Payment for goods and services through mobile money platform has boosted Rwanda’s quest for a cashless economy.
All that started in 2007 with the introduction of M-PESA, a mobile service that allows Kenyans to store and transfer their money using only a cell phone. Through these platforms funds can be exchanged over the network using SMS messages, meaning it works on almost any mobile phone
In Kenya it has become a popular platform for typically small transactions. Through a mobile money account, a farmer in a rural village can access credit to buy fertilizers and seeds and this is what he needs to thrive.
This is one of the models that are being discussed by experts in Kigali to solve the challenge of less credit flowing to the agriculture sector.
The platform pioneered by Safaricom, a leading Kenyan telecom operator is thought to be one of the models that can be replicated to accelerate rural agriculture financing, a challenge that has seen only 5 percent of the 60 percent people employed by the sector accessing credit on the continent.
“It was primarily set up to allow subscribers to transfer money from virtual account to cash, but now it has gone beyond this, famers can access micro loans,” said chief executive of Credit Information Sharing Association of Kenya, Jared Geteng in a conference in Kigali.
“The governments can transform the lives of its rural people by supporting and encouraging the introduction of mobile phone banking services in the country” he said.
Accordingly, through a mobile banking platform, farmers are able to borrow short term loans and service their businesses of which they pay after their incomes from the harvests without necessary going through the hectic banking procedures.
“In this process, Getenga says other bi- products such as Mpesa bank accounts, where subscribers can save, insurance products have been introduced and it has become phenomenon towards use of ICT in agriculture financing, he adds, “It is helping and we would encourage other economies to take up this innovation.”
Accordingly, a subscriber is able to borrow from Mpesa bank accounts for up to Kshs 500,000 with an interest ranging from 6 to 4 percent depending on the payment period.
“Our previous experience with coffee farmers, was that it was always hard for a farmer to wait for payment that would take a long when they require quick loans to facilitate their businesses,” said John Amimo, program coordinator, AFRACA who was formerly working with coffee cooperatives in Kenya.
Experts believe that the mobile banking model bridges the proximity gap that exists between rural farmers and the banking institutions while lowering expenses farmers face in formal banking services.
“But as AFRACA, we have been receiving high demand from our members who are eager to learn about this innovation,’ he said adding that the association began a study visit to Kenya for countries to learn about the innovation, it’s now three years since the program started.
Moreover some countries are tapping into the mobile banking, with telecom operators building more innovative products on their mobile banking platform, for example, Tigo has also provided a mobile banking savings account and facilitates farmer payments by cooperatives.
With the government’s rollout of internet connectivity as well as a national payment platform that brings together financial institutions and telecom operators more mobile money payment product are expected to roll out.
Nevertheless, Amimo says there is need for central banks in the region eager to allow mobile banking to thrive.
The three day conference organized by African Rural and Agricultural Credit Association-AFRACA’s in partnership with Development Bank of Rwanda-BRD is looking at drawing replicable models to boost rural financing in Africa.
Rwanda like other countries in the Sub- Saharan Africa is facing limited flow of credit to the agriculture, according to central bank statistics with only 6 percent of commercial bank loans extended to farmers in the first quarter of 2016.
“Commercial banks have to develop a variety of products tailored for rural farmers,” Monique Nsanzabaganwa, the Vice Governor of the Central Bank told Rwanda Eye.
Experts also believe that with its flexibility of using the subscriber’s number as collateral helps farmers to easily access quick micro loans that would help them buy inputs.