Digital Trading and Market Platforms: Ghana Case Study

Abstract

AbstractSmallholder farmers in sub-Saharan Africa produce much of the food consumed across the continent, yet with expected population growth, they will need to double production by 2050. Smallholders could significantly intensify production with the adoption of modern agricultural technologies, but many farmers are unable to find buyers willing to purchase their outputs at profitable prices. Meanwhile, buyers and traders have demand for agricultural goods but face high costs in finding farmers who can consistently supply goods with certified quality. Similarly, there is a lack of investment in food processing infrastructure because processors cannot reliably obtain produce as inputs to operations. These market failures typically manifest in the form of two development challenges: (1) there is a misalignment in the supply of and demand for the agricultural goods produced by smallholder farmers, and (2) smallholder farmers are often at a price disadvantage when it comes to knowledge of prices of their commodities. This case study measures the effect of introducing digital trading and market platforms (including price alerts, mobile phone-based trading platforms, and commodity exchanges) in Ghana, through a series of randomized control trials and quasi-experimental studies. Technologies like mobile price alerts (from Esoko) and a mobile phone-based trading platform (Kudu) are found to increase yam prices by 5%, with benefits for smallholder farmers. This increase declines over time, but there are net benefits for farmers as a result of “bargaining spillover.” The potential impacts of a new commodity exchange in Ghana are also discussed, exploring how this technology can influence the decisions of smallholder farmers, incentivizing them to produce higher-quality products.