Agricultural transformation and rural development through mobile technology

By OLUKAYODE OYELEYE

Prominent among the various factors responsible for the backwardness of agriculture in Nigeria is the fact that the farmers, majority of which are rural-based, are poor and dependent on old-fashioned tools. Their poverty, which has been pervasive, has generally been attributed to their remoteness from financial centres in the urban environment and from government policy makers and implementors, poor access roads that waste much time and increase transaction costs, leading also to increase, although sometimes arbitrarily, in prices of agricultural produce.

The farmers have, for the most part, been operating at the mercies of weather, at the whims of middlemen and creditors, under the ruthless influence of pests and diseases and, have been operating mostly at deficits, but kept doing the farming business for lack of alternatives. Those who could not cope further, or decided to take risks outside agriculture, have ventured into towns and cities, looking for other means of livelihoods, no matter how unsure.

Add all of these to the ageing population of the farmers, and you will be able to predict what the future portends for agriculture, food security and the economy of Nigeria. Although an integral part of the real sector of the economy, agriculture in Nigeria has, for decades not been reckoned with as a strong pillar of the economy and so has remained in the informal sector. While this lasted, the planners, policy makers, researchers, development organisations and NGOs had been churning out conflicting and mostly estimated figures on the state of rural infrastructure, agricultural employment, volumes of food produced and the sector’s contribution to national Gross Domestic Product (GDP).
 
The farmers remained backward, isolated, remote, poor, disenchanted and disconnected from the national economic radar. Yet, Nigeria’s food import profile rose on annual basis and billions of naira frittered away on food importation. Nigerians, over time, developed tastes for imported products that could very well be produced at home, to generate huge volume of employment for Nigerians and reduce capital flight. Under the Agricultural Transformation Agenda (ATA) of the Jonathan’s administration, it is time to do things differently, as the president has once put it.
 
The financial institutions have huge roles to play, especially in guaranteeing money movement, to boost rural and urban economies. Nigerian banks have been declaring profits running into billions of naira annually from narrow areas of business, particularly those they considered less risk-prone, notwithstanding the fact that they are not necessarily sustainable. For the country, the unbanked and under-banked represent a large and potentially profitable untapped market. Traditionally, commercial banks have concentrated overly on risks in agriculture as reasons for not lending to the sector, and are overlooking very huge business opportunities while they give disproportionate attention and services to the urban centres and other volatile investment options. Their activities betray a clear absence of research-based corporate business decisions and an absence of needs assessment studies as basis for developing their operational plans.
 
 The robust economic growth of the past decade, and even before it, has not trickled down to the people, and banks’ outlook played a significant part:  only large corporate and guaranteed wage earners in the public and private sector in the urban centres have been having access to credit.  Majority of the populace are rural dwellers that do not have access to basic financial services and are poor. This class of people is made up of peasant farmers and petty traders.
 
According to a report by Enhancing Financial Innovation & Access (EFInA), 63.5 per cent of Nigerian adult males and 76.8 per cent of adult females are unbanked, while 78.8 per cent of the country’s rural populations are largely unbanked. About 59.3 million adults are unbanked due to irregular income, unemployment and distance to the bank branches. Currently, in Nigeria, 23.8 million adults choose to save money at home, 12.9 million adults use informal societies and 6.7 million adults use village associations.
 
Nigeria is not alone in this trend as a recent research by Deloitte Consulting LLP shows that financial institutions around the world compete against one another trying to attract and retain the same middle- to upper-income retail customers year after year. Yet a common finding is that there is an enormous market that most banks are ignoring — and that nonbank competitors have begun to cultivate effectively: the world’s 2.5 billion adults who are either unbanked or under-banked.
 
Differentiating the categories, experts at Deloitte identified the unbanked customers as having no checking, savings, credit, or insurance account with a traditional, regulated depository institution. Under-banked customers, on the other hand,  have one or more of these accounts, but conduct many of their financial transactions with alternative service providers, such as cheque-cashing services, payday lenders, and even pawn shops — and still use cash for many transactions.
 
Nigeria is a big country, with many far-flung towns, villages and even hamlets. Sending or receiving money for buying and selling agricultural inputs and farm products, payment of salaries or school fees, settlement of business transactions, or family support is common among businesses and individuals. It requires efficient, reliable and affordable money transfer services in which money can be deposited in one location and withdrawn in another in both urban and rural areas.
 
The informal systems of money transfer such as individual traders carrying money on themselves or sending commercial drivers or their conductors are susceptible to highway robberies and thefts. Money sent through letters and parcels of the courier companies may be stolen. Other challenges include delays and long queues, network limitations, insolvency of branches, unreliable communication and misdirected parcels. Structural weaknesses in the formal financial industry, however, limit the access to money transfer services, especially in rural areas and for low-income people. Banks are concentrated mainly in urban centers, operating under conditions that constitute barriers to the use of their services.
 
Mobile money solutions will play a major role in integrating Nigeria’s hugely informal economy, which is driven by small-scale farmers, traders, craftsmen and other types of small and medium-sized businesses, into the formal economy. The desire to spur progress in smallholder agriculture has historically led to search for new models of agricultural financing that address the constraints faced by farmers. Among these models are interventions that provide agricultural finance to farmers in groups and attempts to use the Grameen lending model. The beneficiaries, which are mainly rural and remote, still face daunting hurdles in accessing such supports. Other efforts include establishment of credit and microfinance platforms based on collateralised lending.
 
Indeed, the emergence of rural micro-finance organisations and Savings and Credit Cooperative Societies (SACCOs) has been based on the premise that smallholder farmers need unique services that are close to them. These models have had limited success due to factors such as high transaction costs of delivering the services to small and widely dispersed farmers, high covariate risks, missing markets for managing weather and market risks and the lack of suitable collateral. These factors limit the ability of smallholder farmers to save, borrow as well as access remittances.
 
Encouraging banks and other financial institutions to embrace alternative transaction channels (internet, POS, mobile phones etc) is timely now. These channels are a convergence of banking and telecommunication sectors, designed to ensure ease and convenience for the users. Mobile money merges the regulatory environments of both telecommunications and banking into a new paradigm that ultimately demands a collaborative dialogue among providers to balance intervention for risk mitigation with market innovation.
 
The widespread diffusion of ICT, particularly mobile phones is known to have the potential of bridging the digital divide as well as alleviating poverty through the direct and indirect job creation. Mobile money has now become an imperative factor for financial inclusion and the key driver of funds from the informal sector to the formal/banking sector. Mobile money campaign in Nigeria, as done presently, tends to concentrate largely at the urban cities and the banked segment. 

 
 
Western Union and MoneyGram, which operate through commercial banks, are used almost exclusively to receive money rather than send it. Despite the network of these formal providers throughout the country, rural areas and client segments such as low-income earners tend to be excluded. The availability of financial services in the rural areas has suffered a setback since the mid-nineties when there was a massive failure of banks and commercial banks closed down less-profitable branches especially in rural areas.
 
Such gaps left by formal providers have typically been bridged by informal means and services. These include transporting the money by oneself or sending it by a friend or through an unlicensed service. Most financial organisations tend to be located in commercial centres where there is enough clientele to make their operations profitable. Such centres, however, tend to be inaccessible to the remotely located smallholder farmers.
 
The lack of access to a broader set of financial options in rural areas represents a potential constraint to entrepreneurship and the ability to undertake socially and privately profitable investment projects. Participants are geographically scattered, financial transactions are small and rural incomes tend to be unstable.
 
Narrowing the digital divide is not a subject of debate. It is fundamental to the nation’s goal of becoming one of the top 20 largest economies in the world by the year 2020. Nigeria presently has an estimated population of 160 million people with the number of unbanked populations placed at about 70 per cent. Because it is upon this category of people that Nigeria depends for local supply of food,, the agricultural sector has a huge transformational prospect in this case. It is critical and important for financial inclusion. It would serve as a key driver of funds from the informal sector to the formal/banking sector and is directly linked to economic development, hence reduction of poverty.
 
 The introduction of mobile money services, a viable tool to provide basic financial services, by the CBN was seen as a veritable tool to create payment access to these unbanked Nigerians in the rural areas, and also help drive financial inclusion in the country. Mobile money is therefore a tool that would allow individuals to make financial transactions using mobile cell phones.
 
It is important to distinguish between mobile banking and mobile money. Mobile banking entails banking transactions through a mobile device such as a mobile phones or Personal Digital Assistant (PDA). Mobile payments (m-payments) are financial transactions undertaken using mobile wireless device. Put in its simplest form, Mobile Banking gives you access to your bank account details and allows you to perform most banking and non-banking transactions – balance enquiry, transfers, bill payments, purchases etc) right on your mobile phone. In essence, you must have a bank account to use a mobile banking service. Mobile money, however, is targeted primarily at the unbanked/under-banked market segments. At the bottom of the socio-economic pyramid therefore lies a significant percentage of the unbanked and under-banked population.
 
Unlike the commercial banks and savings organisations, mobile money transfer (MMT) services attract no ledger fees and minimum balances. By facilitating cheap and timely transfer of small amounts of money across large distances, MMT can improve the investment in, and allocation of, human capital as well as physical capital. One element of banking not offered by MMT services is lending. The advantage of Mobile Money lies in its reach to the larger population of the unbanked/under-banked. It is a veritable tool that is capable of transforming traditional banking for those at the bottom of the pyramid to the present level.
 
For people who live in isolated areas, the service means no longer having to carry lots of cash to markets or towns. It reduces the risks of losing huge amounts to banditry and theft. For people without bank accounts, the service means they can pay cash in exchange for mobile credit, making payments and transfers and building up savings – becoming participants in an economy from which they had previously been locked out.
 
The cell phone is a portable, revolutionary tool. More people in the world have access to mobile phones than they have to running water, electricity, or even toilets. It comes across as a tool for bringing the rural dwellers into the mainstream economies. As of May 2012, Nigeria’s mobile telecommunications subscribers’ base hit 101.1 million. According to the African Journal of Business Management, published on 15 February, 2012, majority, about 70 per cent of the population in developing countries, particularly in Africa, live in rural areas and have no access to financial services.
 
The benefits of mobile money implementation in Nigeria to all stakeholders are enormous. Mobile money and mobile banking will increase the number of customers’ reach particularly at places where the banks ordinarily would not have gained access to or where setting up a bank branch would not have made a good business justification in terms of running cost. For the beneficiaries, in addition to mobile apps that are common to mobile banking and mobile money, short messages services (SMS) and unstructured supplementary service data (USSD) transaction channels available on mobile money is another simplified advantage which the common man can use without any complication.

Nigeria is one of the fastest growing telecoms nations of the world and the adoption of mobile money will help a great deal to solve the problems associated with remittances, transactions and savings. Analysts at Financial Derivatives Company (FDC) Limited stated that the high level of mobile telecommunications penetration, placed at over 105 million by data in the country, released by the Nigerian Communications Commission, is expected to translate into an increase in bankable Nigerians if properly harnessed. The mobile operators obviously have a greater access to a large percentage of the population as well as to infrastructure for the deployment of the mobile money service.
 
A senior executive at Accenture Nigeria recently posited that the success of mobile money services, acceptance of the services by the rural dwellers and investment in mobile payment infrastructure would only come when people realise the opportunities inherent in that industry. She noted that capital would always go to where there is an opportunity, adding that mobile money subscribers far outnumber personal computer users and the banked in Nigeria; a great opportunity the providers have failed to utilise. It is hoped that over time, mobile money operators – most especially the banks – will leverage on the database of their unbanked and under-banked mobile money users to gain market insight and for marketing purposes for other banking products and services which may eventually encourage the unbanked to own a bank account.
 
In Nigerian agriculture, the women occupy a significant position numerically and in terms of volume of activities. Nigerian women farmers constitute 70 per cent of the country’s agricultural workforce and produce 80 per cent of the country’s food, yet most of them lack access to almost everything that could make farming worthwhile and gainful. They are not only susceptible to the whims and caprices of weather; they also face challenges such as lack of funds, inadequate agricultural information, inability to preserve farm produce, and poor access to the market. Others are lack of information about crop production, pest control, treatment of animals, economic and health information.
 
The time has come for Nigeria, a developing country, to enhance the contribution of women entrepreneurs to the creation of meaningful and sustainable employment opportunities and poverty alleviation. Improving access to financial services, including savings accounts, can make all the difference. Women are considered good savers, and research has demonstrated that they are more likely to reinvest their savings in their families and communities.
 
The World Bank notes that gender equality is smart economics as it can raise productivity, improve other development outcomes, including prospects for the next generation, and contribute to more representative decision making in societies. However, various researches have shown that one of the easiest ways to enhance financial inclusion is by enhancing women’s welfare and participation in the nation’s economy.
 
Women, especially, have a niche in rural agriculture, operating at various points, and sometimes throughout the length, of commodity value chains. It is therefore imperative for the female farmers to have access to adequate information in order to boost agricultural and rural development. The plight of the female, rural-based farmers has received attention of Nigerian government at the highest level. In this context, the mobile phone, as a device, can turn the lives of rural female farmers around. According to experts, the mobile phone is both an engine of opportunity and convenience.
 
Recognising that ICT holds great potential for rural dwellers, particularly female farmers, President Goodluck Jonathan, in his widely reported 2013 budget presentation to a joint session of the National Assembly, said his administration will give millions of mobile phones to women farmers. President Jonathan, who describes this as part of efforts to prove the gender friendliness of his administration, said: “To further integrate women in the various sectors, we have developed an innovative approach to mainstreaming gender issues starting with five pilot ministries – agriculture, health, communication technology, water resources and works.”
 
The president had explained that “these ministries are signing MOUs with the Ministry of Women Affairs to deliver on specific services for women.” According to him: “The Ministry of Agriculture, for example, will work with its ICT counterpart to ensure that five million women farmers and agricultural entrepreneurs receive mobile phones to be able to access information on agro-inputs through an e-wallet scheme,” and announced that “N3bn has been set aside to be disbursed to participating MDAs as incentives for them to deliver on these targets.”  
 
In a December 25, 2012 edition of the Punch newspaper, Chairperson, Women in Technology in Nigeria, Mrs. Martha Omoekpen Alade, who lauded the gesture, said: “It is an excellent initiative. Rural women need such to keep abreast of technology. This will, to a great extent, bridge the digital divide. Rural women are important to economic stability. It is a good thing the Federal Government is positively gender sensitive.” She revealed that WITIN has developed a mobile app for illiterate rural women, adding that the app currently runs on affordable mobile phones.
 

Prior to that time, however, the Minister of Agriculture, Dr. Akinwunmi Adesina, had announced government’s plan to distribute 10 million mobile phones to smallholder male and female farmers, beginning from 2013, in equal proportion for both genders. The minister had said that the phones would carry features such as information on climatic conditions, market prices of farm produce, extension workers and how farmers can access agricultural funds. He explained that the initiative was aimed at subsidising the cost of major agricultural inputs, such as fertiliser and seeds. “By that the farmers can get information on planting seasons. We cannot do that by newspapers, we need to have something they can relate with in local languages,” he had said.
 
Experts have observed that five million mobile phones in the hands of women farmers will create a platform for multiple services with the overall aim of improving the economic standing of the poor farmers. The private sector, according to them, has a lot to benefit.
 
A 2010 survey on Access to Financial Services in Nigeria, conducted by EFInA shows that only 30.0 per cent of the country’s adult population currently has a bank account, which is equivalent to 25.4 million people. And 67.2 per cent of the adult population has never been banked, which is equivalent to 56.9 million people. While 63.5 per cent of adult males are unbanked, a whopping 76.8 per cent of adult females are unbanked. These unbanked female Nigerians form part of the 78.8 per cent of the rural population which remains unbanked till today. As such, experts concluded that it can be easily taken for granted that most of the rural female farmers do not have bank accounts.
 
EFInA found out further that only 400,000 people out of 28.6 million adults operating bank accounts in Nigeria have mobile money accounts. The figure represents 1.4 per cent of the bank account holders. The survey also shows that 0.45 per cent of the total adult population (given as 87.9 million people) in Nigeria use the mobile money facility. It stated that mobile money was mostly used to buy airtime, with 32.9 per cent of registered mobile money users buying airtime on the platform; while 28 per cent use mobile money to send money to people.
 
Former President, Association of Telecommunications Companies of Nigeria, Mr. Titi-Omo-Ettu and the Programme Director, One Network, Mr. Sola Bickersteth, observed that the federal government’s proposed phone gift to the women farmers, if implemented, is a fantastic move and in line with global trends.
 
eTransform Africa: The Transformational Use of Information and Communication Technologies in Africa, which was recently jointly published by the World Bank and African Development Bank, with support from the African Union, also backed the move by the government.
 
The Lead ICT Policy Specialist, World Bank and the author of the report, Mr. Tim Kelly, said, “Africa is rapidly becoming an ICT leader. Innovations that began in Africa – like dual SIM card mobile phones or using mobile phones for remittance payments – are now spreading across the continent and beyond. The challenge going forward is to ensure that ICT innovations benefit all Africans, including the poor and vulnerable, and those living in remote areas.”
 
Leading mobile phone manufacturer, Nokia, who welcomes federal government’s initiative as rightly directed, says its Nokia Life Tools, recently introduced into Nigeria, is already offering a wide range of information through the services (through the mobile phone) covering health care, agriculture, education and entertainment which address the needs of rural consumers and improves their economic prosperity and quality of life. Nokia’s General Manager for West Africa, Mr. James Rutherfoord, says the Nokia Life Tools is a key part of Nokia’s overall strategy to connect the next billion people by providing access to locally relevant services and information on affordable devices.
 
“Farmers will be able to check market prices without travelling long distances. People will be able to find important health care information without having to travel miles to see a doctor, and students will be able to learn English. All the services are available on easy-to-use and affordable mobile phones,” he added. Nigerian farmers need to show in the nation’s economic radar. One of the ways to do this is to empower them through the mobile phone with appropriate apps. The perennial risks of unpredictable weather, absence of market information, poor rural roads and post harvest wastage that are sometimes associated with their inability to reach market on time can be overcome.
 
Microensure, a recent winner of a Financial Times/IFC award in financial service innovation for the bottom of the pyramid, has introduced a variety of micro-insurance solutions via mobile phones. Its product line includes life insurance in Ghana, farmers’ crop insurance in Tanzania, and health insurance in India.
 
Tina Rosenberg in a piece titled, ‘Doing More Than Praying for Rain’ said,  “In the United States, insurance against extreme weather is seen as so important that Washington subsidises it highly and requires it for farmers who want other government benefits. If American farmers need weather insurance, African peasant farmers need it even more. But the vast majority of African peasant farmers have no opportunity to insure their crops.
 
Dayo Oketola, in his piece on December 25, 2012, quoted experts as saying that, “from agriculture information to mobile money, m-Insurance to m-Health, the proposed five million mobile phones to be distributed to five million women farmers will unlock huge opportunities for them and urged the Federal Government not to rescind on the promise.”
 
Deepening insurance market especially through retail insurance has been tied to effective use of mobile telephone on insurance product distribution. The fact that only 1.0 per cent (0.8 million) of the adult population in Nigeria has insurance, according to experts, clearly demonstrates the potential for using mobile phones as a distribution channel for providing financial services to the unbanked especially against the background of the country’s 109 million mobile lines.
 
According to the Munich Re Foundation in Making Finance Work in Africa, “Nine countries in Africa contain more than one million lives and properties insured: Ethiopia, Ghana, Kenya, Namibia, Nigeria, South Africa, Tanzania, Uganda and Zimbabwe. Every one of those countries, with the exception of Nigeria, achieved that coverage with the help of a simple mobile phone linked life product.”
 
Sir Chukwu Jideani, was one of the compliance practitioners and the corporate lawyers fashioning out the means of addressing the legal and regulatory issues in this fast-developing financial services landscape. On October 19, 2012, in an article on Nigeria: Mobile financial services and the unbanked in Nigeria, published in Nigerian Pilot newspaper and in Microfinance Africa, Sir Jideani noted thus: “I am particularly elated because the benefits of mobile money is huge, not only is it cheaper than the conventional services models and other alternatives to cash; it ensures the inclusion of persons who hitherto had been excluded from formal financial services; provides branchless banking and enables women in rural communities to receive money and take savings away from the prying eye of domineering men.
 
In Africa, the adoption and usage of mobile phones for electronic payments, and to bring financial services to the under-banked and unbanked is becoming widespread. The continent has had several successful mobile money deployments driven by financial institutions such as Standard Bank and Commercial Bank of Africa in South Africa, Ghana, Uganda and Kenya, with Nigeria, clearly seen as a very important market in terms of volume of business.
 
Endeva, a German developmental organisation, in its 2010 report stated that mobile money has bolstered financial inclusion in Kenya. The organisation disclosed that, prior to the introduction of M-PESA in Kenya in 2006, as a joint venture between Safaricom and Vodafone, banking transactions were expensive and many people did not have bank accounts. However, early in 2010, over 9.5 million Kenyans were already using their mobile phones to conduct basic financial transactions such as payment for groceries in supermarkets, or to transfer money to their families.
 
In view of the poor and unbanked number of Nigerians today, the mobile money payment should have a wider coverage than it does now. Nigeria has much to learn from M-PESA both in Kenya and in Tanzania with over 15 million and 9 million successfully registered mobile money accounts respectively till date. M-PESA was the first mobile money implantation in Africa. Findings revealed that the prototype implementation is user-friendly and can be used by all without many problems. A Selected Paper prepared for presentation at the International Association of Agricultural Economists (IAAE) Triennial Conference, Foz do Iguaçu, Brazil, 18-24 August, 2012, was based on household studies in Western and Nyanza provinces of Kenya.
 
The study found that use of MMT services significantly increased level of annual household input use by $42, household agricultural commercialisation by 37 per cent and household annual income by $224. It concluded that MMT services in rural areas help to resolve an idiosyncratic market failure that farmers face, which is the problem of access to financial services. It therefore recommended that other developing countries should follow the Kenyan model and provide an enabling environment that would facilitate entry and survival of MMT initiatives.

M-PESA began by using Safaricom’s airtime retailers (agents) to issue microloans that borrowers would repay at an interest rate reduced by eliminating the overhead conventional microloans carried. According to a 2011 report of Central Bank of Kenya, in early 2011, Safaricom had an M-PESA subscription base of about 16 million and about 17,000 agents (outlets) countrywide. This represents substantially more points of service than the combined number of bank branches which were 1063, and 1979 Automated Teller Machines (ATMs).
 
M-PESA accounted for $130 million in revenue to Safaricom in the 2010 financial year.  Statistics from the Central Bank of Kenya indicate that Safaricom’s M-PESA users moved more than Ksh. 728 Billion (approximately $8 Billion) in 2010. This amount was moved in the more than 306 million transactions conducted in the service. The report further puts daily movement of cash to more than Ksh 2.3 Billion. Revenue from M-PESA in 2010 stood at Ksh 12 Billion, up from Ksh 8 Billion in 2009. M-PESA has proven to be the most widely used method of mobile money transfer as evidenced by the number and value of transactions effected.
 
MMT has shown a clear edge over banks, especially because it is fast and cost-effective. For instance, to send KSh. 35,000 ($ 350) within Kenya, using a classic money transfer company such as Western Union would cost KSh. 1,200 ($ 12), but using MMT method, such as M-PESA, to send the same amount would cost only Ksh. 75 ($ 0.75) which is six times cheaper, according to the Central Bank of Kenya’s 2010 report. Classic money transfer methods requires that one must visit a given post office or bank (which could be a long distance away) to receive the remitted cash. Most banks and post offices are associated with long queues and fixed times of operation hence the opportunity cost of time spent while waiting to obtain the cash and other transaction costs are usually high
 
The use of borderless mobile telecoms services to provide secure, convenient and user-friendly mobile banking services to unbanked people throughout via mobile phones will reduce time wastage, uncertainties of trips to far-away bank branches and other needless transaction costs. In response to M-PESA’s success, the model has been imitated in other countries. Africa’s biggest mobile operator MTN has rolled out schemes elsewhere, the most ambitious in Kenya’s neighbouring Uganda. One year after rollout of mobile money service in Uganda, MTN’s payment service exceeded that of M-PESA at the same stage. A key factor in the Ugandan success is marketing through 2500 representatives, which shows a massive job creation opportunity.
 
M-PESA has been used to facilitate access to insurance or credit to enable beneficiaries invest, get farming tools or mitigate against catastrophic events. For farmers, it helps in ensuring better crop outputs, providing a safety net in case something happens. In 2009, the worst drought in decades devastated Kenya and wiped out the farmers’ corn crop. Micro-insurance was provided for about 200 corn farmers for their crops.  Kilomo Salama insurance compensated the farmers, and word spread. According to some estimates, by the end of 2012, 50,000 Kenyan farmers must have registered to participate in the insurance scheme.
 
Mobile money system has created a lot of jobs. In countries where mobile money system has become a norm and part of everyday life, there is a series of agent networks set up by mobile operators. They are dispersed throughout the country. It’s a massive network of individuals that have their own little shops. They take your money and credit your account or debit your money account, so they can also pay you out. The use of mobile money has created new jobs, businesses, and opportunities for millions of people in Kenya and has helped many to stave off the risks that are associated with farming.
 
With the use of mobile phones, farmers in Africa have a new tool to help them with their crops. It is interesting to note that the mobile money initiative that began in Africa is being exported to other continents, including the developed countries. Other countries in the Americas and Asia are preparing to launch their own mobile money services as well.
 
Around the world, millions of smallholders are facing effects of climate change. Extreme or erratic rains, flood and drought threaten their livelihoods. Most of the farmers work five hectares or less, often in remote areas. In Kenya, the agricultural sector employs three-quarters of the working population. In a bad season, they can lose their entire harvest and lack the money to buy quality seeds and other inputs for the next growing season. They need simple, affordable and relevant system of insurance adaptable to the farmers’ situation.

Kilimo Salama (safe farming in Swahili) is an agricultural insurance product that helps farmers cope with climate change and devastating weather shocks. Kilimo Salama, launched in 2008 in Kenya, insures farmers against drought and excess rain. It is now the largest agricultural insurance programme in Africa and is the first such programme worldwide to reach smallholders, using mobile phone technology.

A farmer can try out insurance for as little as ten US cents to insure a bag of seed costing $2. If there is a drought, for example, the farmer will receive a payout of two dollars, and can begin afresh at the next growing season. Kilimo Salama currently insures over 70,000 farmers. Previously, few of them could afford such cover because of the high cost. Traditional crop insurance relies on expensive farm visits to very claims. Kilimo Salalama does not visit the farms. The programme is designed specifically for smallholders. It uses automated weather stations and mobile payments. These dramatically reduce administrative costs, enabling a premium price that millions of farmers can finally afford.

Kilimo Salama’s use of technology is the key to the micro-insurance product’s affordability and the model’s scalability. Clients are smallholders scattered throughout rural Africa. To reach them, the programme partners with agricultural micro-credit institutions and local agro-vets or stockists who sell farming inputs like seeds, fertiliser and crop protection products.

With a population estimated at 167 million people, 25.4 bank accounts and over 90 million phone subscribers subscribing to mobile payment, Nigeria promises to become Africa’s biggest mobile money market. The compelling needs of millions of unbanked Nigerians are expected to drive the country’s mobile money volume to surpass Kenya’s celebrated 9.5 million M-PESA subscribers among its 39 million people. To this end, the Nigerian Communications Commission (NCC) recently said it would develop an all-inclusive regulatory framework geared towards supporting telecommunications operators in the deployment of mobile payment services in the country.

Victor Mbalewe, an agricultural scientist, and a leader in private sector agricultural investment, wondered why buying phones of a few thousands of naira to empower farmers should stir any controversy. Mbalewe, who manages the Imo State government’s AGRONOVA, an agricultural outfit, asked what the fuss was all about if government has given input subsidies of as much as N75,000 to individual farmers without rattling the public.  He said the federal government, in a bid to encourage cocoa production in Imo State through production of seedlings, allocated 20,000 free cocoa pods to the state in 2012, out of which the state has already picked up 4,000 pods.
 
Stanbic IBTC Bank, a member of Standard Bank Group, and Afripay, has entered into a strategic partnership with Globacom Nigeria, a telecommunications services provider, to launch a mobile money service, to make financial services accessible to about 23 million of Nigerians on the Globacom network, thus breaking down barriers that hitherto hindered financial inclusion of millions of Nigerians. These will not only drive financial inclusion of the under-banked, it will also facilitate understanding of Nigeria’s true Gross Domestic Product (GDP), improve national planning by government and will entrench the cashless economy initiative of the CBN.

Massive use of cell phones by rural farmers can create thousands of rural jobs for some local service providers. Feedback from a group of farmers in Ondo State has shown that “they want extension to be strengthened.” By what means could that be done most easily, especially given their recognition of the fact that they need inputs and that rural road conditions need to be addressed? They have indirectly substantiated why they need phones but were not able to establish firmly the rationale because of concerns for charging their batteries. Their problem actually presents an opportunity in the sense that a business can be spawned from this gap they have identified. 

Just days ago, in a city suburb, I observed a board with many phone charging points, powered by a small generator. I began to imagine how much the operator would spend on fueling the generator compared to how many people would come to charge their phones for a fee. I reckon that it is not likely that operator would be doing that if he does not make any gain out of the idea. So, why can’t some villagers take the initiative of operating such a business to service those in their communities that have phones? I think this is a business development challenge as well as an opportunity. This is one of the embedded services in the agricultural value chain that should be explored and exploited.

If road access is a problem and farmers see their need for inputs, it means they are better off with phones that save them time, reduce their trouble and uncertainty and remove the risks of making needless trips. Some extension services can be personalised and delivered on phones. This will make it easier to reach more beneficiaries, especially as there is a prevailing problem of low ratio of extension officers to farmers. A few will be able to serve more farmers, overcoming the logistic barriers and making a better use of time and other key resources, yet achieving more in agricultural productivity.

     * Dr. Oyeleye is S. A. Media to Minister of Agriculture, Federal Republic of Nigeria