Access to credit is one of the main obstacles facing farmers on the continent. The agricultural sector, often neglected by financial institutions, creates up to 80% of jobs depending on the country. Indeed, the share of financing granted to agricultural value chains is only between 3.5 % and 6 % while the contribution of the agricultural sector to GDP on the continent can reach 40 %. In this context, it seems almost unimaginable to imagine millions of small-scale farmers accessing loans. Yet this is the promise of Kenya Commercial Bank (KCB) for Kenya and Rwanda through its MobiGrow offer.
Using technology to meet the challenges of agricultural finance
In Kenya alone, agriculture contributes 26% to the economy, and 20% to employment. The sector controls over 75% of the labour force and 50% of export earnings. However, in rural areas and especially for farmers, there were almost no dedicated financial services.
Fortunately, digital platforms have breathed new life into this sector and have managed to gradually reverse this trend. They offer a diverse range of services that allow consumers to find the solution that suits them best. MobiGrow is one such platform.
"We leverage technology to address the challenges farmers face in accessing credit and inclusion. We also provide farmers with non-financial solutions such as capacity building forums to develop their agribusinesses," says Annastacia Kimtai, President of KCB.
Mobigrow focuses on rural and agricultural needs, and offers three major services:
● E-commerce which allows farmers and businesses to trade directly.
● Digital payments, savings, credit and insurance services.
● Advisory services for farmers, weather information or market developments.
Financing for farmers is a real development tool that allows them to access better quality agricultural products for higher yields. However, it does not always protect them from unpleasant surprises due to weather conditions or price fluctuations. This has the effect of significantly reducing farmers' profit margins.
This is an ongoing issue facing MobiGrow, especially as in Kenya where it operates, net bank lending to agriculture has remained at 4 % of the total portfolio.
How does it work?
MobiGrow has solved the problem of time-consuming downloads by providing a simple, easy-to-use system that is suitable for farmers in rural areas.
To access MobiGrow, simply enter the USSD code *225#. This allows you to open an account, apply for a loan or register for farmer training.
MobiGrow, a startup that stands out
MobiGrow is able to stand out because it focuses on savings, credit and insurance services for rural households.
The service was launched in 2016 and has 400,000 registered users on its platform. These users access savings, input loans, supply chain finance, farm advisory services, market information and financial education.
KCB is focusing on digital savings accounts for smallholder farmers. As of July 2019, there were 200,000 depositors with a total value of 150M Kenyan shillings, or $1.5M. Mobigrow's service activity rate is approximately 30 %.
On the lending side, Mobigrow adopts a value chain financing approach with an emphasis on tripartite (farmer-bank-agribusiness) forward contracts for risk sharing.
As of 30 June 2019, a total of KSh100m (USD1m) in loans has been disbursed in three counties in Kenya.
MobiGrow's challenges and solutions
In its early days, MobiGrow struggled to build trust with consumers and partners. It was still in a start-up phase so many were wary. In addition, in rural areas it is very often difficult to change farmers' habits and get them to adopt new methods.
MobiGrow had to be both a great service to reassure potential partners, and easy to access for rural farmers. The customer experience had to be at the heart of the process in order to build a real sense of trust.
MobiGrow is successfully meeting this challenge and is working with a diverse group of private sector partners, such as agricultural traders, mobile network operators, buyers, cooperatives or other farmer aggregators and specialist technical service providers.
What does the future hold for MobiGrow?
MobiGrow is targeting over 2 million farmers in Kenya and Rwanda over the next five years. In addition, it works to increase financial inclusion and improve the livelihoods of smallholder farmers, especially women and youth.
