Digital access: The future of financial inclusion in Africa
This report (PDF) by the International Finance Corporation and Mastercard Foundation highlights the phenomenal success of digital financial services (DFS) in sub-Saharan Africa. Chapter 10 focuses specifically on digital financial services in relation to agricultural value chains. In the cocoa sector in Ivory Coast, cash payments pose a number of problems for farmers; harvest payments often arrive late and there is a risk of theft. An alternative is paying farmers through DFS, which can be used to enable a full suite of financial services to rural farmer communities. While there is a fairly wide usage of mobile phones and farmers are willing, there are still a number of challenges, for example the poor digital infrastructure in rural areas. Extending the use of DFS for rural and agricultural purposes could bring many benefits to the entire value chain and daily lives of farmers. DFS platforms could be used to link farmers with input suppliers and agricultural buyers. Another article also focuses on farmers in Ivory Coast. Managing income can be particularly challenging for farmers, since they typically receive most of their income during one or two harvest per year, but need to cover expenses throughout. Therefore, it is important for financial service providers to understand seasonal patterns that govern incomes of smallholder farmers. Substantial minority of farmers save, however this has a profound impact on farmers’ ability to budget for the entire year; a poorer farmer who saves has greater chance of feeding the family than a farmer who is better of but does not save. This indicates that encouraging good financial practices, for example by providing easily accessible remunerated savings, would be of great benefit to many farmers. It is more likely to have high adoption levels if they are delivered by DFS, because of convenience, acceptance, and widespread usage of DFS by farmers for more basic transactions.