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