Editor’s note: This is the second of a three-part series that began last week, laying out three steps for embedding mobile money into agriculture development at the BoP. Click here for part one and part three.
The new industry of mobile money began as recently as 2007 and has rapidly saturated the large urban city centers in East Africa. West Africa and elsewhere in the world are following close behind. The next challenge for the industry is to roll out into rural areas in further pursuit of breaking even – and even generating a return on investment. In their 2013 state of the industry report, GSMA, the umbrella organization for mobile network operators worldwide, acknowledges this challenge as well as the need to position mobile money agents in the right rural areas to have maximum impact. Meanwhile, a mobile payments strategic alliance partner for the cotton sector in Zambia believes a race is underway among large cotton buyers to have the fastest speed of payment to farmers. These same types of alliances that link large commodity buyers with mobile payments providers have emerged in Uganda, Kenya, Ghana and elsewhere.
There are a number of dynamics that can strategically align a large commodity buyer with a mobile financial services provider and other supporting entities. The commodity buyer wants to replace its obsolete cash payment scheme with an efficient, low-cost digital payment mechanism, and the mobile payments provider wants a regular payment stream flowing into numerous mobile wallets that generate transaction fees. Meanwhile, farmers benefit from convenient and safe receipt and storage of crop payments, and the subsequent convenience of their own mobile payments to buy more input supplies, and to pay for school fees, water, utilities and numerous other expenditures in their village-based economies.
An upcoming report by the Technical Centre for Agriculture and Rural Cooperation that I am authoring explores three such cutting edge strategic alliances that leverage the procurement policies of large buyers of commodities that source from smallholder farmers. Each alliance has partners with different roles and interests that come together with a common mission to replace cash payments to farmers with mobile payments. For example, SmartMoney-Uganda – a mobile savings and payments service – has partnered with the Ministry of Trade, Industry and Cooperatives (MTIC) to introduce its service to their over 13,000 cooperatives throughout the country. Together with the MTIC point of contact, SmartMoney conducted pilots in Northern and Eastern Uganda. And since August 2013, it has invested in the build-out of its infrastructure, and has begun implementation with coffee and cotton buyers in the Kasese district in Western Uganda. MTIC has been an invaluable partner from the very beginning – the service aligns with its mandate to improve farmers’ income and their general livelihood.
In Ghana, Agribusiness Systems International (ASI) facilitated the RiMFin alliance between TigoCash (one of Ghana’s leading mobile network operators), GADCO (a major rice producer and miller) and smallholder rice farmers to pilot a new mobile payments service. Through this program, GADCO sourced product from and made mobile payments to 722 smallholder farmers, and is now scaling up to 5,000 farmers. This has replaced their previous cash payment scheme that was costly, difficult to account for, susceptible to fraud, and onerous to pay out in a timely and safe manner.
In Zambia, the big story is the eight-year-long pursuit by the largest cotton buyer, NWK Agri-services (formerly Dunavant) to find a digital payments solution for its 130,000+ farmers to which they disburse as much as $44 million USD per season in 880,000+ separate transactions. Last year, an employee was killed during an attempted robbery. Zambia’s very low population density presents many challenges to making the economics of a digital solution work. Nevertheless, NWK Agri-services has explored mobile payments and e-vouchers, and has recently moved into prepaid bankcards. Each of NWK’s mobile/digital solutions had different alliance partners and/or partner roles and responsibilities.
The particular characteristics of a value chain at a regional and/or national level require a unique strategic alliance design that delivers a custom solution set of mobile/digital technologies and business model innovation. Once the partners come together and the solution set is crafted, the next challenge is how to integrate both into the value chain where the farmers live and work.
Stay tuned for the third and final part of this series on how to embed mobile money into agriculture value chains.