Input side digital platforms to serve farmers
Input side digital platforms to serve farmers
Business Model Description
Invest in or provide project financing towards farm digitization and mechanization related to supporting supply chain activities from the farm level to the market. Examples of companies active in this IOA space:
Agrithmics (Private) Limited: Established in 2015, this company is Cloud based end-to-end process Automation and Fintech solution company. It streamlines the supply chain ecosystem that caters to unique requirements of suppliers, workforces and communities in the scalability and profitable operational environment (13)
Dialog Axiata PLC: Govi Mithuru - A mobile agriculture service launched in 2015, this company provides customized and timely advice to farmers regarding land preparation, cultivation, crop protection, harvest and improved family nutrition. This service is designed to help farmers by sending the right Information at the right time, correctly tailored for their crop, location and stage of cultivation (14)
Hayleys PLC is a leading conglomerate with several plantation companies in the group. They developed a precision agriculture solution in 2019 for real-time monitoring of the weighing system at tea plantations. The integration of key data, allows the firm to make informed decisions based on accurate information and enhance yields while ensuring that each production process is monitored (15).
Expected Impact
Support farmers by providing digitization and mechanization based solutions to improve productivity and induce climate resilient farming practices.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Sri Lanka: Eastern Province
- Sri Lanka: Northern Province
- Sri Lanka: North Central Province
- Sri Lanka: North Western Province
- Sri Lanka: Southern Province
Sector Classification
Food and Beverage
Development need
In 2021, Agriculture was 7.3% of GDP(1), comprising 21.8% of Goods Exports (2) and employing 27% of the labor force (3). With the economic crisis, livelihoods have been under threat, resulting in a food security crisis and malnutrition concerns, which could reverse gains seen in development indicators (4).
Policy priority
National Nutrition Policy (2010): focuses on ensuring food and nutrition security for all citizens (5). Food Production National Program 2016–2018: focuses on crop production and productivity. National Export Strategy 2018-22: listing out objectives of efficient trade and logistic hub. All these policies were designed to achieve national and SDG targets.
Gender inequalities and marginalization issues
Low-income households have food security concerns with high food prices and drop in agricultural production. UNICEF’s April 2022 national survey showed that 70% of households have reduced their food consumption. The estate and urban poor are disproportionately affected. Sri Lanka ranked 66 out of 113 in the Global Food Security Index in 2019 (11)
Investment opportunities introduction
The changing economic status of the country with expanding urbanization provides the opportunity to increase the number of food manufacturing units (particularly with digitisation). For example, the mechanisation of cold chain infrastructure is also vital as it involves a complex supply chain with storing and movement of time and temperature-sensitive products.
Key bottlenecks introduction
Key challenges include limited supply chains, access to capital and inputs, lack of cold storage facilities with multi-user facilities. There is low productivity in the sector with a majority of land ownership by the government. The decision to change overnight to organic fertilizer (which was subsequently changed) has also disrupted the food production and output of farmers.
Food and Agriculture
Development need
ICT is a significant contributor towards achieving country’s agricultural objectives and helps minimize post-harvest food losses (40%) in Sri Lanka (6) According to a survey by Save the Children in 2022, price hikes, a lack of fuel and food shortages have left families struggling to feed their children. 30% of families had reduced the number of meals they eat in a day (10)
Policy priority
National Agriculture Policy aims to create a socially-acceptable and sustainable food system in Sri Lanka, through a globally competitive agricultural production, processing and marketing mechanism (7). Sri Lanka E-Agriculture Strategy, 2016 (12) lays down a roadmap recognising ICT as a significant contributor towards achieving country’s agricultural objectives.
Gender inequalities and marginalization issues
29% of the working females in Sri Lanka (8) are employed in agri sector where the GDP contribution accounts for only 7% (9). In certain districts, this participation exceeds 50%, due to high reliance on agriculture based livelihoods. Hence, lack of productivity and income from agri increases the vulnerability of women depending on agriculture for their livelihood.
Investment opportunities introduction
Need for platforms to improve productivity such as smart water management, e-market place for agriculture, logistics information linking agriculture service providers and markets, farm mechanization, traceability of agro-chemical movement through value chain, analytical tool to syndicate demand from farmers and electronic agri surveillance systems.
Delays in adapting to climate sensitive practices, Low adoption of technology based farming and food processing techniques to improve productivity, difficulty in accessing affordable raw materials such as seeds, lack of consistent policy on fertilizer leading to fetrilizer shortages that affect productivity and lack of resilience against global and local economic factors
Agricultural Products
Pipeline Opportunity
Input side digital platforms to serve farmers
Invest in or provide project financing towards farm digitization and mechanization related to supporting supply chain activities from the farm level to the market. Examples of companies active in this IOA space:
Agrithmics (Private) Limited: Established in 2015, this company is Cloud based end-to-end process Automation and Fintech solution company. It streamlines the supply chain ecosystem that caters to unique requirements of suppliers, workforces and communities in the scalability and profitable operational environment (13)
Dialog Axiata PLC: Govi Mithuru - A mobile agriculture service launched in 2015, this company provides customized and timely advice to farmers regarding land preparation, cultivation, crop protection, harvest and improved family nutrition. This service is designed to help farmers by sending the right Information at the right time, correctly tailored for their crop, location and stage of cultivation (14)
Hayleys PLC is a leading conglomerate with several plantation companies in the group. They developed a precision agriculture solution in 2019 for real-time monitoring of the weighing system at tea plantations. The integration of key data, allows the firm to make informed decisions based on accurate information and enhance yields while ensuring that each production process is monitored (15).
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
5% - 10%
Agricultural employs 27% of the labor forc. Most of whom require input side digitasation support
Sri Lanka aims to reduce its significant reliance on imports to support and narrow down the trade deficit through export promotion and import substitution. Sri Lanka has imported fruits and vegetables worth USD 400 - 600 million during 2015-2018, mainly consisting of bulk crops of onions and potatoes (8).
The Public Investment Programme (PIP) 2021-2024 recognizes that the agriculture value chains face a multitude of problems including fragmented nature of value chains, low economic scale of production and lack of quality assurance. Amongst major issues, high post-harvest losses incurred due to poor handling and lack of proper facilities is highlighted as a concern (6).
The National Export Strategy for Sri Lanka (2018-2022), under its logistics strategy, highlights that lack of proper cold storage facilities or infrastructure hinders export opportunities. Allocating land and forming an ecosystem to attract more foreign direct investment will create conditions for the private sector to lead the development of cold storage solutions and multi-user facilities (9).
Indicative Return
5% - 10%
Financial analysis is based on various stakeholder interviews (12) and quantification of economic and financial analysis under the Agriculture sector modernisation project implemented with the Technical Assistance of the World Bank (14).
Investment Timeframe
Medium Term (5–10 years)
Agriculture sector modernisation project (2016) forecasted strong positive financial returns in the medium term with attractive income opportunities for farmers and organizations. The project assumes a model where existing irrigation techniques are replaced by drip irrigation.
Ticket Size
USD 500,000 - USD 1 million
Market Risks & Scale Obstacles
Capital - CapEx Intensive
Business - Supply Chain Constraints
Market - Highly Regulated
Impact Case
Sustainable Development Need
To increase productivity of the agriculture sector while ensuring food security, reducing post-harvest damages and improved income for those engaged in agriculture.
Lack of digital solutions prevents addressing key issues in the sector such as lack of productivity, price volatilities due to low value add and low economic returns for farms and firms engaged in agriculture.
Climate change is creating unreliable and volatile outputs affecting the food security and safety, requiring the country to invest in smart agriculture practices to make supply chain more resilient.
Gender & Marginalisation
To increase agriculture supply chain integration and support expansion of regional businesses, which can increase income for farmers and reduce regional disparities
To increase income and economic opportunities from women led households, female employees and women owned/led businesses that are dependent on agri sector value chain activities.
Expected Development Outcome
To achieve objectives of the Sri Lanka E-agriculture Strategy which envisions excellence in adopting e-solutions to transform agriculture for national prosperity (12)
To increase the capacity of agri sector according to the market demand and increase quality of supply chain. This ensures better economic gains via possibility engage in value added agri product while promoting healthy and sustainable living.
Sustainable transformation of agriculture to a modernized sector. Development and adoption of innovations and technologies to improve crop productivity and reduce wastage (7).
Gender & Marginalisation
Expand the market access of agri products, and increase export opportunities for SMEs through integration into global value chain.
Generation of more employment opportunities, particularly for women and marginalized communities, through improved productivity and potential value addition of agri products.
Primary SDGs addressed
2.2.2 Prevalence of malnutrition (weight for height >+2 or <-2 standard deviation from the median of the WHO Child Growth Standards) among children under 5 years of age, by type (wasting and overweight)
17.1%
Not Available
12.3.1 (a) Food loss index and (b) food waste index
Not Available
Not Available
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Public sector
Outcome Risks
The outcome would be affected with obtaining necessary approvals with public sector stakeholders and initiate proposed business model, which can be a cumbersome process.
More locally produced food may be exported, which may lead to increased prices and lower availability of food in local markets.
Gender inequality and/or marginalization risk: Lack of initiative to uplift the agriculture sector will deepen the regional and income disparities in the country.
Impact Risks
If targets are not achieved, high import dependency and decline in yields will contunue, making it challenging to meet sustainability goals.
Low level of affordability for smallholder farmers, who would be unable to afford the services offered by digitisation channels without additional financial support
Gender inequality and/or marginalization risk: Lack of technology or improvement in yield would lead to economic and business losses, further aggravating income disparities for women and MSMEs.
Impact Classification
What
To move towards farm digitization and mechanization related to support supply chain activities from farm level to the market. To improve food security and enhances economic productivity.
Who
Farmers benefit from higher economic returns; households and consumers gain access to quality food at affordable prices; corporates and exporters benefit from better economic gains.
Risk
Sri Lanka faces risk of unconsistent and adhoc policy changes (eg: the organic fertiliser policy). Therefore, potential policy changes may affect the scalability and commercialization.
Contribution
Improve food security, reduces wastage and improve production. This can improve contribution towards GDP which was 7.3% of GDP and current contribution of 21.8% towards goods exports.
How Much
Total factor productivity (TFP) of Agriculture has only grown by an average of 0.6% per year since 1980 (17). This can improve TFP as well as reduce post harvest losses (40%)
Impact Thesis
Support farmers by providing digitization and mechanization based solutions to improve productivity and induce climate resilient farming practices.
Enabling Environment
Policy Environment
National Agriculture Policy is a sectoral policy that works towards a vision for achieving a sustainable food security for national prosperity. The vision for creating a socially-acceptable and sustainable food system in Sri Lanka is set to be achieved via 10 goals (7).
The National Export Strategy (NES) consists of priority sector strategies and trade support functions where Processed Foods and Beverages, and logistics are given key considerations for achieving the mission of an export hub driven by innovation and investment (9).
The Public Investment Programme (2021-2024) is prepared with a medium-term perspective for estimating the amount of investible resources that become available to the government during a given period and indicate how these will be allocated to different sectors and agencies (6).
The World Bank funded Agriculture Sector Modernization Project is aligned with the Country Partnership Strategy (CPS) 2013-2016. The project seeks to contribute to two CPS focus areas, namely: “Supporting structural shifts in the economy” and "Improved living standards and social inclusion". (17)
Financial Environment
Gains and Profits from Agro processing is subjected to a lower income tax rate of 14% (18).
The Board of Investment (BOI) in 2022 launched the five-year residence visa program dedicated to investors, stakeholders and BOI enterprises.
The FTAs with India and Pakistan cover trade in goods. They provide for duty-free entry and duty preferences for manufactured and agricultural goods. A domestic value addition of 35% is required to qualify for concessions granted pursuant to the FTAs (19)
Regulatory Environment
Customs Ordinance (1869); Border (trade) Measures: Regulation of food and agricultural imports and exports (including tariffs). Imports and Exports (Control) Act (1969); covers import control measures on Agri products
Land (Restrictions on Alienation) 2014 (and Amendments thereof in 2017 and 2018): provides exemptions, regulations pertaining to land ownership thresholds and regulations pertaining to foreign investors and limitations of foreign ownership (8)
The Agrarian Development Act (2000) and the Amendment Act (2011) constitute the legal environment on matters relating to landlords and tenant cultivators of paddy lands and the utilization of agricultural lands in accordance with agricultural policies.
Regulation related to natural resources: The Fauna and Flora Protection Ordinance (1964). Approximately 2.3 million ha, equivalent to 35% of Sri Lanka, is administered as protected areas by the Department of Wildlife Conservation and Forest
The Plant Protection Act No. 35 of 1999 that facilitate the international movement of healthy plants and plant products for the development of national agriculture and related industries
Marketplace Participants
Private Sector
Agrithmics, Dialog PLC, Cargo hub, Tess Cold Chain Facilities, Hayleys Agriculture Holdings Limited, CIC Agri Business (Pvt) Ltd
Government
The Ministry of Agriculture. The Ministry of Environment, The Ministry of Trade.
Multilaterals
The United Nations Industrial Development Organization (UNIDO), The World Bank, The European Union
Non-Profit
The Ceylon Chamber of Commerce
Target Locations
Sri Lanka: Eastern Province
Sri Lanka: Northern Province
Sri Lanka: North Central Province
Sri Lanka: North Western Province
Sri Lanka: Southern Province
References
- (1) Department of Census and Statistics (2022). National Account 2015 Base. http://www.statistics.gov.lk/NationalAccounts/StaticalInformation/2015/Reports/Annual_A49/GDP_co_2010-2021
- (2) Central Bank of Sri Lanka (2021). Annual Report: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/publications/annual_report/2021/en/9_Chapter_05.pdf
- (3) Department of Census and Statistics (2022). Quarterly Report of the Sri Lanka Labor Force Survey - Second Quarter 2021. http://www.statistics.gov.lk/LabourForce/StaticalInformation/QuarterlyReports/2ndQuarter2021
- (4) United Nations Office for the Coordination of Humanitarian Affairs (OCHAO and The UN Resident Coordinator's Office (RCO) (2022) Sri Lanka Food Security Crisis - Humanitarian Needs and Priorities: June – Sept 2022 https://srilanka.un.org/en/185471-sri-lanka-humanitarian-needs-and-priorities-plan
- (5) National Nutrition Policy of Sri Lanka(2010):https://extranet.who.int/nutrition/gina/sites/default/filesstore/LKA%202010%20Sri%20Lanka%20National%20Nutrition%20Policy-English_0.pdf
- (6) The Public Investment Programme (2021-2024):https://www.npd.gov.lk/images/publications/PIP_2021_2024.pdf
- (7) The National Agriculture Policy (2021): https://www.agrimin.gov.lk/web/images/pdf/Policy/2021.03.27%20-%20NAP/NAP%20Web%20Version%20-%2026%20March%202021.pdf
- (8) Department of Census and Statistics, Annual Labour Force Survey (2020): http://www.statistics.gov.lk/LabourForce/StaticalInformation/AnnualReports/2020
- (9) Central Bank of Sri Lanka (2020). Annual Report: https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/publications/annual_report/2020/en/6_Chapter_02.pdf
- (10) SRI LANKA: More than two third of Families struggle to feed themselves as Economic Crisis Wipes out Incomes Save the Children, (2022):https://www.savethechildren.net/news/sri-lanka-more-two-thirds-families-struggling-feed-themselves-economic-crisis-wipes-out-incomes
- (11) Sri Lanka’s Food Security in the Context of the COVID-19 Pandemi, CBSL (2020):https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/publications/annual_report/2020/en/13_Box_01.pdf
- (12) Department of Agriculture, Sri Lanka E-agriculture Strategy (2016): https://www.fao.org/faolex/results/details/en/c/LEX-FAOC169703/#:~:text=The%20Sri%20Lanka%20E%2Dagriculture,agricultural%20vision%20and%20development%20objectives.
- (13) Agrithmics (Private) Limited: https://agrithmics.lk/#sec2
- (14) Dialog Govi Mithuru: https://www.dialog.lk/govi-mithuru/
- (15) Hayleys Plantations: https://www.hayleys.com/plantations/
- (16) Sustainable Development Council Website for SDG indicators: https://data.sdg.lk/access/2
- (17) Project appraisal document of Agriculture Sector Modernization Project (2016): https://www.agrimin.gov.lk/web/images/Project_Appraisal_Document.pdf
- (18) Inland Revenue Department: Income Tax rate (2022): http://www.ird.gov.lk/en/publications/SitePages/Tax_Chart_2021.aspx?menuid=1404
- (19) 2021 Investment Climate Statements: Sri Lanka, US Department of State: https://www.state.gov/reports/2021-investment-climate-statements/sri-lanka/