The state of mobile payments in agriculture

In January I wondered if this would be the breakout year for agriculture mobile payments. As we enter the second half of the year, I’m pleased to report on various current and upcoming initiatives that suggest it will be by year end.

Even though we are in the 21st century, most of the 1.5 billion smallholder farmers worldwide are still paid in cash. The number of farmers and the numerous transactions throughout the value chain mean the agriculture sector makes the strongest value proposition for private sector investment in rural areas. Transitioning these farmers to receive mobile payments increases revenue for telecommunications companies and reduces cash handling costs and promotes other value chain efficiencies for commodity buyers while providing farmers with numerous benefits, including a “financial identity,” safety, storage and convenience.

There are a number of recent initiatives that are jump-starting ecosystems of cash-in/cash-out agents, merchants and mobile money users in rural areas:

● The Technical Center for Agriculture and Rural Cooperation — CTA — just published its mobile payments landmark study about the Visa-funded Rice Mobile Finance initiative in Ghana, a private sector investment in coffee mobile payments in Uganda, and cotton digital payments solutions in Zambia.

● Mercy Corps is a network orchestrating partnerships as part of its new Swiss Agency for Development and Cooperation-funded Agri-Fin Mobile Phase II and its new MasterCard Foundation-funded Agri-Fin Accelerate initiatives in Uganda, Zimbabwe, Indonesia, Kenya, Zambia and Tanzania.

● In Ghana and Ivory Coast, the World Cocoa Foundation is currently conducting a mobile money market study and curriculum development that will inform upcoming cocoa mobile payments pilots.  

As stated in Bill and Melinda Gates’ annual letter for 2015 “once [mobile money] gets going, then there will be competitive innovation in offerings like special savings or credit plans related to farming.”

In addition, a viable ecosystem will serve the other mobile finance needs for health, education, utilities and financial products as well as supplier financing of items like clean cookstoves, solar power/lanterns, treadle pumps and more, thereby accelerating the shift to cashless economic activity in rural areas.

As we consider digital finance and the future of farming we might compare the activity of a village economy to the bloodstream, heart and brain activity of the human body. The digital flow of value in rural areas will be like the “bloodstream” that keeps all person-to-person, consumer-to-business, business-to-consumer and government-to-person parts of the village connected and healthy.

The village-level income earning activities, including agriculture, handicrafts, services and labor, will be like the beating “heart” that keeps the bloodstream circulating in the rural economy.

Finally, the infrastructure ecosystem — the agents, merchants and users — will be like the “brain,” given the rapidly emerging multisector consumer functionalities — such as agriculture, health, education and finance — being added to payment systems.

The perennial struggle for agriculture has always been the vicious cycle of low productivity and little or no financing. The phenomenal uptake of mobile phones provides a payments/information/finance channel that extends directly into the households at the base of the pyramid.

This presents us with game-changing opportunities to impact the poor in multiple ways — starting with agriculture. This nicely aligns with recent policy-level interest: The third International Conference on Financing for Development, in Addis Ababa, Ethiopia reconfirmed the need for private sector investment and public-private partnerships, while specifically noting the need for mobile banking.

To be formally adopted in September, sustainable development goals 2, 3, 5, 8, 9, 10, 12 and 17 note the need for financial inclusion and/or increased agriculture productivity, with goals 9 and 17 specifically noting the need to use digital technologies.

Developing nation central bankers are reassessing their standards for proportionate risk management to capture the full potential of mobile finance to accelerate financial inclusion. Meanwhile, telecommunications regulators are also exploring new standards and opportunities as indicated by the upcoming Digital Economy International Workshop hosted by Colombia’s Communications Regulation Commission in Cartegena that will also include agriculture digital payments.

Agriculture digital payments, though nascent, are well underway and the favorable policy environment bodes well for continued uptake and scale out. By strategically leveraging the underlying economics of agriculture we can stand up the digital bloodstream, heart and brain of a wider cashless village economy.

Private foundations and donors can leverage their convening authority to promote collaboration, communication and coordination between incumbents, new entrants and regulators. They can also provide proof of concept, conduct research, promote awareness and education, capture lessons learned and best practices, compile open source tools/technologies, and manage knowledge for this new space.

To maximize the power and potential of digital technologies requires only our imagination and commitment to align the private sector telecommunications and banking sectors as well as the international community to reduce poverty, improve health and education while increasing living standards for the poor.

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