NAIROBI (HAN) March 6, 2016. GEESKA Markets. The digital cloud is high above every smallholder farm in Africa. We have the opportunity to bring the power of the cloud down to earth, and transform the ability of smallholder farmers to access finance, information and markets as never before.
On Monday, a landmark edition of the international journal Foreign Affairs highlighted the possibility of rebuilding Africa’s food systems with smallholder farmers as the standard bearers of digitally powered world-class agriculture. The technology to do so is now available — from the farm, to the cloud.
The African continent is already in the forefront of the mobile revolution. There are now nearly 700 million mobile phone accounts — more than in the US and Europe combined.
Africa has also become the world leader in mobile banking: 12 per cent of adults in sub-Saharan African have a mobile money account, compared with only 2 per cent of adults globally. We are leapfrogging development — skipping a whole phase of technology and putting Africa in the lead.
Or so it seems. But mobile phones and even mobile money accounts do not amount to digital financial inclusion. Millions still live without access to formal financial services and the potential of digital technologies to equip smallholder farmers with knowledge, data and market opportunities has yet to be realised. Digital technology offers an historic opportunity to scaling success across Africa’s farming households and rural communities.
Consider the gap in financial inclusion. As Chidi Okpala, former African director of Airtel Money recently told the Mobile Money Expo in Nigeria, of the roughly 75 million people living in the Democratic Republic of Congo, less than two million have bank accounts.
Of Tanzania’s 42 million people, less than four million have bank accounts. In 2014, only 29 per cent of adults in rural areas had a financial account of any kind. Across the region, fewer women (30 per cent), than men (39 per cent) have formal accounts.
Without access to credit, loans, savings, payment systems, and weather or crop insurance, smallholder farmers cannot run their farms as efficient businesses. But traditional finance is difficult and expensive to access — and rarely designed to meet farmers’ needs. Similarly, networks of government agricultural extension agents on their own cannot possibly reach the millions of farmers dispersed across our landscapes.
Done right, mobile services provide alternatives. They can reach people in remote areas, deliver valuable information and services to a broad customer base, and allow two-way communication.
But the devil is in the detail. Lack of familiarity with technology, an explosion of ill-conceived apps and an absence of trust in financial institutions have contributed to slow uptake of digital financial tools. Meanwhile, mobile agriculture is just getting started.
Grameen Foundation and other innovators across the continent are overcoming these challenges. Last month, the sixth annual Kalahari Awards at Africa’s Mobile Money Expo in Lagos, Nigeria, honoured an innovative digital group savings plan, Airtel Weza, with the Best Pro-Poor Innovation Award.
The plan is designed for some one million rural Ugandans who rely on informal community savings groups and usually store their cash in a metal box. Despite having three locks entrusted to three members, the money is still subject to theft.
Grameen Foundation partnered with Airtel Uganda to develop a secure and transparent digital system built on the group practice by requiring three members to enter individual pin numbers to approve cash withdrawals, with SMS messages confirming each transaction. Within months of its launch, more than 250 groups had registered for the service.
Airtel Weza is just one way in which digital innovation can benefit smallholder farmers. Another is Digital Green, a nonprofit that uses video to improve extension and create farmer networks. Nigeria’s government-initiated mobile wallet programme enables distribution of subsidised fertiliser through digital vouchers.
In Kenya, smallholders account for more than 75 per cent of agricultural output, but can rarely access loans. Grameen Foundation and microfinance institution Musoni created Kilimo Booster, a mobile-based agricultural loan designed specifically for smallholder farmers. Unlike other loans, its flexible repayment terms correspond to farmers’ harvest cycles and cash flows.
But for most farmers, problems persist in accessing both finance and agricultural information, and banks have little understanding of farmers’ businesses. One solution relies on three-way information flows — between farmers, extension agents, and financial institutions. In this vein, Grameen Foundation has partnered with Opportunity Bank of Uganda to bundle mobile extension and financial services.
Farmers receive farming advice and information from a network of mobile-equipped agricultural extension agents; the agents also collect data on farm operations that help Opportunity Bank understand farmers’ needs and identify smallholders who are qualified for loans.
The loans enable farmers to improve their productivity and connect to markets. It’s a win-win situation that simultaneously trains farmers in best agricultural practices and financial literacy, and provides a scalable business model that benefits the bank.
As these examples show, the rapid expansion of financial inclusion and the development of mobile agriculture hold enormous promise for agricultural development. But these transformations require Africa’s government, business and civic leaders to invest in a new era of digital innovation to serve poor rural communities. Then, from the ground up to the cloud, the possibilities will be endless.
Juan Guardado is East Africa director of the Grameen Foundation.