Digital tools hold great promise to promote agricultural transformation and benefit smallholder farmers in the developing world. One such tool is Uber for tractors, which aims to enable farmers to access tractor hire services in a way that is deemed similar to the Uber service for ride-hailing. While widely praised, Uber for tractors has not yet been rigorously analyzed. How does it work in practice? And what is its potential to reduce the transaction costs of tractor service provision, both for tractor owners and for smallholders who use tractor services? To answer these questions, we present case studies of two companies that apply digital tools in support of tractor hire: Hello Tractor in Nigeria and EM3 Agri-Services in India. A transaction costs economics framework was developed to identify how Uber for tractor tools can, in theory, influence the attributes of service hire transactions and, thus, reduce transaction costs. For the empirical analysis, a mixed-methods approach was applied involving approximately 400 respondents and comprising net-maps (a participatory mapping tool), focus group discussions, interviews with tractor owners and other stakeholders, and a survey among farmers. Our results show that the Uber for tractor models have indeed the potential to reduce transaction costs for service providers, in particular the owners of several tractors, by enabling the monitoring of tractors and operators through GPS devices. Farmers who access services have, so far, only indirectly benefitted from the new digital tools, because they still relied on “analog” solutions – booking agents and phone calls – rather than a smartphone app to request services. Overall, the paper shows that Uber for tractors is a pioneering concept, but investment in enabling conditions, such as digital literacy and network coverage, is required to harness the full potential of such digital innovations for smallholder farmers in the developing world.
Published in World Development 144: 105480
Adapted from Hohenheim Working Papers on Social and Institutional Change in Agricultural Development, 001-2020.