Enabling role of ICTs to transform smallholder farmers to entrepreneurs
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"Enabling role of ICTs to transform smallholder farmers to entrepreneurs”. An overview of IFAD-funded ICT related activities supporting rural enterprises. Presentation at FAO Rome, 27 October 2010 by Michael Hamp, Senior Rural Finance Advisor and Head of the Financial Assets, Markets and Enterprise Development Unit of the Programme Management Department, IFAD.
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Enabling role of ICTs to transform smallholder farmers to entrepreneurs
- 1. Michael Hamp, IFAD 27 October 2010 Overview of IFAD-funded ICT related activities supporting rural enterprises 2010 Information Economy Report presentation at FAO
- 2. Outline • Mobile-phone banking pilots • IFAD-WFP Weather Risk Management Facility • Rural remittances • Agricultural value chains and marketing
- 3. Why is branchless and mobile banking relevant? • Branchless banking: - reaches large numbers of poor rural people - uses ICT and non-bank retail agents to deliver financial services outside conventional • Some example: - Kenya: 50% of population is registered for M-PESA (only 23% has bank accounts) - Remote rural community in the Amazon: 5 BB agents have made a night-day difference!
- 4. Branchless banking: A beacon of hope Encouraging results: • branchless banks reach remote areas. In rural Brazil, deposits and withdrawals constitute 38% of transactions compared to 8% in urban areas • eight branchless banks reached 37% of people previously unbanked • Five branchless banking providers reached more unbanked people than the largest MFI in country • The same five providers grew rapidly, needing on average three years to acquire more unbanked clients than the largest MFI in the same market
- 5. IFAD-WFP Weather Risk Management Facility • a joint initiative of IFAD and WFP with support from Bill and Melinda Gates Foundation Objective Increase access of smallholder farmers to a wide range of risk management tools
- 6. WRMF focus The WRMF focuses on four areas: • Building the capacity of local stakeholders in weather risk management. • Improving weather and climate services, infrastructure, data monitoring and management • Supporting the development of an enabling environment • Promoting the use of technology to complement ground-collected data (e.g. use of satellites, remote sensing applications)
- 7. WRMF main outputs • pilots in Ethiopia and China • Technical publication on: ‘Potential for Scale and Sustainability in Weather Index Insurance for Agriculture and Rural Livelihoods’ www.ifad.org/ruralfinance/wrmf/index.htm • A technical guide for donors: Effective ways to support index insurance • Mapping exercise with Wageningen University to determine crop vulnerability to weather and climate risk, also relative to weather data availability and household socio-economic conditions
- 8. Rural remittances Did you know that: • 30 to 40% of remittances goes to rural areas • Thanks to high mobile penetration rates in rural areas, more and more money is being transferred using using mobile phones Did you know that: • over 200 million people going north send home $350 billion • Remittances to developing countries total 3 times Official Development Assistance (ODA)
- 9. Remittances and mobile banking Konecta in Paraguay: launching a new technological platform service for fast money transfer services targeting 75,000 people IOM and Crystal Fund in Georgia: setting up a mobile remittance platform integrating microfinance institutions and commercial banks, to provide microloans, microsavings, and micro health insurance products Example of IFAD’s projects using m-banking & m-remittances ACCESS Bank Madagascar: piloting a wired and mobile IT platform to link MFIs and remittance companies to small farmers and families of migrants in rural areas
- 10. Pro-poor value chain programmes Smallholders in Value Chains: • Usually disadvantaged because they lack information, which affects their negotiations with other actors in the chain. Benefits: Reduced transaction costs Overcoming information market failures Improved communication along the value chain Input suppliers Customers’ feedback Buyers (actual and Potential) Market prices Product specifications Storage facilities Transportation Packaging Operations Weather Input prices Small- holders
- 11. Pro-poor value chain programmes: Access to information Zambia National Farmers Union (ZNFU 4455): Business model Service focused on needs of smallholder farmers, producers and traders Provided focused and targeted market information Easy to understand, little or no bells and whistles Covered entire value chain Open to all farmers – no registration fee for farmers Traders need to register Local content and no massive pushing Sustainability: through advertisement ©IFAD/Mwanzo Millinga Results Smallholder farmers better access to market info and participate on equal footing with traders Improve negotiating power Reduce transaction cost Win-win: convergence with radio, mobile phone and internet service has had positive impact say: 90% traders 60% farmers 40% negotiated better price Over 50% increased income
- 12. Where to next? • How do we move from piloting and more piloting to mainstreaming ICT4D in development activities? • What is the future of m-applications? • When will we all embrace m-development? • Is public-private partnership really the panacea? • What are other viable business models to embed ICT4D in rural development projects?
Notas do Editor
- Branchless banking can reach large numbers of poor people in rural areas, relatively quickly. BB is the delivery of financial services outside conventional bank branches using information and communications technologies and nonbank retail agents. In Kenya, for example, nearly half of the adult population is registered for M-PESA, double the number of those with a bank account (23 percent). In one remote rural community in the Amazon, clients travelled 12 hours by boat to the nearest bank branch or paid someone US$5–US$10 to make the trip prior to the arrival of banking agents in the community. Now, there are five agents in the community, and clients save significant time and money.
- Encouraging results: Reaching remote areas: In Brazil, deposits and withdrawals make up a much larger proportion of transactions in rural locations (38 percent) than in urban ones (8 percent). In eight branchless banking pioneers, 37% (on average 1.39 million) of active clients were previously unbanked In five of the eight cases, the branchless banking provider reaches more previously unbanked people than the largest MFI in the same country: on average 79% more. The same five providers grew rapidly, needing on average three years to acquire more unbanked clients than the largest MFI in the same market.
- The Weather Risk Management Facility (WRMF) is a joint initiative of the International Fund for Agricultural Development (IFAD) and the World Food Programme (WFP). Launched in 2008 with the support of the Bill and Melinda Gates Foundation. Objective Increase access of smallholders to a wide range of risk management tools that promote improved agricultural development and disaster relief
- Building the capacity of local stakeholders in weather risk management by strengthening partnerships, offering technical assistance and promoting knowledge exchange in the development and use of risk mitigation mechanisms. 2. Improving weather and climate services, infrastructure, data monitoring and management by improving the applications of weather information for weather risk management. 3. Supporting the development of an enabling environment by engaging with government partners and advocating for national risk management frameworks, and appropriate financial and weather risk-management strategies and policies. 4. Promoting the use of technology to complement ground-collected data (e.g. use of satellites, remote sensing applications
- The WRMF has piloted two projects, both of which carried out detailed monitoring and evaluation exercises to assess and document the results. In Ethiopia, an index insurance product was developed to reduce the risks smallholders growing haricot beans faced from drought. Low-cost automated weather stations were also installed as part of the pilot. The National Meteorological Association, the Nyala Insurance Company, and the Luama Farmers’ Cooperative Union were key players in the design and delivery the product. In China, the first application of a weather index insurance product in the country was designed to reduce smallholders’ vulnerability to drought and heat waves. The Ministry of Agriculture, the Research Institute of Meteorological Science, the Institute of Environmental and Sustainable Development of the Chinese Academy of Agricultural Sciences, and the Guoyuan Agricultural Insurance Company were key partners. WRMF publications for donors and practitioners The Potential for Scale and Sustainability in Weather Index Insurance for Agriculture and Rural Livelihoods highlights eight key principles that drive the scale and sustainability of index insurance programmes. It assesses 36 index insurance programmes around the world and details the experience of nine case studies. It discusses the various risks smallholder farmers face; explains weather index-based insurance; and outlines the key drivers of sustainability and scalability of weather index insurance. It also defines the important roles of donors, governments and the private sector. Effective ways to support index insurance: A technical guide for donors provides donors with useful information on supporting initiatives in index insurance. This practical reference tool details key considerations in design, implementation, monitoring and evaluation. It also reflects best practice, and the state of the art on index insurance.
- You might know that: There are over 200 million people going north and US$ 350 billion going south Remittances to developing countries total 3 times Official Development Assistance (ODA) You might not know that: 30 to 40% of remittances go to rural areas Mobile phone coverage is generally over 90% of population even in developing countries Transfer of remittances using mobile phone technology is becoming a cheaper means of transferring money
- Information channels Internet, mobile, radio, local newspaper, market centres, market billboards. Core issue Sustainability - what happens after funding of MIS is over? e-Choupals Initiated by ITC Ltd, Agribusiness Division. Coverage: 30,000 villages across 6 states in India. Impact on smallholders Cheaper and reliable inputs. Access to information on weather, crop prices, services (training and production). More informed selling decisions & improved productivity.
- Based on our experience, we would like to leave you with a number of questions which we hope will spark a conversation among and between this audience.