The main purpose of the program is to overcome search barriers, facilitating new matches and ideally cutting out the middlemen who profligate along the supply chain in the presence of information frictions. To achieve this, we are fielding a multi-pronged intervention:
1. AgriNet CAs: We will train and certify 210 Commission Agents from AgriNet. These are individuals who are already existing agricultural traders in the treatment communities, but as a part of the project they will be given training in how to work inside the AgriNet model, including how to bulk and quality grade, how to interact with AgriNet’s head office to facilitate transactions, how to use Cash on Bag credit, and how to use the new digital trading platform.
2. Kudu trading platform: We will dramatically scale up Kudu, a digital platform written by computer scientists at Makerere University that allows buyers to post bids, sellers (CAs) to post asks, and then performs a back-end matching on crop, price, and distance to identify the three ‘best’ sales lots for each bidder. The system sends these lots by SMS to the buyer; if the buyer is interested in pursuing a purchase then she calls AgriNet who facilitate the transaction and collect a 10% commission on the sale, to be split between the CA, the Network Manager, and AgriNet headquarters.
3. Price Information: We will implement an ‘SMS Blast’ system that will use push SMS to saturate a randomized subset of the treatment areas with information on local prices, national prices, prices currently available through the Kudu platform, and how to contact the CA to arrange for Kudu transactions. The numbers used for this will be harvested from the baseline household and trader surveys, as well as from the business relationships of the CAs themselves. The SMS blast system will be randomized at the individual level among farmers in the household baseline to create variation in exposure to information. There are five information types in the SMS Blast system:
a. ‘Downstream’ price information: price information for your local market, the local hub, and the local superhub. This is expected to be particularly salient for farmers, because it gives them a sense of the margins their local traders are making, but it will be sent to CAs and non-CA traders as well.
b. ‘Random Blast’ price information: each week we will randomly sample five treatment TCs and circulate price information on these markets to the entire treatment set of CAs, traders, and buyers.
c. Kudu Promotion information: advertising messages for Kudu, and information on how to contact the local CA to use it, sent to farmers (in future seasons we will also use this system to encourage non-CA traders to independently register on Kudu).
d. Kudu price information: sent to those receiving the Kudu Promotional information
e. Extra AgriNet price information such as FIT-Uganda prices for markets all across the country, to be sent only to CAs.
Then, there are four types of users who will receive the SMS Blast:
a. CAs: all CAs will receive price information at high frequency through the Blast system.
b. Farmers: 3/4s of farmers in treatment TCs surveyed in the baseline who have mobile phones will receive the SMS Blast. The remaining 1/4th of these farmers will receive no messages through the SMS Blast system, to create household-level variation. Control TC farmers receive no SMS information.
c. Non-CA Traders.
4. Transport Guarantees: We will use project funds to introduce two types of randomized guarantees to the Kudu system. These guarantees are aimed at mitigating the impact of contractual risk for buyers, thereby inducing them to accept deals for which the risk would otherwise be too great. The randomization occurs at the level of the Kudu sales match; meaning that each time a buyer enters the system and is matched to sellers there will be an independent randomization as whether that bundle of contracts receives a guarantee. There are two levels of guarantee: the Basic Guarantee, which covers the buyer against any shortfalls in quantity that occur when they arrive in the village to buy, and the Comprehensive Guarantee which additionally covers against shortfalls in quality or attempts by the seller to renegotiate price. The cost of the guarantees during the pilot phase will be covered by a grant from IGC. 38% of sales matches will receive the Basic and 15% the Comprehensive Guarantee. The guarantees reimburse buyer losses according to a distance-related percentage:
a. 0-100 km: 25%
b. 100-200 km: 50%
c. 200-300 km: 75%
d. 300+ km: 100%
Losses are calculated relative to the contract terms as agreed before the buyer set out, and the specific losses covered are as per the type of guarantee. The fact that the reimbursements are a discontinuous function of distance allows us to use Regression Discontinuity to assess the impact of transport risk on buyer willingness to transact.
5. Trader Credit: Cash on Bag (COB) is a service for extending credit to CAs, who in turn may use this credit to pay cash-constrained farmers for 50% of the value of their crop upon bulking with the CAs and 50% upon sale to the buyer. It is designed to allow CAs to bulk a greater volume from a larger number of traders and thereby engage in more trade. We will randomize the allocation of Cash on Bag (COB) credit among the 60 most reliable CAs in the AgriNet system, whereby 30 will randomly receive credit and 30 will not. This randomization will be done at the subcounty level to prevent spillovers from treated to untreated CAs. Credit will be delivered at the beginning of the harvest season to be used for trading throughout that season. The expectation is that CAs can make 6 successive transactions within a season with the COB credit, and their use of it will be overseen by (and guaranteed by) the Network Managers.
The study is focusing on four crops: maize, dried nambale beans, matooke bananas, and tomatoes. The first two are the primary storable food crops in Uganda and are major export crops; matooke bananas are the core subsistence food across most of southern Uganda, and tomatoes are the most heavily traded highly perishable crop in the country.