Changing market dynamics

What is USAID's commitment to mobile money generally and – more specifically – to mobile money in agriculture?

Through President Obama’s ‘Feed the Future’ initiative, USAID has dramatically enhanced its efforts to combat poverty, malnutrition and hunger among the rural poor. We know from decades of investments in microfinance that financial services – credit, savings and insurance – are a fundamental enabler for farmers and their families to reduce their vulnerability and finance new opportunities like schooling, housing and new business prospects. We know from more recent developments that technology, such as mobile money platforms, can be game changers in increasing outreach and making it more cost effective to reach the rural poor with banking services.

This is all to say that we are very bullish about the opportunity for scaled impact through mobile financial services. There is a growing body of evidence suggesting that mobile financial services are having an impact at the household level in terms of stabilising consumption patterns, promoting savings and transitioning people to formal economic activity via mobile accounts. Perhaps the most exciting development, however, is the market dynamics that change as a result of mobile financial services. Companies like Angaza and M-KOPA are offering lower cost, reliable power to the rural poor because low-cost mobile money payments collection systems are suddenly making commercial sense.

USAID’s mobile financial services programme has global outreach and focus on the policy environment and technical advisory services for payments providers. One of the initiatives we co-founded, the ‘Better than Cash Alliance’, helps organisations and countries to make the transition to electronic payments. The initiative’s mission is ultimately to empower people and help emerging economies grow.

On the demand side, the ecosystem of private sector mobile network operators, financial institutions and other mobile money participants are increasingly conscious of an awareness and education gap in rural agricultural communities. What is your organisation's role in closing this gap in these areas and promoting an uptake of mobile finance services?

Indeed, governments and donors have an important role to play to ensure that strong consumer protection measures are in place. This includes promoting awareness of products and consumer rights, continuing to invest in financial literacy and technological literacy, and perhaps most importantly ensuring that supervisory and oversight capacities grow as the market becomes more saturated.

But I would also like to stress our important role in ensuring that financial services – whether delivered through technology-enabled channels or not – are used to improve the financial health of consumers. Financial services offer a choice – for example, the choice to save for school or to borrow funds for a new venture – but, as we know all too well from recent experiences in the United States, financial services don't ensure that good choices are made.

What's exciting about mobile financial services is that the mobile phone not only makes the delivery of financial services possible but, through the same device, we can introduce messaging and reminder services that we hope can promote good financial decision making. We are starting to see some examples of this from our work in Mozambique.

Tell us about your work in Mozambique.

In Mozambique, using improved agricultural technology (fertilizer and better seeds, for example) can greatly increase the crop output and family income for farmers, yet adoption is extremely low, in part because of limited cash flow during the planting season. In an effort to increase the use of these better technologies, USAID/Mozambique is using the insight that small changes in timing can make a big difference. We are offering farmers the chance to save for inputs using mobile money right after harvest, when farmers have the most cash on hand. Early results are promising. For example, although less than 1% of the population is using mobile money, 46% of farmers in the study adopted mobile money. The farmers in the treatment group were offered a small cash incentive to encourage saving during harvest. They had 30% higher savings than the control group. I call this ‘mobile persuasion’!

There is little data on the cash use behaviour patterns of farmers that can be used to design mobile finance products and services. What is USAID’s role, if any, in closing this gap to ensure the supply of agricultural mobile finance is closely aligned with demand?

It is very early days, but we are exploring ways in which we and others can support data analytics capabilities that would reveal the underlying needs and behaviours of the rural poor. This kind of information would help us to understand how we can better serve them. Firms such as Cignifi and Experian MicroAnalytics are showing us how to use and analyse data as a way for us, in development communities, to better understand these families that, for far too long, have been left out of the policy discussions that dictate their futures.