taker in a coalition usually conducts field visits as part of due diligence for an FSP, the FSP should be able to take on this task for a short period of time if the off-taker’s resources are temporarily tied up with an operational emergency. Additionally, a balanced spread of cost, risk, and value can keep all partners motivated to continue in the service coalition
- Employ mechanisms to appropriately share cost, risk and value created. As your coalition scales to service more farmers or provide more services to existing farmers, overextension of certain services can skew the balance of cost, risk, and value sharing. A scaling strategy should include regular reevaluations of this balance.
- Build trust. Coalition partners should actively work to earn each other’s trust. With time, knowing your partners and their propensity for ethical behavior and follow-through can help the coalition to make better informed, less risky decisions. In the early days of a service coalition, partners should implement services in phases, only adding higher risk services after trust has been built. Trust is also key to building more open data sharing protocols and avoiding risks such as the free rider risk referred to earlier.
Scaling Up
Scaling Up
- Add partners for scaling to new geographic regions. Even if your coalition still has capacity to service more farmers, you might find that onboarding new partners is beneficial when expanding geographically. Making use of a local partner to provide services can reduce additional logistics costs and add knowledge of the local context to your coalition.
- Manage complexity using organizational tiers or levels. To effectively scale your coalition, it may be beneficial to organize into a higher-level strategic coalition that governs multiple local coalitions. For example, if your coalition provides services to farmers in multiple regions of one country, with local partners in each region, you may choose to have a national coalition for higher-level strategic decision-making and multiple local coalitions that are partially self-governing but still compliant with the strategy and objectives of the national coalition.
- Ensure sufficient resources and capabilities across the coalition. Excitement about scaling opportunities and the drive to adapt to a rapidly evolving environment can inspire organizations to make bold commitments. To facilitate success, a scaling strategy should involve continuous reassessment of resources and capabilities across the team, ensuring sustainable growth.
Recovering Costs
Recovering Costs
- Keep good records. Understanding the spending and resources associated with service delivery is a critical first step to evaluating opportunities for cost-recovery. Through data sharing, it also allows coalition partners to understand the costs and collaborate on new models.
- Experiment with fee-for-service models. Despite limited resources, farmers are often willing to pay for services that have a direct impact on income such as aggregation, storage, and even training. Get to know your farmer base and evaluate their willingness to pay for services that your coalition is offering. There may be opportunities for partial cost recovery, complete cost recovery, or even profit.
How to complement your Service Coalition?
The successful implementation of
- Farmer Management Information Systems (FMIS). In a model where data management and data sharing play an important role, digital tools are central to success. Using FMIS for collecting and managing farmer data facilitates data-driven decision making within the service coalition and makes data sharing feasible.
- Tripartite Financing Agreements. Many service coalitions include a financial service provider (FSP) to facilitate farmer cashflow via loan or credit services through a tripartite financing agreement. Typically, such agreements include the farmer (or farmer group), an off-taker and a financial service provider; we refer to the agreements among these three entities as a tripartite financing agreement. Central to this agreement is guaranteed off-take between the farmer and off-taker, which is used as collateral to secure the loan.
- Commission-Based Agent Networks. In order to offer a broad range of services, service coalitions must always consider available resources and capabilities for providing those services. Agent based models can allow the coalition to scale while reducing cost to serve preserving a connection with farmers. Agents can be shared among coalition partners for more efficient
What is the impact of a service coalition
There are a number of ways in which employing service coalitions can impact outcomes:
Gross investment per farmer
Gross investment per farmer
Using data from 121 inclusive business analyses, 16 of which are service coalitions, we find that for companies, the cost of delivering services to farmers is significantly reduced when they are part of a service coalition. Companies that are not members of a service coalition spend on average, $95.87 per farmer per year on delivering services. Companies that are members of a service coalition spend on average $56.22 per farmer per year on delivering services. While this analysis is correlational, reasons for this reduced cost include:
- Sharing a farmer base, reducing customer acquisition costs.
- Less human resource and transportation costs as these can be shared across coalition members
- Sharing real (physical) assets such as storage capacity or machinery between coalition partners.
- Reduced costs for data collection and additional data availability through the sharing of data between service coalition partners.
Cost recovery
Cost recovery
Currently, we do not have sufficient data to make conclusive statements about cost-recovery for service coalitions. Anecdotally, we see that in cases with a lead service coalition member, that lead member bears a lot of the initial costs in the early days of the coalition. Once the coalition takes off, costs become better dispersed across members. However, for the lead member, cost recovery appears to take time.
Value creation at farm-level
Value creation at farm-level
Value creation at farm-level is defined as the absolute monetary value created at farm-level on average per year. In other words, it is the monetary difference between a farmer, who is receiving the goods and services provided by the model and a farmer, who is not receiving the goods and services provided by the model. Using the data from 121 Inclusive business analyses, 16 of which are service coalitions, we find that service coalitions create about three times as much value at farm level as companies, that are not a part of a service coalition. Specifically, companies that are not a part of a service coalition create an average of $474.20 of value at farm level per year, whilst companies that are a part of a service coalition create an average of $1,516.11 per year. While this analysis is correlational, reasons for this could include:
- Improved access to services for more farmers through an increased resource pool, which broadens the coalition partners' capacity for service provision.
- A more complete and complementary service package, whereby farmers not only gain access to more services but also to better services that work together to equal more than the sum of their individual parts.
- Improved access to higher risk services, which become more viable for a service coalition to provide because of opportunities for risk reduction and risk sharing. A key example that contributes to value creation at farm level is access to finance.
- The potential that service coalitions are found in higher value crops or with better performing farmers where the absolute gain at farm-level can be higher
Where to find more inspiration?
Internal Resources
Internal Resources
- A Service Coalition Structure to Address Challenges in Kenya’s Aquaculture Value Chain
- Achieving a Sustainable, Well-Functioning Service Coalition Through a Service Coalition Manager
- Shifting Gears: Engaging the Private Sector for Agricultural Transformation
In this article
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What is this document and why does it matter?
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What is a Service Coalition?
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Context matters: what are enabling conditions for Service Coalitions?
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Why not? Key limitations, risks, and unintended consequences
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How to design a Service Coalition?
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What is the impact of a service coalition
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Where to find more inspiration?
Larissa Shnyder
Innovation Manager
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