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AGRICULTURE AND MOBILE
FINANCIAL SERVICES
David Garrity, CFA; GVA Research LLC
 DEFINING “DISASTER” IN CONTEXT
OF PRESENTATION
 Natural (e.g. earthquake) vs. man-made
(e.g. famine)
 Anticipating fut...
 AGRICULTURE: A CRITICAL PAIN
POINT IN DEVELOPMENT
 Crop yield growth lagging population growth.
 1 in 3 work in agricu...
 AGRICULTURE PRODUCTION:
CAPTIVE OF INFORMAL ECONOMY
 Informal economy characterized by high
cost of capital which promo...
 MOBILE DATA ENABLING
INSURANCE & CREDIT EXTENSION
 Caller Data Records (CDR): Basis for
effective customer segmentation...
 MOBILE OPERATORS: ACTIVE IN
MOBILE MICRO-INSURANCE
 Expanding mobile coverage supports
wide-scale deployment of mobile ...
 AGRICULTURE: INSURANCE DEPENDS
ON INDICES
 Technology available to support wide-
spread deployment of index-based
insur...
 INDEX INSURANCE DEPLOYMENT
AT SCALE: KILIMO SALAMA
 Kilimo Salama (“safe farming”) – First micro-
insurance product dis...
 KILIMO SALAMA: POSITIVE
OUTCOMES AT SCALE
 200 farmers (2009 launch) => 185K (2013) =>
1MM (2015)
 One country at laun...
 KILIMO SALAMA: LESSONS LEARNED
 Customer trust must be established and
sustained for program to succeed.
 Immediacy of...
 TOWARDS A MODEL OF COMMERCIALLY
SUSTAINABLE MFS
 CDR data access to enable analysis and
allow offering of affordable MM...
THANK YOU FOR YOUR INTEREST
 June 2015 publication
“Technology for Development:
What is Essential?” (Springer
Verlag)
 C...
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International Conference on Financial Services (IFS) 2015: Agriculture and Mobile Financial Services

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Looking at Agriculture and Mobile Financial Services, presented as part of The World Bank Group at IFS 2015.

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International Conference on Financial Services (IFS) 2015: Agriculture and Mobile Financial Services

  1. 1. AGRICULTURE AND MOBILE FINANCIAL SERVICES David Garrity, CFA; GVA Research LLC
  2. 2.  DEFINING “DISASTER” IN CONTEXT OF PRESENTATION  Natural (e.g. earthquake) vs. man-made (e.g. famine)  Anticipating future disasters through risk mitigation.  The global poor are concentrated in areas more subject to adverse climate events.
  3. 3.  AGRICULTURE: A CRITICAL PAIN POINT IN DEVELOPMENT  Crop yield growth lagging population growth.  1 in 3 work in agriculture worldwide.  Smallholders produce 80% of food consumed in developing countries.  Loss of arable land to urbanization.  Climate volatility threatens accelerated erosion of arable land.  Market price signals should not be ignored as indicating persistent and emerging imbalance that must be addressed.
  4. 4.  AGRICULTURE PRODUCTION: CAPTIVE OF INFORMAL ECONOMY  Informal economy characterized by high cost of capital which promotes need to self- insure.  Lack of insurance leads to under-planting by 25% margin.  Important to establish access to lower cost of capital through insurance.  Insurance necessity underscored as mass crop failures more likely with increased weather volatility.
  5. 5.  MOBILE DATA ENABLING INSURANCE & CREDIT EXTENSION  Caller Data Records (CDR): Basis for effective customer segmentation.  Segmentation: critical basis for extending financial services.  Accurate risk-based pricing supports sustainable business models.  Best practices for managing credit risk:  Origination credit scoring system employing CDR and other data.  Management system to rank agents dynamically for commission payouts.  Automated customer management system.  Enhanced mobile client interface allowing real-time credit management.
  6. 6.  MOBILE OPERATORS: ACTIVE IN MOBILE MICRO-INSURANCE  Expanding mobile coverage supports wide-scale deployment of mobile micro- insurance (MMI).  MMI deployment aimed at maximizing revenue per user and customer retention.  Prepaid account arrangements imply low risk to mobile network operators (MNOs).
  7. 7.  AGRICULTURE: INSURANCE DEPENDS ON INDICES  Technology available to support wide- spread deployment of index-based insurance products.  At present, weather index based insurance products are superior to area-yield based insurance products for implementation.  Technology advances in monitoring & evaluation (e.g. drones) may allow normalized difference vegetation index (NVDI) insurance products to replace weather index based insurance.
  8. 8.  INDEX INSURANCE DEPLOYMENT AT SCALE: KILIMO SALAMA  Kilimo Salama (“safe farming”) – First micro- insurance product distributed and implemented via mobile phone network.  Technologies: mobile phone, solar-powered computerized weather stations.  PPP Model: Sygenta (agribusiness), Safaricom (MNO), UAP (insurance), Int’l Finance Corp. (World Bank Group).  Policy payouts disbursed by mobile money at end of growing season based on weather station data.
  9. 9.  KILIMO SALAMA: POSITIVE OUTCOMES AT SCALE  200 farmers (2009 launch) => 185K (2013) => 1MM (2015)  One country at launch (Kenya) => three countries now (Kenya, Rwanda, Tanzania).  Insured farmers invested 19% more than uninsured peers and earned 16% more income.  95% of insured farmers had loans linked to insurance coverage.  In 2012, over 30K farmers could access $5.5MM in loans due to insurance coverage.
  10. 10.  KILIMO SALAMA: LESSONS LEARNED  Customer trust must be established and sustained for program to succeed.  Immediacy of policy payouts necessary to keep client trust.  Importance of agent network to support service deployment and operation.  Offer farmers a package (i.e. seed, fertilizer, financing) plus insurance.
  11. 11.  TOWARDS A MODEL OF COMMERCIALLY SUSTAINABLE MFS  CDR data access to enable analysis and allow offering of affordable MMI.  Bundle MMI with credit products, do not offer as stand-alone product.  Use technology to reduce risk.  Focus on establishing solid trustworthy agent network.  Require supportive governmental environment to allow for development and operation of mobile as channel for financial service offerings.
  12. 12. THANK YOU FOR YOUR INTEREST  June 2015 publication “Technology for Development: What is Essential?” (Springer Verlag)  Chapter 5: Mobile Financial Services in Disaster Relief: Modeling Sustainability  http://gvaresearch.com/2015/06/ book-release-technologies-for- development-what-is-essential/  Email: david@gvaresearch.com

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