Experimental Design Details
The main idea of this research is to find out a sustainable business model where there is no external support, and the service provider is either (a) dependent: employed by the miller and get paid based on his work, how many rice producers he convinces and signs a contract with for the miller; or (b) independent: a young freelance who uses the business model designed to build his own network of millers and rice producers.
The first treatment (BM1) foresees contract farming and personalized extension service with payment after harvest. The concept of contract farming as categorized by Mighell and Jones (1963) involves three factors which are (i) fixed-price; (ii) production management and (ii) input of supply. In the case of the study, the rice producers have already been using contract farming with credit proposed to them in terms of input supply or cash and the additional service will be the personalized extension service. The service provider will assist the rice producer during the production process by providing advice on how to ensure and improve productivity. Based on the targeted yield, the personalized services are then provided upon: advice on the amount of seed needed, the amount of fertilizer, crop calendar, and related practical advice for rice farms management. In addition, the rice farmer is asked about his willingness to provide information that will be used for both the advice and the miller to assess the farmer’s performance and creditworthiness. The rice producer will pay after harvest. Payment is delayed, reflecting the fact that farmer faces cash constraint during the production process and can receive payment either at rice maturity (even before harvest) or after harvest and sale, depending on the contract with the miller.
The treatment (BM2) provides the same service as presented in treatment 1, but with a different payment method. Based on the contract with the service provider, the cost of the service is included in the rice price. Therefore, to ensure transparency, we recommend that at the time of the agreement, the price of the rice ($/kg) must be set and the agreement of both parties must be obtained. Then, a contract is signed between both parties specifying the fixed rice price incorporating the cost of the service and the services to be provided by the agent, as well as the timing and duration.
The treatment (BM3) offers the same service but with a cash payment. The rice farmer must pay the agent in cash for each consultation. In this case, the price must also be fixed and received an agreement of both parties.
In addition to the treatment group, there is a Control group (C), with contract farming that describes the fixed price, the credit support in the form of input supplies or cash, and the blanket extension service (no RiceAdvice, no extension service fee). We randomly assigned rice producers in our sample size to the treatment and control groups. Based on the millers’ experience with the extension service, two agents will be assigned to each of the treatment and control groups.