Mobile finance shifting to rural areas

Mobile finance has undergone strong growth in recent years, with more than 220 operational platforms worldwide. While the majority of these have so far been confined to urban areas, providers are fast realising the need to break into rural regions to expand market share and achieve nationwide presence.

The agricultural sector is an ideal entry-point into these communities, given the keenness of commodity buyers to move away from inefficient and more expensive cash payments to producers. With cash transactions comes the increased risk of theft and violence, high transportation costs and greater possibility for corruption.

Dr. Lee Babcock, an independent consultant working with The Technical Centre for Agricultural and Rural Cooperation (CTA), has set up the Mobile Strategy unit for ACDI/VOCA (mobile money and mobile data) and believes that CTA is at the forefront of leveraging digital technologies for the benefit of farmers.

“We want to embed mobile into the agricultural supply chain,” says Babcock. “The key to this is leveraging the corporate procurement policies of large buyers.”

Integrating mobile into agri supply chains

Companies across Africa are looking at diverse ways of integrating mobile finance solutions into the agricultural supply chains. Uganda’s SmartMoney works with large cotton and coffee buyers to transition their cash payments to mobile payments

The largest cotton buyer in Zambia, NWK, has offered incentives to farmers in its pursuit of moving to e-payments.

Zoona, currently in use in by partners in Zambia, Zimbabwe, Malawi, and Mozambique, provides organisations and government agencies with a method to send bulk payments for specific purposes, including fertiliser and seed subsidies, short-term savings for farmers to manage seasonal income, and in-kind donations such as food or other agricultural inputs.

This drive is not restricted to smaller or specialist local companies. In Ghana, the American multinational financial services corporation VISA has funded a RiMFin pilot which transitions cash payments of the largest rice buyer in the country, Gadco, to TigoCash payments.

There are of course numerous challenges to overcome, with illiteracy amongst the target rural user-base a key barrier. In light of this, Zoona, who offer an e-voucher service, opted to deliver their service to end-users through both mobile wallets and via paper scratch-cards.

Chrissy Martin, global partnership manager at E-Vouchers, has found that the paper-based distribution method works better in rural communities where many people trust and understand scratch-cards, which are extensively used for mobile airtime top-up.

Wisdom Alorwuse, project coordinator at Millicom Ghana, who are implementing RiMFin in Ghana, advance on this, commenting that in a survey they conducted of rice farmers in the country, 68% were unable to send an SMS. This led RiMFin to embark on an education exercise with farmers that has, to date, educated more than 800 farmers in the use of their platform.

Despite the evident challenges, the potential on the continent is significant. “80% of Africans have mobile phones and 70% live in rural areas,” explains Michael Spencer, founder and CEO of SmartMoney, “whilst rural institutions can lose up to 15% of their entire annual operating budget in cash-related payment costs.”

Cash is the only available form of payment in many of these rural areas, adds Spencer. “There are no credit cards and a lack of trust in banks”.

SmartMoney’s solution allows rural users to store and exchange money using basic GSM mobile phones, with no need for smart phones or internet access. Their revenues are earned from fees charged to larger agricultural companies, which means SmartMoney can offer a free service to rural users. This could give them a competitive edge as rural users are often excluded from existing mobile money providers by prohibitive transaction fees.

It is not just technology firms pushing this revolution. Cotton purchaser NWK is also taking an innovative approach; offering life and weather insurance products to Zambian farmers in return for them moving from cash payments to e-vouchers, and most recently pre-paid bank cards.

“The benefits far outweigh the cost of the premiums,” says Agrotosh Mookerjee of MicroEnsure, a partner in the scheme. The scheme has seen approximately $380,000 insured with strong scale-up demand and interest from insurers and reinsurers.

With more and more entrants into the mobile finance market, the choice for rural customers looks set to grow. More importantly, perhaps, so will the education process needed to ensure that those who most need such schemes are able to benefit from them.