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Lessons with Farmers and Mobile Financial Services

Kyla Yeoman's picture
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By Lesley Denyes. Orginally published on Agri-Fin Mobile, a site about Mercy Corps' project to “bundle” key services of agricultural advice from private sector, research and extension institutions with financial services providers and telecommunications companies.

Coming on the heels of the latest industry focus on financial innovation for smallholder farmers, we want to highlight the importance of combining actionable information with affordable financial services. Once farmers have the information they need to improve their productivity, access to financial transactions becomes critical, from purchasing new inputs to selling their products. Mobile technology makes such services affordable commercially, as mobile phone use has grown exponentially and mobile financial services offerings expand beyond urban areas. A 2012 global multi-year study by GSMA found that “unconnected” populations in developing countries, particularly in rural areas, will drive mobile subscriber growth over the next five years, to an estimated 1.8 billion people.

Beginning August 2012, we conducted three surveys in Indonesia, Uganda and Zimbabwe as part of our Agri-Fin Mobile program, which bundles agricultural information and financial services using mobile technology. The surveys identified which services are currently inaccessible to smallholder farmers, and the challenges in providing those services through mobile phones. Our findings include the following:

  • Significant potential exists for mobile related services across the three countries. For example, more than 80 percent of all surveyed households in
  • Indonesia and Zimbabwe have access to a mobile phone.
  • In terms of how farmers access information services, traditional avenues, namely face-to-face and radio, are still primary sources of information. 
  • Regardless of the m-money status of a household, remittances are primarily used for routine financial support among relatives living in different households. Evidence from those using mobile money revealed a steady, but gradual, increase in the mobile money subscriber base with 46 percent in Indonesia, 55 percent in Uganda and 64 percent in Zimbabwe of remittances being sent/received via mobile money. 
  • The research also noted that rural users travel longer distances (average of 45 kilometers) and spend more money on transportation to reach mobile money agents. 

Agri-Fin Mobile has already started to build and test bundled mobile services and products. To facilitate these services, we are working with banks such as Bank Andara, mobile network operators (MNOs) such as Orange, platform developers such as 8Villages and MobiPay, along with a multitude of buyers, input suppliers, content developers, farmer aggregators, governments and farmer organizations. Although the services have only been up and running for four months, we have observed the following trends:

  • The support of the Ministry of Agriculture was necessary for local buy-in initially, but over the long-term, we anticipate the private sector will drive demand.
  • Value chain actors require that mobile payments be more cost-efficient than cash or else provide a sufficient alternative value proposition, whether through increased security or convenience. What often motivates them is the ability to use the platforms as a management information system or the opportunity to become agents themselves to capture the commission revenue from the transactions.
  • Buyers view the payment system as a reflection of themselves and their service to farmers. If fees are high or the agents don’t have liquidity, it hurts their competitiveness and they risk side-selling by the farmers.
  • Compared with MNOs, banks are harder to convince to participate in mobile agriculture value chain payments. For MNOs, payments are a core business, and capturing any existing cash payments on mobile will interest them. Banks, on the other hand, see payments or fee products as a value added service, and may be less willing to invest in the necessary marketing or agent build out.
  • Security features for mobile payments, such as session time outs and pin verifications, are not always suitable for smallholder farmers, who tend to be older and less familiar with digital products.
  • The primary reason farmers sign up to receive payments from their buyers is not because they see the value of receiving their payments in mobile form, but because they want a safe and convenient place to save their sales proceeds.
  • Initial data shows that women are not accessing the service at the same rates as men, perhaps because registration takes place “off farm.”

Agri-Fin Mobile’s work in Indonesia, Uganda, and Zimbabwe demonstrates that achieving agricultural development goals requires more than just financial services and actionable information, and requires an ecosystem approach - from flexible and supportive policies and regulations, to support structures for farmers of different age groups and genders.

Following are several points to consider when designing sustainable solutions:

  • Concentrate on the market needs, not on the technology: Any mobile agriculture or ‘bundled’ service should begin by focusing on the need that the intervention is meant to address—for example, better and more timely market information, better access to financial services, etc.
  • Use appropriate technologies: The newest, most elaborate, or most innovative technology is not automatically the most appropriate one when dealing with farmers. Because of their ubiquity, older technologies such as basic feature phones (as opposed to “smart phones”) can be more cost-effective and have higher rates of adoptions.
  • Ensure the business model is a win-win: Understanding the perspectives of each stakeholder and building successful cross-sector partnerships is critical for the success of the program and for developing a viable mobile agriculture and financial platform. Each partner in the ecosystem must provide complimentary services without risk of overlapping and competing. Bundling activities requires consumers to change their behavior and also requires new products and services. As each of these players is able to create value, all partners will benefit, whether it be through expanded services or new market access.

Lesley Denyes is the program director for Mercy Corps’ program, Agri-Fin Mobile, a mobile-enabled bundle of services for small-holder farmers.

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