Although digital technologies have disrupted businesses in many different sectors, smallholder farmers say life is so normal they feel no impact of the revolutions emerging from the use of mobile phones.
Experts in digital solutions say the adoption of some technologies currently on the market does not correlate with the needs of farmers, such as access to affordable financing and available markets for their produce.
“A lot of people thought that farmers would jump on mobile money but they have not,” Lucrezia Biteete, the managing director at Laboremus Uganda, said recently during a Financial Technology (FinTech) workshop that brought together digital solution innovators, bankers and farmers.
“Many of these innovations [on the market] are not clear to the target groups that they are innovating for. Innovators need to carry out research and understand the problem,” she said.
Laboremous is a software consultancy company offering a range of digital solutions that aim at driving financial inclusion.
The agricultural sector faces challenges such as low insurance uptake and biased perceptions, affordability, insufficient data on crop varieties and poor product designs, among others, which have constrained farmers’ production capacities.
According to information from Bank of Uganda, the annual amount of money transferred through mobile money totaled Shs 43.83tn in 2016, up from Shs 32.7tn in 2015. The growth has pushed banks to revise their investment portfolios.
“One of the biggest challenges that commercial banks are facing is inactivity of [bank] accounts,” said William Sekabembe, the executive director of Dfcu bank, which has a strong presence in Uganda’s agricultural sector.
“Every bank today is working to reduce their branch network…use FinTech to push products.”
According to Sekabembe, commercial banks continue to shy away from financing agriculture because of the risks involved. The unpredictable weather patterns, the limited access to the market and fluctuations in food prices, all combined make the industry risky.
More farmers still prefer to deal in cash as compared to digital solutions. According to Bram Peters, the country technical specialist in digital finance at United Nations Capital Development Fund (UNCDF), farmers perceive cash as the cheapest option but very often do not see the hidden costs associated with it.
“The majority of the projects we have this year are in digital financing in agriculture. The total budget for this is around $4.8m [nearly Shs 1.7tn],” Peters said.
According to the Uganda National Household survey 2016/17, it was established that households whose main source of income is subsistence farming, at least more than half (53 per cent) received income in cash.
In addition, it is estimated that only 10 per cent of Ugandans have a bank account. These statistics prove that access to financial services can be especially lacking for the country’s small and marginal farmers.
As a result, UNCDP launched mobile money for the poor (MM4P) programme to provide support and demonstrate how the correct mix of financial, technical and policy support can build a robust digital financial service ecosystem that reaches low-income people.
According to Nathan Were from the World Bank, Fintech start-ups also have the opportunity to create a considerable positive impact by designing personal loan products to provide for farmers’ household expenditure on medical and education needs so as to reduce the ‘debt trap’ they fall into.
Currently, in the market, there are a few solutions specifically targeting farmers; for instance, solutions such as One Acre Fund, which supplies smallholder farmers with asset-based financing and agricultural training services to reduce hunger and poverty.
Others include KwataSente and Ensibuuko among others.