By Bob Aston
The Fin4Ag
Conference: revolutionising finance for agri-value chains, which took place
at the Kenya School of Monetary Studies from 14-18 July, 2014, provided
participants an opportunity to deliberate on the economic landscape of digital
agri-finance.
Session 45: The economic landscape of agricultural digital finance,
moderated by James Wainaina, the Vice President and Area Business Head
at the East Africa MasterCard, included a review of the history of mobile money
and how digital finance can serve households at the base of the pyramid. The
session also looked at the three approaches to agricultural digital finance:
market research, strategic alliance, and horizontal integration into agri-value
chain interventions.
Originally referred to as mobile money, digital finance has rapidly emerged by way of joint ventures between Mobile Network Operators (MNOs) and banks. The fact that it can easily be integrated with digital technologies, such as smart cards, scratch cards, point of sale devices, biometric identity capture, ATMs and others technologies has also helped its expansion.
Participants during one of the sessions |
Originally referred to as mobile money, digital finance has rapidly emerged by way of joint ventures between Mobile Network Operators (MNOs) and banks. The fact that it can easily be integrated with digital technologies, such as smart cards, scratch cards, point of sale devices, biometric identity capture, ATMs and others technologies has also helped its expansion.
During the session, Michael
Mbaka, Senior Project Manager, Financial
Sector Deepening (FSD), Trust Kenya, addressed barriers and opportunities
to digital agriculture finance in Kenya. He noted that there is low bank
product usage (25%) compared to mobile money usage (58%). The high rate of
mobile money usage in Kenya is even higher among farmers, where 67% of farmers
own mobile phones and 60% use mobile money.
“Mobile money leads in current financial services usage. This
creates a huge opportunity in increase in contract farming models as well as
existence of agricultural data management entities,” said Mr. Mbaka.
He said there is better delivery of mobile money in Kenya due to
higher financial access point, but added that barriers such as digitisation of
data, reach of excluded farmers with traditional solutions, weak industry
capacity to create innovative financial solutions and weak demand side
understanding needs to be addressed.
“Building inclusive financial markets has an immense economic
value due to moving to the cashless mode of payment. This will facilitate
better payment systems thus stimulating growth,” said Mr. Mbaka.
Similarly, Carol
Kyazze Kakooza, Program Director for Agri Fin Mobile at Mercy Corps, shared
how Agri Fin Mobile has been used to provide bundled and affordable
agricultural technical services and financial services. This approach has
helped to build sustainable business models that enhance and stabilise incomes of
smallholder farmers.
“We have been offering agriculture content, market information and
financial services using our mobile platform. The platform is not only cost
effective but it is also a convenient way for smallholder farmers to access
financial and market services,” said Kakooza.
Participants during one of the sessions |
“New market segment in the cooperative sector will encourage
nationwide mobile finance penetration and financial inclusion. Cooperatives
provide the demand and supply platform for mobile finance,” said Mr. Kumakech.
He noted that mobile finance service providers normally get closer
to where farmers live and work, which encourages subscription.
“Cooperatives exhibit the organisational framework desirous to
deliver financial inclusion through Agricultural Digital Financing,” added Mr.
Kumakech.
In conclusion, this session highlighted the importance of mobile
and web technologies that are increasingly becoming important for accessing new
opportunities in value chain financing.
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