Farmers are never the easiest community to reach for microfinance institutions. It goes without saying that many work in remote, rural areas. They may be prone to natural disasters – a point which is very clear this week as we visit Kenya and heard about the plague of locusts wreaking havoc across East Africa. Growing seasons also mean that farmers may have particular needs when it comes to loan structuring and may need to wait for crops to mature to pay back the principal. This goes without mentioning the challenges of inputs and quality seeds which are a day-to-day challenge across Africa and the problems after harvest of accessing markets.
Several of the challenges being faced by farmers are ones which technology is helping to address. Today we visited an MFI which is focused on using technology to support farmers and then we visited farmers in the field.
As a first step, the MFI helps farmers to buy high quality inputs on credit. The farmers we met had complained that they often found the wrong seeds were provided or the seeds were of very poor quality. This had changed since they started working with the MFI. Unsurprisingly, the credit officers coming round operate digitally and use tablets for the whole process, helping to keep operations streamlined. To reduce operational costs, the MFI is branchless and loan officers spend their entire time on the road.
Loans are structured to fit in with the growing cycles. We learnt from the farmers that, in the case of the majority of crops here in Kenya, there were two growing cycles, each lasting about 6 months. During the growing period, farmers tend to have limited funds, and they only pay back the interest on the loan, together with a small portion of the principal. During the harvesting, however, they are expected to pay back the loan in full. This, of course, is done via mobile payments which work very efficiently in the surprisingly strong 4G signal we found in the relatively remote areas around Meru.
Over the full loan period, farmers are sent tips via their mobile on how best to farm. These range from advice about when to plant to weather warnings and the farmers we spoke to said how useful they were (all the farmers had mobiles – this might not have been what we all expected – but we were reminded that mobile penetration has now reached 90% in Kenya).
The other innovation the MFI has put in place is market linkages. Farmers have traditionally had very limited access to the markets and are reliant on middle men who often exploit their limited bargaining power. Prior to the harvest the MFI helps to put together an inventory and works with brokers, often using digital market places, to get a better price.
All these digital innovations clearly have considerable potential and the enthusiasm of farmers towards this system was palpable. They felt it had made a large difference to their ability to collect good yields. However, this year the rains have come early and are making harvests a challenge. Moreover, not even 100km away from us in Meru, the locusts are eating through crops. As climate change challenges come increasingly to the fore, it is important that more initiatives are provided to farmers to support them in their increasingly difficult work and that insurance is available in the case of such natural disasters. Given the fast pace of digital innovation, it will be exciting to see what is available in a few years – or even a few months – from now.