Emerging Trends in Digital Delivery of Agri-finance
By Howard Miller and Grace Njoroge
This is the first in a series of three blogs on the role of technology in the rural finance projects supported by the Mastercard Foundation Fund for Rural Prosperity (FRP). In this first blog, we explore the major trends in digital delivery that the Fund is seeing in its portfolio. In the second blog, we will dig deeper into how these technologies are being used to solve problems for the rural poor; and in the final blog of the series we will focus on what this means for the Fund and for rural development programmes more generally.
Back in 2014 when we were designing the Mastercard Foundation Fund for Rural Prosperity, we debated for a long time some of the terminology around the fund. One word that came up a lot was innovation. What do we mean by innovation? How do we define it, and how do we measure it?
Another word was solution. If we are talking about a financial solution for a smallholder farmer, then what is the problem? Innovation and solution are over-used words in financial inclusion, and in international development generally, and we wanted to make sure we were using them to actually mean something.
In the two years since the Fund was launched, with 11 rural finance projects up and running, it has become increasingly clear that we cannot talk about innovation and solutions for the rural poor without considering the role of technology. With 277 million registered mobile money accounts in Sub-Saharan Africa, a base level of digital finance penetration is often taken for granted, even in rural contexts, and bidders are getting more and more imaginative about how to build new structures on these digital foundations.
This, however, brings a new set of challenges. In his book “Geek Heresy”, Kentaro Toyama uses a range of examples to illustrate the limitations of technology in development. Technology, he argues, can only improve on ideas, processes and institutions that are already well-designed. Apply technology to a bad system and you’ll probably only make things worse. For technology to have a meaningful social impact, it needs to be used to amplify the skills and ambitions of people.
You can see Toyama’s argument in some of the best examples of tech for development in recent years. M-Kopa (a Fund grantee), is such a compelling story not because its technology is so out of this world but because the technology solves specific problems for the consumer, and is delivered through an effective, well-designed mobile payment model. Technology wasn’t the solution in and of itself, it was one key part of a clever business model.
We see similar trends across the Fund portfolio. These projects are using technology to not only deliver financial services, but also to solve some additional challenges in the lives of the rural poor. For example, in Ethiopia, Kifiya Financial Technology, a payment services provider, is working through large buyers (multipurpose co-operatives) to deepen market linkages in addition to acting as a rural agent for financial institutions.
In Ghana, Prepeez Technology Limited, a company focused on technology solutions for the agricultural sector, is using satellite imagery to cluster farmers into groups in order to manage risk and provide more relevant market and weather information. With the information gathered, farmers will then be eligible for agro-insurance and access other financial products.
Olam, a global agribusiness trader, is in Uganda offering input financing along with a digital platform to connect coffee farmers, and also provides information on best farming practices. Biopartenaire in Cote d’Ivoire, which specialize in sourcing cocoa beans from smallholder farmers, is looking to increase cocoa farmers’ financial literacy through an app that also facilitates access to credit for the farmers.
In each of these cases, innovation doesn’t mean disruption. It means a good idea, using new technology to overcome an important pain point in a system with high potential to improve outcomes for farmers. Technology is not just supporting financial inclusion; it is providing a service – information, networks, market linkages, cost savings, advice – that links financial inclusion to improved livelihoods. It is providing a solution.
In any innovation competition, you see a lot of business models that use amazing new technologies, with a high degree of innovation, to solve problems that nobody actually faces. This is innovation for innovation’s sake. At the Mastercard Foundation Fund for Rural Prosperity, we’re trying to keep the solution part front and center to ensure that the technological innovation is responding to a real challenge faced by rural African populations.
It is encouraging to see some of the great ideas coming through the Fund and how the innovation frontier is being meaningfully shifted with every group of applications. In the next blogs, we will look deeper into how those projects are impacting rural populations in Africa, and what we can learn for our future work.
Howard Miller is an Associate Consultant, Nathan Associates
Grace Njoroge is a Financial Inclusion Advisor, KPMG Advisory