Can this be an Opportunity for Mobile Banking in Ethiopia?

Photo Credit: The Economist

I participated in a very informative event this week in Washington DC where a researcher was sharing his experience on “Weather-Index based Crop Insurance for Smallholder Farmers in Ethiopia”. As I listened to the discussion as an agricultural information specialist, my concern was what is the role of mobile technologies in this?

According to the researcher, Dr. Shukri Ahmed a Senior Economist, Food and Agriculture Organization (FAO), the concept of crop insurance has a long history from Asia with the leadership of India. However, due to the challenges associated with insurance in general and access to credit to smallholder farmers, the idea somehow waned. But according to Index Insurance Innovation Initiative (I4), there is overwhelming evidence that uninsured risk can drive people into poverty and destitution, especially those in low-wealth agricultural and pastoralist households. There is therefore a re-emergence of insurance for smallholder farmers across the globe.

The speaker gave a detailed background to the study in Ethiopia and the importance of partnership in the design and implementation of the study. The difference, however, with this new approach to crop insurance for smallholder farmers is the use of index (indices) to support the insurance service, and intervention against emergency situation. But at the same time the study is targeting farmers that are relatively better off and who are already engaged in the market but are not investing in insurance due to the anticipated risks. The outcome of the pilot study is expected to help protect the livelihoods of smallholder farmers, who are vulnerable to severe and catastrophic weather risks particularly drought, enhance their access to agricultural inputs, and enable the development of ex-ante market based risk management mechanism which can be scalable in Ethiopia.

Dr. Shukri Ahmed, Senior Economist at the United Nations Food and Agriculture Organization (FAO)

Unbanked or Branchless Services

Adding another concept to an already very complex issue that tries to combine weather, insurance, credit/finance, and smallholder farming, should be carefully considered. But the key question is whether mobile technologies can play a catalytic role in this entire complex system?

Among the reasons for choosing a given area for the pilot study, include availability of Nyala Bank branches, the vulnerability of yields to drought, the availability of nearby weather stations, and the willingness of cooperatives in the area to purchase the new product. As the pilot study progresses, the possibility of scaling the project across the country is high. But what will be the implications for the absence of banks in the rural farming communities in a country that has an approximately one bank loan per 1000 adults? Can Mobile Banking help understand why smallholder farmers under-investment in agriculture?

A success story of mobile banking by the Dutch-Bangla Bank Limited (DBBL) in Bangladesh was recently highlighted by the GSMA Mobile Money for the Unbanked. Interestingly, the story pointed out how DBBL learnt from Kenya’s famous mobile money program M-PESA. Kilimo Salama (KS) is an innovative index-based insurance product that insures farmers’ inputs (seeds, fertilizer, pesticides), and outputs (crop harvests), in the event of drought or excessive rainfall. It uses weather stations to collect data and implements SMS-based mobile technologies to administer and distribute the payouts. Mobile technologies will not only help with the financial transactions such as seen in Kilimo Salama’s case but also in support of the weather stations for timely and accurate decision making for pay-outs.

My conversation with Dr Shukri about the possibility of integrating mobile money into the project to address the challenge of absence of banks in rural Ethiopia, revealed the huge untapped market for Mobile Banking in that country. However, the success of such services depends on a convincing business case for both the banks and Mobile Network Operators (MNOs). Most importantly, however, is the state of telecommunication infrastructure and regulation in the country. These need to be in place for services and applications to thrive. With this huge investment

Outside Ethiopia, I believe it is time for African countries to take advantage of the increasing mobile phone penetrations in the continent beyond social networking to general development applications such as for agriculture, health, education, and rural development.

To listen to the audio recording of the event, visit Center for Strategic and International Studies (CSIS).

August 25, 2012/by actualize

Agriculture, Environment, Originally posted on the GBI Portal

Boosting women’s shea nut businesses with smartphones

The shea nut industry has come a long way since I was a Peace Corps volunteer in West Africa from 2006-2008. In fact, despite researching ICT4D initiatives on a daily basis, I was still baffled when I read the Economist article about a shea project in northern Ghana that provides personalized barcodes for women to stick to shea nuts sacks as they sell them to buyers.

Photo credit: The Economist

It’s one thing to read or listen to others talk about the use of mobiles to improve maternal health or apps that help grain buyers manage transactions from small-scale farmers in the developing world. It’s another to really consider the impact that various ICTs are having on the people of an area where one has lived or worked before.

Shea, a product that grows on trees as a fruit and whose nut is pounded into butter to be used for cooking, confectionary, and cosmetics, has long been referred to as “women’s gold.” That’s because traditionally women are the primary ones to gather the fruit from the ground after it has ripened and fallen. The nuts grow only in the semi-arid zone of sub-Saharan Africa from the Gambia to Uganda. Because of the rare properties of shea, the worldwide demand for the product worldwide has grown, some sources estimating that 150,000 tons of dry kernels are exported every year from Africa. Various non-profits, NGOs and aid agencies have taken advantage of the large shea demand to create projects that empower women by increasing their income and providing access to markets.

When I volunteered in Mali, shea production was hot on the development agenda. USAID was supporting shea projects through its Small Project Assistance grants, as well as organizing trainings on improved shea production methods through the West Africa Trade Hub. Since shea trees were abundant in my rural site of Kamona, I was able to work extensively with the women on shea projects; we formed a cooperative, acquired solar shea nut dryers and connected with nut buyers.

Christy and Nema from Kamona village, mali

Walking with shea producer in Kamona, Mali

For our shea projects, contacting buyers on cell phones was about as far as ICT use went. Records of the sacks that women brought were kept in torn notebooks using barely-working pens. If someone told me then that cell phones (what’s a “smart” phone?) would be used to keep track of the weight, price, and quality of nuts and sacks, I would not have believed it. Then again, volunteers who had been in Mali just a couple years before me never had access to mobile phones and were envious when us newbies could keep in touch with our families in America on a daily basis if we wanted.

Women in Kamona, Mali, making soap using shea butter

The project in Ghana is being implemented by the German company SAP alongside the NGO PlaNet Finance and is both a social and business investment. A smartphone scans the barcode on the shea nut sack during delivery and talks to a server in Germany, tracking each bag as it is weighed and loaded onto a lorry. Another part of the project has had the women form a federation called the Star Shea Network, which allows the women to offer a reliable supply of nuts and gain bargaining power with buyers. The women have also received training on nut quality improvement and how to act on market price information received through mobile phones. Eventually, SAP hopes that the women will be able to pay for the services with their increased income rather than relying on grants to sustain the project.

ICTs have been used to improve the work of shea producers in other ways, such as creating a directory of shea butter buyers, and marketing shea products through picture and videos. Though the smartphone project is nascent and is not yet being implemented elsewhere to the best of my knowledge, I cannot help but wonder if similar initiatives will reach the shea nut collectors in Kamona.

October 14, 2011/by actualize