The potential for mobile money services to promote financial inclusion among rural farmers in Manica Province Mozambique

Abstract

The lack of financial inclusion among rural, smallholder farmers in the developing world remains widespread, and particular so in sub-Saharan Africa, where as little as four percent of the population have access to a personal bank account. In most cases, banking institutions primarily focus their financing operations on commercial farming operations, despite the fact that the majority of the population is involved in smallholder farming operations. As a result, these “unbanked” smallholder farmers lack the ability to grow their farming operations, which prevents these economies from obtaining sufficient growth. The inability of traditional financial services to address smallholder farmers’ needs stems from, amongst other reasons, the remoteness of such farmer operations, which is associated with substantially high transaction costs and per-client operational costs. Moreover, rural farmers typically lack sufficient collateral, making such financing unfeasible from a financial institution perspective. Nonetheless, there does exist great potential to reverse such low productivity trends through the provision of services which can adequately serve these unbanked smallholder farmers. Such services should address aspects of extension services, marketing services and specifically financial services. Such services which are suitable for attempting to service rural farmers must take into account the ubiquitous nature of mobile phone technology in sub-Saharan Africa. While most individuals who are involved in smallholder agriculture lack access to a personal bank account, the opposite is true regarding the utilisation of mobile phones. It is this mobile platform which presents the greatest opportunity to increase the proportion of the smallholder farmer population which finds benefit from financial services. There are success stories from numerous developing countries which have aggressively pursued mobile money services, which are aimed at servicing the unbanked proportion of the population, as an avenue to increase financial inclusion for its people – Kenya’s M-Pesa being the most notable example. While lessons can be learnt from the M-Pesa model in Kenya, the potential for such a service must be evaluated in Mozambique where a mere four percent of farmers have access to formal financial services. In order to evaluate the potential of mobile money services in Mozambique, a sample population was selected in the province of Manica, in central Mozambique. This sample population was surveyed with the intent to establish: i. The extent to which farmers are included in the formal financial sector. ii. Whether rural farmers in Mozambique have in fact adopted mobile technology services to the same extent as most of its sub-Saharan counterparts, and the extent to which rural farmers are willing to utilise such technology in order to enhance their levels of financial inclusion. iii. If farmers are willing and able to adopt mobile money services, where the farmers see that they could benefit the most from such services. Do farmers have enough knowledge on such services to encourage the adoption of such services? If not, what kind of farmer training is needed on the concepts of mobile money services? The survey did indicate that Mozambique has followed a similar path to much of its sub-Saharan African counterparts with respect to mobile phone technology adoption, with most farmers owning a mobile phone. Furthermore, the survey established that there is a lack of financial inclusion among rural farmers which emphasises the need for alternative methods of financial services provision. The survey respondents indicated that they are aware of mobile money services; however, they lack sufficient knowledge on such services, which deters the respondents from adopting such services. While the majority of the rural farmers who took part in the survey indicated that they do not currently utilise a mobile money service, the farmers that are making use of such services have come to terms with the various benefits that mobile money services present, as much of these respondents utilise their mobile money service on a frequent basis in order to execute financial transactions. In order to enhance the adoption of mobile money services, a structured introductory and roll-out process is required whereby rural farmers are introduced to mobile money services and their various benefits and functionalities. Given the general lack of knowledge on mobile money services among rural farmers, and in line with the results obtained from the survey, a structured training regime is is needed which addresses the various knowledge gaps identified by the survey, while simultaneously demonstrating the various benefits of such services, as well as how basic mobile money transactions can be executed. Such areas of farmer training are likely to promote the adoption of mobile money services, bringing rural farmers closer to the formal financial system and allowing such farmers to transact in a way previously not possible.