Digital Payments fundamental to Sustainable Agriculture – A view across the emerging world


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Agriculture is a critical economic sector in the emerging world. About 85% of the world’s population live in rural areas and about 80% of this population directly depend on agriculture for their livelihoods.

The value chain within Agriculture economies have many pain points that digital payments and proactive financial services can help address. By enabling farmers to be compensated quickly, transparently, and securely for their crops, digital payments allow them to save money and reinvest it in their livelihoods.

Some key issues are as follows,

  • Cash based Agriculture economies suffer from inefficient value chains resulting in huge wastage of food. Opaque pricing also results in increased costs for farmers.
  • Lack of Proactive financial services like savings and insurance products for farmers. Poor access to credit means farmers lack a plan B.
  • Social Programs and subsidies often don’t reach the beneficiaries or are less effective by the time they do. Also, coverage of such social programs is very limited.

Agriculture Economy 1

A report by BetterThanCash highlights the need for better and faster digitization of payments and financial services to farmers. Some key statistics are as follows.

  • Asia had the highest number of malnourished population (about half a billion) and 23% of Africa suffered from malnourishment.
  • There are over 2.5 Billion small holder farmers (those with less than 2 Hectares of land) in the world and they account for about 80% of the crops produced in Asia and Africa
  • 37% of food produced in these economies get wasted due to lack of market access to these farmers.
  • 95% of these farmers were paid in cash. (2016 statistic)
  • A 1% increase in agricultural production in eight APEC economies was associated with a 1.4% decrease in the number of rural people living under the poverty line.
  • Agricultural growth reduces extreme poverty 3.2× faster than non-agricultural
    growth in low income countries.

The above stats provide a view of the size of the problem that exists, but also highlights that a focused execution of financial inclusion in the Agriculture economy can reap better results than most other sectors.  Mobile industry association GSMA estimates the market for digital payments would reach $394 billion by 2020, paid to 370 million farmers.

The challenge in doing so is often the number of stakeholders that need to act to solving a particular pain point. In order to provide a frictionless digital payment capability to farmers, the payment provider needs to work with the vendor and also potentially with a Mobile service provider (in Parts of Africa and Asia).

Similarly providing insurance and savings products for farmers, not only need the service provider and the vendor to come together, but also for the farmer to have some awareness of these products and what their benefits and risks are. The subsidies and leakages in social programs reaching the beneficiary will need governance from the public sector institution.

Often, NGOs can bring together such actors to effect transformation for the society and the industry through digital financial services. For eg: Bill and Melinda Gates Foundation are working on several such programmes within Africa to bring innovative financial services to Farmers.

A case study in Uganda is an example. Mount Elgon is one of  Africa’s highest mountains and home to 5,500 coffee farmers who are paid in cash. During coffee washing season, an employee must drive >50 km every  day, collect $50,000 in cash, and drive back to make payments at multiple washing stations.

UNCDF’s Mobile Money for the Poor (MM4P), in partnership with the Bill & Melinda Gates Foundation, worked with MTN Uganda (a mobile network operator) to establish basic mobile connectivity and with Fenix International to finance mobile handsets, MM4P helped build the basic infrastructure necessary to digitize payments for these coffee farmer. Farmers were then onboarded to MTN Mobile Money, through which they receive their payments.

Such initiatives create huge opportunities by opening a distribution channel (the mobile wallet) to customers, which can be used for additional financial services for the farmers. Another use case is the potential to create digital market places for farmers, where they can sell their crops directly to buyers. This results in dis-intermediation and more efficient value chains.

There are some countries who are already doing this model NINAYO in Tanzania and SEWA RUDI in India are examples. These developments are sporadic green shoots across the world, but it would take quite a lot of effort to bring about economic prosperity through financial inclusion and digitization for farmers.

Arunkumar Krishnakumar is a Fintech thought leader and an investor. 

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  1. Great article! Another promising example of how tech is empowering smallholder farmers is Agrocenta from Ghana. They offer a holistic suite of services to farmers such as a digital marketplace, mobile money solution and uber-like logistic service to bring the produce easily to the buyers.

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