Paul is a small landowning farmer who lives in the Rongo region of western Kenya. He grows sugar cane most of the year and is a member of the Rongo sugar cane cooperative. Paul has two options for selling his cane: taking fresh-cut cane to one of the local markets or boiling the cane juice, called evaporating, and making brown sugar. 

Brown sugar has very little value locally, since sugar cane is so abundant there, but in urban areas like Nairobi, it is a rare treat. 

The process of boiling the cane juice is time consuming and hot, but the extra value created by doing that is well worth the effort for Paul. This is his value addition.

If he has no buyers for his brown sugar, Paul has to carry his raw cane to market, which he can only do in limited quantities, and it is not very valuable in those locations. In an effort to maximize his earnings, Paul makes several phone calls to contacts in different markets, if he has them, and asks what sugar is selling for in those markets. He can call into a national system to find the prices in major markets, but he isn’t going to any of those, and among his options, those markets within four hours of his home, the prices sometimes vary by up to 300%. It is in his best interest to determine the best price before he sets out on his daily journey. He would be profoundly happy if he could stay on his farm and produce brown sugar, saving him many hours of walking every day while at the same time earning more money for his time.

William is a college professor who lives in Nairobi. Though he has a full-time job and does well, he likes to pursue entrepreneurial activities on the weekends. He has discovered that he can sell brown sugar in Nairobi for about 800 Ksh/kg, if he takes it directly to a pharmaceutical company who uses it in medicines. That company is willing to buy as much as he can deliver, because he asks for a lower price than most of the larger scale commercial ventures selling brown sugar.

In order for William to maximize his earnings in this venture, he wants to have 1000 kilograms of brown sugar waiting for him so he can fill the truck he rents for the weekend and reduce his driving time by limiting his pick-up points to as few as possible. He has found in the past that the farmers in the Rongo region have been good to work with and have been happy to receive the prices he offers for their brown sugar, but he doesn’t know a lot of these farmers, so when he tries to acquire large quantities, he has to make a lot of phone calls, sometimes to people he doesn’t know. This adds up and is also not something he enjoys doing. It is cold calling. He doesn’t think of himself as a salesperson. To prepare for any given trip to Rongo, he spends about 700-800 Ksh in cell-phone minutes arranging the 40-50 farmers he needs to accumulate the full 1000 Kgs that will fill his truck.

If William calls the Rongo sugar cane cooperative headquarters and asks if they can provide a load of brown sugar, they will have to make the same number of phone calls that William would have made, also costing them time and money. One time, the co-op accepted the job, but failed to organize the farmers, and William arrived to find only half a load, disappointing him greatly and barely covering his costs to make the trip. He vowed to call the farmers directly after that. Furthermore, there is some concern by members of the cooperative that the co-op leadership plays favorities with its members, and leaves some of them, including Paul, to fend for themselves. William does not know Paul, and thus Paul doesn’t get a call when William is trying to coordinate his transaction.

Enter: WishVast.

The Rongo Co-op purchases a WishVast system and signs up each of its 500 members.

Now William can send one text message to the co-op’s WishVast number, and each of its 500 members receives the message. In his message, William indicates the time of his pick-up, how much brown sugar he needs, and the price per kilogram he is willing to pay. He includes his phone number and indicates that he will buy the first 1000 kgs that responding farmers say they will be able to provide. Within minutes, he is receiving text messages agreeing to 30, 40, and 50 kgs of brown sugar. Soon, he has enough to fill his truck.

When William arrives at the pick-up, he checks the sugar against his list and determines who met his expectations and who failed to meet them. He sends WishVast points to the network, which function like E- bay’s rating system, rating each participant of the transaction on the quality of their interaction. Those farmers that met William’s expectations receive high ratings, and the farmers respond with high ratings for William. By doing this, future potential business partners can check on the reputation of any of these people and choose with whom to do business.

Fafchamps and Madhin (2005) analyzed the business practices of traders in Benin and Malawi and arrived at the conclusion that the scene is dominated by transport – for goods and for traders. Trading enterprises are small and therefore the amount of material they can gather from any one market is limited to the amount that the trader can reliably find, finance and examine. Consequently, movement of good occurs by means of small vehicles – mostly pick-up trucks. Also a large amount of personal travel is necessary because traders have to examine the goods they buy and payment is usually in the form of cash on delivery.

The traders surveyed by Fafchamps and Madhin (2005) seemed to work effectively under the several restrictions they work with, like, little external finance, lack of branding or trademarks, lack of certified quality or organized commodity exchange, large amounts of  decentralized production and consumption. They depend “on networks to share information, discourage breach of contract and are able to perform an essential trading function in a flexible and expeditious manner. But the end result nevertheless is a costly system that provides a limited service to consumers and producers.” This is very similar to the conditions prevalent in Kenya, where WishVast will be first implemented. The aim of WishVast will be to reduce the inefficiency and personal travel now necessary. The system will strengthen the trusting relationships between the traders, while increasing their access to information so that the process is streamlined. The WishVast ratings will help them create a brand that others can refer to, further increasing efficiency.

The series of images below illustrates this scenario:

Step 1

Reference:

Fafchamps, M. and Madhin, E. G. (2005) Agricultural markets in Benin and Malawi: operation and performance of traders, Retrieved from http://www.gprg.org/themes/t4-soccap-pub-socsafe/sc-uses/trade-sc.htm on 2009-4-11