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How can digital tools enable
smallholder finance?
Moderator:
RAF Learning Lab
Panelists:
Kenya Commercial Bank
Opportunity International
Mercy Corps Agrifin Accelerate
March 6, 2017
Why are we talking about digitalization?
• Until recently FSP’s have generally overlooked Africa’s 48 million smallholder
farmers because of the challenges in reaching this customer segment
• But this is changing – new digital technologies and innovative business models
are making it possible to provide credit to smallholder farmers in Africa
• Digitalization is happening across the lending value chain and includes the use
of digital tools and channels for:
o customer relationship management
o customer registration
o loan analysis
o disbursement and repayment cash flows
o delivery of support services alongside core financial products
• Organizations can start their digital journeys in many different places and their
journey's are largely shaped by their business priorities and the broader
ecosystems in which they operate in
What do we mean by digitalization across the lending
value chain?
• Manage SHF
data (e.g.
interactions,
repayment
rates)
• Send
SMS/mobile
notifications
• Deliver support
services
• Analyze SHF
data (including
external data)
• Communicate
loan decision
Client
acquisition
Loan
origination
Loan analysis
approval
Loan servicing
monitoring
Loan
repayment
Ability of
digital to
overcome
challenges
• Facilitate loan
disbursement
• Facilitate loan
repayment
Digital
tools
• Field staff
equipped with
tablets for data
collection
• Mobile
registration and
data collection
platforms
• GPS tools
• Facilitate
marketing and
dissemination
• Mobile money
and payment
platforms
• Mobile wallets to
deposit savings
and manage
account
• Data
management
platforms
• GPS tools to
monitor field
officers
• Digital TA and
other value
added services
• SMS / mobile
marketing
• Up/Cross selling
platforms
Loan
disbursement
Loan workout &
recovery
• Facilitate
customer
registration and
loan application
• Facilitate farmer
data collection
• Facilitate follow
up of
outstanding
loans
RAF
challenge
• High cost to
reach SHFs in
rural areas
• SHFs lack
product
awareness/
literacy
• Difficult and
costly to register
and collect data
on SHF in rural
areas
• Limited
understanding
of SHF for
assessment
• SHF lack credit
history /
collateral
• High costs to
distribute loan
funds in rural
areas
• Cash risks (risks
of holding and
transporting
cash)
• Difficult and
costly to
monitor SHF
data
• High cost to
collect loan
payments in
rural areas
• Cash risks (risks
of holding and
transporting
cash)
• High costs
following up on
outstanding
loans in rural
areas
• Mobile money
and payment
platforms
• Mobile wallets to
deposit savings
and manage
account
• Credit scoring
platforms
• SMS/ mobile
approval
communication
Digital customer relationship management, incl. digital
marketing and notifications
Digital data collection and management
Digital decision making
Digital cashflows
Digital delivery of support services
Digital uses
• SMS / mobile
notifications
We surveyed 23 FSPs across Africa who have started a
digital journey; they map to 4 “digitalization profiles”
Less than 1,000
farmers served
1,000 – 10,000
Farmers served
10,000 – 25,000
farmers served
25,000 – 100,000
farmers served
Over 100,000
farmers served
Legend
Credit
only
Productoffering
Digital integration along lending value
chain
Low High
End-to-
End
financial
solution1
Traditional MFIs.
Traditional MFIs
leveraging digital
for loan analysis
Agribusinesses.
Agribusinesses leveraging
digital payments and
digitalizing data collection
and loan analysis to evaluate
farmer risk
High Tech Banks /
Niche NBFIs. High tech
commercial banks and
niche NBFIs offering
fully digital financial
services
.
Commercial Banks / Innovative MFIs. Innovative
MFIs and commercial banks equipping field
agents with mobile devices and partnering with
B2B digital services providers to offer paperless
and cashless end to end solutions
Loan analysis the start of the digital journey and
support services the final frontier?
1. Customer Relationship Management includes Sales & Marketing
Source: RAFLL Business Case Survey & Dalberg analysis
HighTechBanks
/NicheNBFIs
CommercialBanks/
InnovativeMFIs
Traditional
MFIs
Agri-
businesses
Customer
Relationship
Management1
Customer
Registration
Loan Analysis Cash Flows
Delivery of
Support
Services
Organization 1
Organization 2
Organization 3
Organization 4
Organization 5
Organization 6
Organization 7
Organization 8 N/A
Organization 9
Organization 10
Organization 11
Organization 12
Organization 13 N/A
Organization 14
Organization 15
Organization 16
Organization 17
Organization 18
Organization 19
Organization 20
Organization 21
Organization 22
Organization 23
Fully digitalized
Less digitalized
Not digitalized
N/A No support services offered
Revenues more likely to cover costs, when the provider is
digitalized?
1. Program associated costs refers to cost of funds, direct field operation
costs, direct costs of nonfinancial support services, direct marketing and
sales costs, and all other overhead and allocated program support
Source: RAFLL Business Case Survey & Dalberg analysis
Number of survey respondents by costs covered by loan repayment and fee revenue and by profile type
9%
67%
91%
33%
75%
25%
3 11
High Tech
Banks / Niche
NBFIs
Commercial
Banks /
Innovative MFIs
Traditional
MFIs
34
Agri-
businesses
Loan repayment and fee revenue
covers or outweighs all program
associated costs, or is expected to
in the next 2 years1
Loan repayment and fee revenue
does not cover all program
associated costs, and is not
expected to in the next 2 years
Degree of Digital Integration
+ -
High Tech Banks
/ Niche NBFIs
respondents
excludes two
organizations
who have yet
not rolled out
lending products
Organizations believe it
will take on average 5-10
years for their SHF lending
unit to become profitable
FSPs who have measured the impact of integrating digital tools
see more value from increasing the addressable market than from
reducing the cost to serve
Number of survey respondents by impact of integrating digital tools and by profile
1 1
1
3
1
1
11
Increase portfolio
quality
Increase in loan
officer caseload
2
Decrease loan disbursal
cost
2
Increase in
customer portfolio
4
Decrease customer
acquisition cost
AgribusinessesCommercial Banks /
Innovative MFIs
Traditional MFIsHigh Tech Banks /
Niche NBFIs
Increased revenue Decreased cost Reduced risk
• 6/7 saw an increase
in revenue
• Customer portfolio
grew between 25-
50%
• Loan officer case load
increased between
30-60%
• 3/7 saw a decrease in the cost to
serve
• Customer acquisition cost
dropped by 25-40%
• Cost of disbursing loans dropped
by up to 80%
Source: RAFLL Business Case Survey & Dalberg analysis
Obstacles to incorporating digital relate to high upfront
costs and lack of internal capabilities
Number of survey respondents (out of 23) by perceived obstacles to digital implementation and by profile
2
1
3
2
2
1
1
2
1
11
6
7
8
7
6 4
2
1
3
1
1
1
8
Lack of
customer
mobile phone
access
High initial
investment
17
Lack of
internal
capabilities
11
Too drastic of
a process
change
11
Lack of
knowledge
on best
tools
9
8
Lack of
proof of
value
Transaction
fees too
high
9
High Tech Banks / Niche NBFIs
Commercial Banks / Innovative MFIs
Agribusinesses
Traditional MFIs
Cost-related Internal Capabilities Customer Ecosystem
Source: RAFLL Business Case Survey & Dalberg analysis
Examples of digital innovation in the SHF lending value
chain by MCF partners
Customer
Relationship
Management
Customer
Registration
Loan Analysis Cash Flows
Delivery of
Support
Services
KCB MobiGrow
Program
• Use of radio radio
(local stations) to
create awareness and
market the benefits
of m-Kulima accounts
and loans to farmers.
• Proactive personal
credit limit prompts
to farmers
• Allow mass on
boarding of farmer
groups to the system
and opening of many
accounts at a go.
• Allow opt in for
individual farmers to
register themselves
and open accounts.
• Alternative data like
deliveries histories
from off-takers,
buyers and
cooperatives used to
score farmers
• Deposits and
transactions used to
score automatically.
• Disbursements of
loans done digitally
on mobile phone
upon meeting
requirements.
• Crop and animal
husbandry SMS’
interactive learning
and tips on price &
markets.
• Use of banks call
center dedicated
pilot line and IVR
Mercy Corps
AFA Program
• WFP: Desktop admin
portal to manage
farmer groups and
input provision
• SAF: Android solution
for farmer verification
• SAF: Android & USSD
self registration and
Agent assisted
registration modules.
• WFP: Android farmer
organization
registration module
• SAF: value chain,
farm size, alternative
telco data, input
purchase data.
Learning data
• WFP: Input
purchases, output
sales.
• SAF: self captured
daily farming records.
INPUT purchases,
MPESA transactions
and call data analysis.
• WFP: INPUT
purchases, output
sales.
• SAF: sms learning
module.
Opportunity
International
• CKW Farmer Profiling
• Bulk SMS
• Loan Officer
Dashboards
• Tablet-based
Customer Satisfaction
Surveys
• IVR Services
• Tablet based account
opening and loan
origination
• Agency Banking
• Smart Phone App Self-
Registration
• Predicative, statistical
Application Credit
Rating
• Machine
Learning/Artificial
Intelligence Based
Credit Scoring
• POS enabled
Agrodealers
• POS enabled off-
takers
• Digitally-enabled lead
farmers and
extension services
• IVR Services
Panelist Presentations
MobiGrow program
• MobiGrow is a partnership program between the MasterCard Foundation and KCB Bank Group
targeting agricultural value chain actors to offer mobile based financial inclusion and information to
smallholders farmers and pastoralists in Kenya and Rwanda.
• M-Kulima is the online system / platform by KCB, that shall support the MobiGrow’s financial services
offering by offering Accounts, Loans, Insurance and Knowledge / Notifications to smallholder farmers.
Financial Services Non-Financial Services
Producer
Organizations /
Off-takers / Buyers
/Processors
Farmers
KCB
MobiGrow
Scoring
System
Agro -
Dealers
DATA
mobi-CASH
PRODUCEFARM
INPUTS
mobi-CASH
Approach Method Target
Partnership
Approach:
Development
Agencies
De-
risked
FPOs,
FPO
Extension
team TtT
facilitation
Mature
Coopera
tives,
Internal Team
Approach
In-person
Field Agents
e.g. Farmer
Trainers.
Nascent
FPOs,
-SMSContent
-Radio
Alternative data to score
Current data and method used:
Credit Scoring Algorithm:
The program uses data from different sources to
determine credit limits for smallholder farmers, this
process is automated, and it follows the process
below;
• Checks national identification from the
Integrated Population Registration System
(IPRS) database.
• Checks credit status from the national Credit
Reference Bureau (CRB) database.
• Check Off-takers / aggregators data on the
past produce deliveries.
• Check transactions from the mobile accounts
to other mobile wallets e.g. M-Pesa, to KCB
bank branches and agents.
• Issue automatic credit limits to smallholder
farmers based on this.
Insert photo or graphic as relevant
source: internet
Alternative data to score..
In the shorter term, addition:
Agronomic and Economic Data:
• Provide smallholder farmers with a digital accounting
tool on their mobile phones, that allows them to be able
to; record their land size, seasonal yield, expenses per
value chain and aggregated, revenues per value chain
and aggregated
• Issue smallholders with daily, weekly and monthly
financial statements from their data on their mobile
phones.
• Use the smallholders financial statements to issue
them credit limits showing up to how much they can
borrow.
In the longer term, addition:
Satellite Data:
• Verify crop availability and status using satellite photos
from shared GPS coordinates
• Verify soil status using satellite photos from shared
GPS coordinates.
Insert photo or graphic as
relevant
source: internet
Mercy Corps AFA
• The AgriFin Accelerate program is a six-
year, USD 25 million program of Mercy
Corps, supported by The MasterCard
Foundation.
• AgriFin Accelerate will support the
expansion of digital financial services to
one million farmers in Sub-Saharan
Africa over six years, delivered by
growing ecosystems of diverse service
providers.
Safaricom Dairy Product
Integrated Mobile Platform:
One-stop access to a variety of services
that decrease the cost and increase the
efficiency of input provision while enabling
farmers to easily transact, learn and grow.
• BUY INPUTS, LEARN, MY FARM RECORDS,
SAFARICOM SERVICES, REGISTER,
CHANGE LANGUAGE
Safaricom Dairy product menu
Safaricom Dairy Product
Integrated mobile platform: Phase 2
developments
• LAYAWAY PURCHASING
• CREDIT OFFERINGS
o INPUT CREDIT
o ASSET FINANCING
o INSURANCE
Current Safaricom Dairy Product partners
Building a Smallholder Farmer Digital Footprint
Dakar, Senegal | March, 2017
• Provided 388,000 production loans, valued at more than $73 million and 880,000 savings
accounts to farmers, with more than 400,000 mobile banking clients across 42 Value
Chains
• Rolled out full mobile banking in Malawi, Rwanda, Uganda and Ghana, and mobile money
services in Tanzania and Kenya
• Established partnerships with MNO’s including MTN, Telenor, Vodafone, and Bharti Airtel
Limited
• Opportunity Malawi is our first majority digital bank: 78% of transactions are client-initiated,
and transacted digitally
• Piloted branchless banking in Tanzania and expanding to four more countries
• CKWs/Digitally Enabled ESPs to Profile & Train over 10,000 SHFs
• Run customized tablet-based and agency-based loan and account origination applications
• Launching a $25 Android Smart Phone to extend MM services to the bottom of the pyramid
Current Digital Innovations in Agricultural Finance
Building a Smallholder Farmer Digital Footprint
Technological Innovation has
enabled FSPs to:
• Leverage Artificial Intelligence
• Create Automatic Credit Scoring
• Reach further and faster for less
than ever before
Smallholder Farmers Want:
• Availability of Financial Services
which are tailored for Agricultural
• Timeliness of Delivery
• Affordability
Rural Systems Lack:
• A Coordinated Ecosystem
• Trust in FSPs
• A Digital Footprint
• Customized Financial Solutions
Building a Smallholder Farmer Digital Footprint
Building a Smallholder Farmer Digital Footprint
Binding the Value Chain Together in a Digital Ecosystem
Building a Smallholder Farmer Digital Footprint
Discussion and Q&A

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RAFLL WAPL session 5

  • 1. How can digital tools enable smallholder finance? Moderator: RAF Learning Lab Panelists: Kenya Commercial Bank Opportunity International Mercy Corps Agrifin Accelerate March 6, 2017
  • 2. Why are we talking about digitalization? • Until recently FSP’s have generally overlooked Africa’s 48 million smallholder farmers because of the challenges in reaching this customer segment • But this is changing – new digital technologies and innovative business models are making it possible to provide credit to smallholder farmers in Africa • Digitalization is happening across the lending value chain and includes the use of digital tools and channels for: o customer relationship management o customer registration o loan analysis o disbursement and repayment cash flows o delivery of support services alongside core financial products • Organizations can start their digital journeys in many different places and their journey's are largely shaped by their business priorities and the broader ecosystems in which they operate in
  • 3. What do we mean by digitalization across the lending value chain? • Manage SHF data (e.g. interactions, repayment rates) • Send SMS/mobile notifications • Deliver support services • Analyze SHF data (including external data) • Communicate loan decision Client acquisition Loan origination Loan analysis approval Loan servicing monitoring Loan repayment Ability of digital to overcome challenges • Facilitate loan disbursement • Facilitate loan repayment Digital tools • Field staff equipped with tablets for data collection • Mobile registration and data collection platforms • GPS tools • Facilitate marketing and dissemination • Mobile money and payment platforms • Mobile wallets to deposit savings and manage account • Data management platforms • GPS tools to monitor field officers • Digital TA and other value added services • SMS / mobile marketing • Up/Cross selling platforms Loan disbursement Loan workout & recovery • Facilitate customer registration and loan application • Facilitate farmer data collection • Facilitate follow up of outstanding loans RAF challenge • High cost to reach SHFs in rural areas • SHFs lack product awareness/ literacy • Difficult and costly to register and collect data on SHF in rural areas • Limited understanding of SHF for assessment • SHF lack credit history / collateral • High costs to distribute loan funds in rural areas • Cash risks (risks of holding and transporting cash) • Difficult and costly to monitor SHF data • High cost to collect loan payments in rural areas • Cash risks (risks of holding and transporting cash) • High costs following up on outstanding loans in rural areas • Mobile money and payment platforms • Mobile wallets to deposit savings and manage account • Credit scoring platforms • SMS/ mobile approval communication Digital customer relationship management, incl. digital marketing and notifications Digital data collection and management Digital decision making Digital cashflows Digital delivery of support services Digital uses • SMS / mobile notifications
  • 4. We surveyed 23 FSPs across Africa who have started a digital journey; they map to 4 “digitalization profiles” Less than 1,000 farmers served 1,000 – 10,000 Farmers served 10,000 – 25,000 farmers served 25,000 – 100,000 farmers served Over 100,000 farmers served Legend Credit only Productoffering Digital integration along lending value chain Low High End-to- End financial solution1 Traditional MFIs. Traditional MFIs leveraging digital for loan analysis Agribusinesses. Agribusinesses leveraging digital payments and digitalizing data collection and loan analysis to evaluate farmer risk High Tech Banks / Niche NBFIs. High tech commercial banks and niche NBFIs offering fully digital financial services . Commercial Banks / Innovative MFIs. Innovative MFIs and commercial banks equipping field agents with mobile devices and partnering with B2B digital services providers to offer paperless and cashless end to end solutions
  • 5. Loan analysis the start of the digital journey and support services the final frontier? 1. Customer Relationship Management includes Sales & Marketing Source: RAFLL Business Case Survey & Dalberg analysis HighTechBanks /NicheNBFIs CommercialBanks/ InnovativeMFIs Traditional MFIs Agri- businesses Customer Relationship Management1 Customer Registration Loan Analysis Cash Flows Delivery of Support Services Organization 1 Organization 2 Organization 3 Organization 4 Organization 5 Organization 6 Organization 7 Organization 8 N/A Organization 9 Organization 10 Organization 11 Organization 12 Organization 13 N/A Organization 14 Organization 15 Organization 16 Organization 17 Organization 18 Organization 19 Organization 20 Organization 21 Organization 22 Organization 23 Fully digitalized Less digitalized Not digitalized N/A No support services offered
  • 6. Revenues more likely to cover costs, when the provider is digitalized? 1. Program associated costs refers to cost of funds, direct field operation costs, direct costs of nonfinancial support services, direct marketing and sales costs, and all other overhead and allocated program support Source: RAFLL Business Case Survey & Dalberg analysis Number of survey respondents by costs covered by loan repayment and fee revenue and by profile type 9% 67% 91% 33% 75% 25% 3 11 High Tech Banks / Niche NBFIs Commercial Banks / Innovative MFIs Traditional MFIs 34 Agri- businesses Loan repayment and fee revenue covers or outweighs all program associated costs, or is expected to in the next 2 years1 Loan repayment and fee revenue does not cover all program associated costs, and is not expected to in the next 2 years Degree of Digital Integration + - High Tech Banks / Niche NBFIs respondents excludes two organizations who have yet not rolled out lending products Organizations believe it will take on average 5-10 years for their SHF lending unit to become profitable
  • 7. FSPs who have measured the impact of integrating digital tools see more value from increasing the addressable market than from reducing the cost to serve Number of survey respondents by impact of integrating digital tools and by profile 1 1 1 3 1 1 11 Increase portfolio quality Increase in loan officer caseload 2 Decrease loan disbursal cost 2 Increase in customer portfolio 4 Decrease customer acquisition cost AgribusinessesCommercial Banks / Innovative MFIs Traditional MFIsHigh Tech Banks / Niche NBFIs Increased revenue Decreased cost Reduced risk • 6/7 saw an increase in revenue • Customer portfolio grew between 25- 50% • Loan officer case load increased between 30-60% • 3/7 saw a decrease in the cost to serve • Customer acquisition cost dropped by 25-40% • Cost of disbursing loans dropped by up to 80% Source: RAFLL Business Case Survey & Dalberg analysis
  • 8. Obstacles to incorporating digital relate to high upfront costs and lack of internal capabilities Number of survey respondents (out of 23) by perceived obstacles to digital implementation and by profile 2 1 3 2 2 1 1 2 1 11 6 7 8 7 6 4 2 1 3 1 1 1 8 Lack of customer mobile phone access High initial investment 17 Lack of internal capabilities 11 Too drastic of a process change 11 Lack of knowledge on best tools 9 8 Lack of proof of value Transaction fees too high 9 High Tech Banks / Niche NBFIs Commercial Banks / Innovative MFIs Agribusinesses Traditional MFIs Cost-related Internal Capabilities Customer Ecosystem Source: RAFLL Business Case Survey & Dalberg analysis
  • 9. Examples of digital innovation in the SHF lending value chain by MCF partners Customer Relationship Management Customer Registration Loan Analysis Cash Flows Delivery of Support Services KCB MobiGrow Program • Use of radio radio (local stations) to create awareness and market the benefits of m-Kulima accounts and loans to farmers. • Proactive personal credit limit prompts to farmers • Allow mass on boarding of farmer groups to the system and opening of many accounts at a go. • Allow opt in for individual farmers to register themselves and open accounts. • Alternative data like deliveries histories from off-takers, buyers and cooperatives used to score farmers • Deposits and transactions used to score automatically. • Disbursements of loans done digitally on mobile phone upon meeting requirements. • Crop and animal husbandry SMS’ interactive learning and tips on price & markets. • Use of banks call center dedicated pilot line and IVR Mercy Corps AFA Program • WFP: Desktop admin portal to manage farmer groups and input provision • SAF: Android solution for farmer verification • SAF: Android & USSD self registration and Agent assisted registration modules. • WFP: Android farmer organization registration module • SAF: value chain, farm size, alternative telco data, input purchase data. Learning data • WFP: Input purchases, output sales. • SAF: self captured daily farming records. INPUT purchases, MPESA transactions and call data analysis. • WFP: INPUT purchases, output sales. • SAF: sms learning module. Opportunity International • CKW Farmer Profiling • Bulk SMS • Loan Officer Dashboards • Tablet-based Customer Satisfaction Surveys • IVR Services • Tablet based account opening and loan origination • Agency Banking • Smart Phone App Self- Registration • Predicative, statistical Application Credit Rating • Machine Learning/Artificial Intelligence Based Credit Scoring • POS enabled Agrodealers • POS enabled off- takers • Digitally-enabled lead farmers and extension services • IVR Services
  • 11. MobiGrow program • MobiGrow is a partnership program between the MasterCard Foundation and KCB Bank Group targeting agricultural value chain actors to offer mobile based financial inclusion and information to smallholders farmers and pastoralists in Kenya and Rwanda. • M-Kulima is the online system / platform by KCB, that shall support the MobiGrow’s financial services offering by offering Accounts, Loans, Insurance and Knowledge / Notifications to smallholder farmers. Financial Services Non-Financial Services Producer Organizations / Off-takers / Buyers /Processors Farmers KCB MobiGrow Scoring System Agro - Dealers DATA mobi-CASH PRODUCEFARM INPUTS mobi-CASH Approach Method Target Partnership Approach: Development Agencies De- risked FPOs, FPO Extension team TtT facilitation Mature Coopera tives, Internal Team Approach In-person Field Agents e.g. Farmer Trainers. Nascent FPOs, -SMSContent -Radio
  • 12. Alternative data to score Current data and method used: Credit Scoring Algorithm: The program uses data from different sources to determine credit limits for smallholder farmers, this process is automated, and it follows the process below; • Checks national identification from the Integrated Population Registration System (IPRS) database. • Checks credit status from the national Credit Reference Bureau (CRB) database. • Check Off-takers / aggregators data on the past produce deliveries. • Check transactions from the mobile accounts to other mobile wallets e.g. M-Pesa, to KCB bank branches and agents. • Issue automatic credit limits to smallholder farmers based on this. Insert photo or graphic as relevant source: internet
  • 13. Alternative data to score.. In the shorter term, addition: Agronomic and Economic Data: • Provide smallholder farmers with a digital accounting tool on their mobile phones, that allows them to be able to; record their land size, seasonal yield, expenses per value chain and aggregated, revenues per value chain and aggregated • Issue smallholders with daily, weekly and monthly financial statements from their data on their mobile phones. • Use the smallholders financial statements to issue them credit limits showing up to how much they can borrow. In the longer term, addition: Satellite Data: • Verify crop availability and status using satellite photos from shared GPS coordinates • Verify soil status using satellite photos from shared GPS coordinates. Insert photo or graphic as relevant source: internet
  • 14. Mercy Corps AFA • The AgriFin Accelerate program is a six- year, USD 25 million program of Mercy Corps, supported by The MasterCard Foundation. • AgriFin Accelerate will support the expansion of digital financial services to one million farmers in Sub-Saharan Africa over six years, delivered by growing ecosystems of diverse service providers.
  • 15. Safaricom Dairy Product Integrated Mobile Platform: One-stop access to a variety of services that decrease the cost and increase the efficiency of input provision while enabling farmers to easily transact, learn and grow. • BUY INPUTS, LEARN, MY FARM RECORDS, SAFARICOM SERVICES, REGISTER, CHANGE LANGUAGE Safaricom Dairy product menu
  • 16. Safaricom Dairy Product Integrated mobile platform: Phase 2 developments • LAYAWAY PURCHASING • CREDIT OFFERINGS o INPUT CREDIT o ASSET FINANCING o INSURANCE Current Safaricom Dairy Product partners
  • 17. Building a Smallholder Farmer Digital Footprint Dakar, Senegal | March, 2017
  • 18. • Provided 388,000 production loans, valued at more than $73 million and 880,000 savings accounts to farmers, with more than 400,000 mobile banking clients across 42 Value Chains • Rolled out full mobile banking in Malawi, Rwanda, Uganda and Ghana, and mobile money services in Tanzania and Kenya • Established partnerships with MNO’s including MTN, Telenor, Vodafone, and Bharti Airtel Limited • Opportunity Malawi is our first majority digital bank: 78% of transactions are client-initiated, and transacted digitally • Piloted branchless banking in Tanzania and expanding to four more countries • CKWs/Digitally Enabled ESPs to Profile & Train over 10,000 SHFs • Run customized tablet-based and agency-based loan and account origination applications • Launching a $25 Android Smart Phone to extend MM services to the bottom of the pyramid Current Digital Innovations in Agricultural Finance
  • 19. Building a Smallholder Farmer Digital Footprint Technological Innovation has enabled FSPs to: • Leverage Artificial Intelligence • Create Automatic Credit Scoring • Reach further and faster for less than ever before Smallholder Farmers Want: • Availability of Financial Services which are tailored for Agricultural • Timeliness of Delivery • Affordability Rural Systems Lack: • A Coordinated Ecosystem • Trust in FSPs • A Digital Footprint • Customized Financial Solutions
  • 20. Building a Smallholder Farmer Digital Footprint
  • 21. Building a Smallholder Farmer Digital Footprint
  • 22. Binding the Value Chain Together in a Digital Ecosystem
  • 23. Building a Smallholder Farmer Digital Footprint

Editor's Notes

  1. Good afternoon and welcome to this last session of the workshop During this session we’re going to talk about about how digital tools can enable smallholder finance in Africa I will start by presenting some key findings from our research on the business case for digitally enabled smallholder finance We will then hear some real life examples of digital innovation along the lending value chain from 3 MCF partners, including KCB, Mercy Corps and Opportunity International This will be followed by a discussion with the panelists and Q&A from the audience
  2. FSP’s have overlooked Africa’s 48 million smallholder farmers because of challenges in reaching this customer segment New digital technologies and business models are starting to make it possible to provide credit to smallholder farmers Digitalization is happening across the lending value chain and includes the use of digital tools for: Customer relationship management Customer registration Loan analysis Disbursement and repayment cash flows Delivery of support services Organizations’ digital journeys are shaped by business priorities and the ecosystems in which they operate in.
  3. What do we mean when we talk about digitalization across the lending value chain? This figure illustrates the different points where digital technologies are entering the SHF lending process to address key challenges – [Walk through diagram] For example: Loan analysis and approval is difficult because FSP’s don’t know much about the SHF and the SHF lacks credit history and collateral Technology firms are addressing this challenge by developing risk scoring tools that leverage non-traditional customer behavior data to help FSP’s reach customers with no credit history Loan disbursement is difficult because of the high costs of distributing loan funds in rural areas and the risks of holding and transporting cash. Here mobile money and payment platforms are enabling cashless loan disbursements and repayments to reduce these costs and risks.
  4. We surveyed 23 financial service providers across Africa that have started their digital journeys The sample is small and is not meant to be representative But the study does provides valuable insights into the current and projected use of digital tools and the impact on the performance of FSPs Lays the groundwork for future Learning Lab research on this topic We found that providers are integrating digital technology selectively along the value chain to balance the potential benefits of digital tools with: customer needs and preferences the company’s product portfolio profitability internal capabilities to integrate digital solutions And capabilities of the digital ecosystem This figure maps the study participants to four “profiles” based on their level of digital integration across the value chain and the extend to which they offer bundled financial products. Traditional MFIs – offer bundled credit solutions and leverage digital technology primarily for loan analysis Agribusinesses – primarily provide credit for inputs and are using some digital tools for payments and data collection Commercial banks and innovative MFIs – provide more complete financial solutions and are digitalizing all functions along the value chain High-tech banks / MNOs / NBFIs – offering a mix of financial products and are fully digitalized along the lending value
  5. This figure maps each study participant by their profile and their level of digitalization across the 5 main steps of the SHF lending process Loan analysis Almost all organizations use digital tools for loan analysis – mostly for data collection and analysis Half of the respondents use alternative data for credit scoring – but over 80% of them only use airtime data (not best indicator for SHFs) Findings suggest that an alternative data push will have the greatest impact on the sector for loan analysis Figuring out what types of data are most useful and how to integrate different data sources into the lending process is critical Customer registration Less than a third of respondents have fully digitalized customer registration The majority continue to rely on some form of human interaction – importance of balancing digital technology with human interaction in rural settings Cash flows Digitalization of cash flows is largely determined by the mobile money ecosystem in which the organization operates Most organizations operating in a mature mobile money ecosystem have transitioned to cashless operations (50%) or are in the process of doing so (43%) Organizations operating in less developed ecosystems use cash (44%) or a mix of cash and digital payments (56%) Support services Hardest to digitalize despite representing the second largest cost to FSPs (behind cost of funds) Only 17% of organizations use e-learning platforms and do so primarily for information services Almost 50% of organizations use exclusively non-digital support services – importance of human interaction for learning?
  6. The big question is whether digitalization is profitable. While it’s too early to be certain, the business case for digitalization looks promising! The majority of organizations in our study are convinced that digitalization will improve their profitability. This figure shows that highly digitalized organizations are more likely to cover associated program costs with loan repayment and fee revenue — or expect to do so in the next two years. Organizations are optimistic about digitalization and plan to increase the use of digital tools across their value chains Over 90% of the organizations are interested in digitalizing cash flows and payments with consumers There is also strong interest in digitalizing loan analysis (>85%) with a focus on integrating additional sources of alternative data in credit decisions Nearly eighty percent plan to make further investments into digital customer acquisition channels and ongoing digital customer management And more than half of the organizations are considering additional investments into digital support / value added services Almost half of the organizations surveyed expect to recoup their investment into digitalization in less than two years.
  7. Where does the value of digitalization come from? Most organizations indicated that the main initial motivations for investing in digital tools in the past have been to reduce cost to serve and to improve portfolio quality. However, organizations that have invested in digital tools and tried to measure the impact report seeing more value from digitalization for topline growth and improved portfolio quality rather than cost reduction. Digital tools can increase portfolio growth and expand an organization’s market through three different pathways: By increasing field officer productivity – enables increased loan officer caseload By acting as a distribution (and marketing) channel – to reach and market products in remote areas that were previously considered too expensive to serve By bringing new segments of the rural population into the addressable market
  8. While digital tools have great potential, FSP’s face a number of challenges in incorporating digital tools High upfront costs appears to be the greatest binding constraint to digitalization - lowers operating costs over time but immediate increase in CAPEX Organizations also struggle with the lack of internal capabilities to implement, integrate and manage digital tools Companies don’t have a clear understanding of the digital service provider landscape, which makes it difficult to assess vendors when considering an investment in digital Many firms also reported being constrained by a less-developed rural mobile ecosystem - limits access to reliable mobile connectivity and insufficient coverage of mobile money agent networks
  9. This table maps out the digital innovations that our 3 panelist organizations are implementing along the lending value chain Note that Mercy Corps is not an FSP, but is working with a number of providers to implement these tools
  10. We will now hear some real life examples of digital innovation along the lending value chain from 3 MCF partners Our first panelist is: Dickson Naftali – Head of the MobiGrow Program with Kenya Commercial Bank Sieka Gatabaki – Financial Services Manager with the Mercy Crops AgriFin Accelerate Program Tim Strong – Regional Agricultural Finance Adviser with Opportunity International
  11. Ecosystem question (OI and MC, possibly KCB)   Q1: Which of the digital tools that you’re working with are easy to replicate in different ecosystems, and which are heavily dependent on the local context?   Alternative data questions (OI, MC and KCB)   Q2: Your organizations all have ambitious plans to use alternative data, but many of these initiates are in the early days of development. We keep hearing that there is great potential for alternative data, but we also know that there are issues around accessing the data and data quality. How are you addressing these challenges, and what would you say to financial service providers that are skeptical about using alternative data?   Q3: We have heard that you don’t need a large amount of data points, just a few very good high quality data points. Do you agree with this? And what data do you think is most important?   Open up Q&A to audience