At the just-concluded Fin4Ag International Conference, diverse ICT and mobile platforms that have been developed and currently being implemented to support access to agricultural finance along the value chain were showcased during the Plug and Play Day.
The day focused on digital/mobile financial services for agricultural and rural development and covered platforms supporting access to credit, payments, savings, insurance and risks management for value chain actors. But the limiting constraint is not entirely technical in nature as the presenters of the Session 47 on “Agricultural Digital Finance – More than Payments” portrayed. Innovations are also urgently needed in the areas of awareness, partnerships, education and delivery.
Just to demonstrate this, in Africa, the highest rate of mobile insurance is in Namibia, currently standing at 55.8 % compared to other countries in the region whose rates range between 0.0002 in Libya to 11 in Zimbabwe.
This raises an important question. Is low penetration a function of low demand? MicroEnsure’s Principal Actuary, Agrotosh Mookerjee posited that while the less privileged frequently face more risks than any other segment of the populace, they may not be aware of insurance products not withstanding the fact that they live with diverse risks every day.
This therefore calls for awareness building. In his opinion, the best model to achieve this is when people have the product already or have others who have used such products share their experiences.
Source: Making finance work for Africa
Other issues brought to the fore by other presenters from Umati Capital, Musoni Kenya Limited, GSMA mAgr, and PERC were that until now, agricultural digital finance products have largely been confined in urban areas resulting in saturation.
Dr. Lee Babcock, a consultant in the United States informed the participants that time is now right for agricultural digital finance products to be rolled out into rural areas to achieve a higher penetration of insurance by promoting higher demand for agricultural insurance products.
For agricultural insurance products to reach their targeted clients, strong and strategic partnerships need to be developed and maintained by and among distribution partners and the insurers. Most importantly, roles and responsibilities need to be clearly defined.
In addition to robust systems needed to support distribution partners with good brand recognition, a strong business case for distribution partners and insurers is crucial to support understanding of customers’ and address their most important needs.
Data sharing by Mobile Network Operators (MNOs)
MNOs are usually reluctant to provide mobile insurance providers with subscribers’ data as they do not wish to lose control over their databases. To address this challenge, Experian, the world’s leading consumer information services and risk analytics firm, and PERC came up with a new initiative called FIRM to “leverage digital technology to gather non-financial information in real time to create a financial identity, credit risk profile and income estimate of a potential borrower, especially those outside the financial mainstream”. Whereas FIRM is not a credit bureau, it “provides a solution for lenders when a bureau has no report”. Thus, its major goal is to incentivise the reluctance of MNOs to share data due to customers’ fears of privacy.
So there you have it. The Fin4Ag conference clearly left no angle unchecked during the week-long discussions on agri-value chain finance and hopefully such another incredibly successful event will be held in the future to evaluate what will be achieved going forward from July 2014.
Photo credit: Neil Palmer/CIAT
Blogpost by Eric Mwangi, Social Reporter for the Fin4Ag Conference.