First published on mezzanineware.com on 6 October 2019
A recent poll discovered that over 65% of South Africans would choose to farm their land if they were to be recipients of such land via a land redistribution program implemented by the South African government. This seems surprising because farming is hard. It’s an up-early, to-bed-late, always-on, never-resting, high-risk endeavor. If it doesn’t rain, if it rains too much, if a bunch of invasive insects climb off a boat at one of Africa’s many ports and eats up all your yield (it happens, read up about PSHB here), there are so many factors that can affect a farmer’s livelihood let alone profits.
Technology, however, is putting up a fight to combat the many issues farmers face. Digital solutions like Safaricom’s DigiFarm offering, enabled by Mezzanine have successfully improved and scaled commercial viability for smallholder farmers in Kenya. A smallholder farmer has between one and three acres of land (up to 8 000 square meters). While that doesn’t seem like a lot – several plush suburban houses in Johannesburg are nestling on land over 1000 square meters in size – more than 70% of Kenya’s agricultural output is supported by these smallholder farmers.
Great digital technology solutions connect dams of value. In the case of DigiFarm, the dams of value consist of the smallholder farmers, the co-operatives and companies that buy their crops, and agribusinesses who manufacture and sell products that farmers use. Flowing bountifully below these dams of value is a river of data that Mezzanine collects and protectively shares to improve the financial inclusion status of these farmers. The river of data enables a third benefit for everyone and that is a digital ecosystem.
A digital ecosystem means that suddenly there is a whole lot more information and equality between different players than there was before. Procurement is more transparent, operations are more efficient, communication is improved, performance can be better monitored, access to formal markets for crops is enabled and best practice in agriculture can be shared and implemented.
There’s another benefit for farmers participating in a digital ecosystem, and that’s the reduction in fraud and corruption, a problem that is rife across Africa. DigiFarm does this by being able to track the quantity of yield submitted to a buyer. So for example when a low-paid farm worker drops off a certain amount of milk at a dairy cooperative and expects to receive a certain amount for it, DigiFarm can ensure that the amount of milk that left the farm is in fact the amount of milk that is being handed over to a supervisor at the cooperative. The supervisor is unable to cheat the farmer in the sale of the milk by under-declaring what quantity was brought to the sale. DigiFarm democratizes the open market for farmers, making sure they are paid a fair price for their yield regardless of which parties are involved in the sale.
According to GSMA, for numerous smallholder farmers, this data that DigiFarm collects is their first digital financial footprint. This then opens a pathway to financial inclusion for them. Their financial transaction logs created through the digital solution can be used to generate an economic identity and a financial history which translate into better opportunities for them to secure loans and financial services. This gives farmers leverage to grow, and when agriculture grows, so does Kenya.
Speaking of Kenya, there are two reasons that DigiFarm has proved such a success for this country. Firstly, penetration of mobile phones is advanced. Secondly, Kenya is a world-best-in-class case for the use of mobile money solutions. In fact 73% of Kenyans have a mobile money account and mobile money payments are used for all types of transactions ranging from the paying of salaries and bills to government subsidy payouts and benefits.
But why is having this economic identity important? Because an economic identity encapsulates a person’s life events, assets and transaction history so it enables access to a range of services. It’s a kind of rich data version of who you are as opposed to what we refer to as foundational identities which are very demographic in content like a passport or a birth certificate. Foundational identity documents don’t really help an individual obtain services like bank credit or more favourable payment terms for their business. For enterprises, an economic identity can be trusted so it enables multiple stakeholders to interact and transact with the farmer.
So establishing an economic identity promotes and enables financial inclusion. Farmers are often considered high risk because the agricultural sector is unpredictable and because farmers themselves have limited if any financial history. Before DigiFarm, trading agricultural goods was predominantly a cash business. Unsurprisingly then, reports show that during 2017, 45% of Kenyans borrowed money from family or friends rather than from financial institutions. With a financial history these farmers are more viable recipients of loans from banks. So now we have Kenyan farmers with economic identities. They went from cash to mobile money so they have a history of transactions, data proving regular income and a loan or credit payment history showing their turnover and asset portfolio.
Kenya’s agricultural sector has been declining over the past few years. This is due to several factors ranging from drought and pest infestation to underinvestment in the sector. Not only did this reduce the country’s GDP but it cost the country and its citizens more because imports were needed to provide for local demand which increased food prices for Kenyans and hindered domestic growth.
Kenya’s vision is to increase the annual GDP growth rate of its agricultural sector to 10% by 2030. To realise that objective smallholder farming is a critical focus area for transformation. To create productive societies, African countries need to increasingly embrace digital technology solutions like Digifarm.