MasterCard plan to digitize agricultural sector
The multinational financial services company is using innovative technology to find solutions that can address challenges facing the agricultural sector
Small holder farmers are critical to Africa’s economy, yet they remain marginalized and face barriers to improving their livelihoods.
According to the Ministry of Agriculture, an estimated five out of close to eight million Kenyan households depend directly on agriculture for their livelihoods.
Unfortunately, changes in climate and the economy have affected most of these farmers, who cultivate relatively small parcels of land with low output and are generally less-resourced as compared to their large scale commercial counterparts.
Slowly, self-help groups, Non-Governmental Organizations (NGOs) foundations and multinational brands are advancing in response to Africa’s agricultural sector.
MasterCard Labs for Financial Inclusion is one of the global series of MasterCard Innovation Hubs. The technology hub based in Kenya is committed to empowering 100 million Africans previously excluded from formal financial sector by 2020, through the use of public-private partnerships, and the innovation of locally relevant technology solutions that are underpinned by a deep understanding of the unique challenges and opportunities that exist in Africa.
The Nairobi Lab brings together MasterCard’s innovation and global financial inclusion capabilities under one roof, combining these with local expertise and insight.
“The Nairobi Lab is currently incubating three scalable solutions in the areas of agriculture, micro-retail and education; namely the MasterCard Farmer Network (MFN), Kionect and Kupaa. Our portfolio also includes several early stage initiatives currently under active research and development,” said Salah Goss, Vice President of the MasterCard labs for financial inclusion.
The labs brought together a team of developers, designers and business stakeholders in a challenge to create an agricultural solution for smallholder farmers.
“Ensuring financial inclusion for this population is important to help them sustain their farms and enhance their livelihoods,” the company said in a statement.
In East Africa alone, there are approximately 13.2m smallholder households with high mobile phone penetration but limited access to markets and relevant financial services. Key pain points that small holder farmers face include; poor market linkage, unfair pricing, lack of technical services & inputs, limited value chain information, lack of relevant financial services, poor infrastructure and logistics services.
In October last year, the MasterCard Farmer, previously known as 2KUZE, received the Best AgTech solution award at the Digital Inclusion Awards held in Nairobi, Kenya.
The awards recognized key business players in various sectors that have adopted innovative technology that offers efficient, convenient and life changing products or services to their clients.
At the event, Salah Goss, the Vice president of MasterCard for Financial Inclusion said that at MasterCard, they strongly believe that together with the government and key stakeholders in the agriculture value chain, they can improve access to and use of formal financial services which will ultimately deliver inclusive growth and empower communities across the globe.
“MasterCard has been at the forefront of using innovative technology to find solutions for challenges facing the continent,” Salah said.
Through the successful introduction of MasterCard Farmer Network solution, the technology will help small-scale farmers looking to sell the produce to connect with the right buyers more efficiently in the local language and receive the best possible prices.
MasterCard has been able to bring the benefits and security of mobile commerce and payments to farmers in Kenya, Uganda, Tanzania and more recently India, by digitizing payments and work flows. This solution creates a digital transaction history allowing farmers to receive formal credit from banks and other financial institutions.
“The company remains fully committed to delivering solutions that build inclusive ecosystems and consequently drive a cashless society. With 2.5 billion adults living without access to mainstream financial tools and services, there is an urgent need to speed up the creation of commercially viable products and services for the unbanked and under-banked on a global scale,” Salah said.
In August 2016, KCB Group and MasterCard Foundation entered into a Ksh.3 billion (US$ 30 million) partnership to promote financial inclusion for at least two million small holder farmers in Kenya and Rwanda.
In addition, KCB Group extended at least Ksh20billion (US$ 200 million) to farmers in the two countries in affordable loans for the next 5 years.
The partners had each set aside Ksh1.5 billion (US$ 15 million) for a total of Ksh3billion (US$ 30 million), to a program that was meant to provide critical funding for smallholder farmers and pastoralists in the largely unbanked agricultural sector in the two countries.
The program aimed to reach farmers, 60 percent of whom are women, in the dairy, livestock and food sub-sectors in the two countries.
“We are reimagining and redefining the agricultural sector with a view of transforming agribusiness by accelerating financial services access,” said KCB Group CEO, Joshua Oigara. “We believe that technology supported agribusiness is an emerging and fast growing frontier that will embolden the agricultural sector to be a stronger driver of economic expansion in the East African Region.”
MasterCard Foundation sees the partnership as a game-changing initiative that utilizes technology to deliver solutions capable of lifting millions of households from poverty.
Besides KCB Group’s business arm delivering the financial services, KCB Foundation its corporate responsibility vehicle incorporated in a shared value approach to deliver social interventions, aimed at the farmer, pastoralists and agri-enterprises amongst other value chain actors.
According to Mr. Oigara, while agriculture is the most significant economic sector in East Africa, contributing 30 percent to the Kenyan GDP and employing over 60 percent of the population, only three percent of the loans in the banking sector are channeled into agribusiness.
“At the same time, the majority of farmers operate on a small scale basis owing to limited access to finance, quality inputs and produce markets. We are taking a holistic approach to ensure farmers are equipped with all the essential resources required to enhance their livelihoods,” said Mr. Oigara.
As one of the largest commercial bank in the East African region and with 120 years’ experience, KCB Group has been at the center of driving the growth of the agricultural sector, making deliberate investments to commercialize the sector and elevate it into a top driver of economic expansion.