During MMU’s Global Mobile Money Event in July, Michel Hanouch from CGAP pitched the opportunity represented by the convergence of mobile money and mobile agriculture to the audience. In this blog post, Claire Pénicaud from MMU and Victoria Clause from mAgri shed some light on how operators can leverage this opportunity to increase mobile money adoption within farmer communities.
The mobile money and mobile agriculture worlds are increasingly starting to overlap. We are seeing mobile money providers actively looking at the agriculture sector for new growth and differentiation opportunities. The size of the agriculture sector both in terms of its contribution to GDP and the size of the workforce in emerging markets is an opportunity MNOs recognize for continued customer growth. Mobile money providers have approached this opportunity in two major ways:
1) by specifically targeting the agriculture sector as a strategic segment to get them to use traditional mobile money services; and
2) by developing specific offerings to appeal to farmers.
Farmers as a strategic segment
In many markets, farmers represent a large untapped segment for mobile money providers. In December 2012, the global demand for finance from smallholders was estimated at $450 billion, with only 2% currently being met. So what does this mean for mobile finance? There is more and more evidence popping up that shows a significant market opportunity for all players involved in providing mobile financial services. Focusing marketing efforts on this particular segment has become a strategic priority for a number of operators.
For example, Orange Uganda is targeting farmers as potential customers with its mobile money service Orange Money, giving them a safe, convenient way to buy farming supplies and get paid for their harvests. In Sierra Leone, Airtel partners with the Ministry of Agriculture to provide mobile money to farmers in the district of Kenema and in Nigeria, Cellulant and Nigeria’s Bank of Agriculture work together to provide mobile money services aimed at driving business transactions in the agricultural sector.
Trying to leverage agricultural value chains, where farmers are organized into groups via out-grower schemes, has also proved to be an efficient way of increasing mobile money adoption among farmer communities. MNOs in countries where the agriculture sector is dominated by a few large value chains such as cocoa are looking to replace inefficient cash payments for farmers within the value chain and thereby expand their mobile wallets and decrease transaction and distribution costs.
Let’s zoom in to one example to highlight this market opportunity: the 600,000 cocoa farmers on the Indonesian island of Sulawesi receive around $450 million in cash payments and according to market research, 67% are willing to use their mobile phones and pay for a mobile money solution to conduct their financial transactions.
Developing specific mobile financial products for farmers
Other mobile money providers have tried to appeal to farmers by bundling their mobile money offer with information-based services. One of the services supported under the GSMA’s mFarmer Initiative is Tigo Tanzania’s information and advisory service for farmers known as Tigo Kilimo. Accessible through SMS, IVR and a call centre, farmers receive customised tips at each stage of the farming cycle, as well as market and weather information. Services like Tigo Kilimo provide a channel to add in advice and training around financial literacy, thereby helping to increase awareness and adoption of mobile money among the rural segments.
Moving beyond traditional mobile money services to provide mobile insurance, mobile credit and savings services specifically designed for farmers has been another way of targeting this segment. In India, PayMate’s mobile credit solution mKCC has allowed over 7,000 farmers to receive loans in a convenient and affordable way. According to a study by the Indian Institute of Banking & Finance benefits of mKCC include savings of Rs 7314 per farmer per year, costs saved on travel of Rs 70-85 per visit, opportunity costs saved in the form of wages, and an average interest saving of almost Rs 1000 a year.
Traditionally risk-averse banks that have battled for decades with designing products for farmers are turning to mobile service providers to help them expand their customer base in rural areas. One of the biggest challenges faced by financial institutions targeting rural customers is that the majority of farmers have no real credit history. Today, innovative offerings such as the First Access alternative credit scoring system that uses anonymous mobile subscriber records to develop credit scores, are helping to reduce these challenges. MNOs benefit by being able to monetize their subscriber data (in a responsible way via a third party), financial institutions now have a better understanding of these rural customers, and farmers are able to unlock the finance they really need. Other companies including Experian, Cignifi, AFB and InVenture are also looking at alternative solutions for credit scoring based on mobile phone usage patterns and mobile money transactional data.
The GSMA MMU and mAgri Programmes will continue to track the overlap of these sectors and document case studies, lessons and emerging best practices. We’re keen to hear from you about any new examples of the convergence of mobile money and mobile agriculture, so please get in touch: mAgri@gsma.com and firstname.lastname@example.org .