Making Tech Work: How Local Know-How Can Improve Digital Financial Inclusion Solutions in Challenging Markets

15 November, 2017

Original source: NEXT BILLION

Technology can either revolutionize development services by lowering costs and expanding access, or it can be an expensive gimmick that doesn’t adequately address the reality on the ground. When done correctly, technology can eliminate inefficiencies, collect valuable information and expand access to critical services. However, technological solutions are not implemented in a vacuum; they are often replacing indigenous, ad-hoc, organic resolutions to daily challenges. These ad-hoc resolutions can appear incomplete and messy, but they reflect the knowledge, instincts and relationships of the parties involved.

As Farmerline and BFA learned in Ghana, when competing with an indigenous resolution, the technological solution must go beyond the technical fix to reflect local know-how and temperaments to provide a superior solution.



In 2016 we met Moses, 52, a smallholder cocoa farmer receiving training and resources from FIBR partner Farmerline, a Ghana-based technology company. Moses farmed cocoa, bananas and food for his family, and sold his produce to Kwame, a purchasing clerk (PC) who paid market price for the cocoa at harvest time.

Although Ghanaian cocoa farmers practically have a guaranteed market for their harvest and experience stable prices, they are unable to access financial services because bank services, especially credit, have stringent eligibility requirements, such as records of previous banking transactions.

In response, Kwame would often extend Moses small amounts of credit (up to 50 Ghana Cedi or about US $11.30) from his personal working capital to help Moses purchase farming inputs such as additional seed and fertilizer. It was a win-win situation for both Kwame and Moses; with more and better inputs, both of them would have more cocoa at the end of the season. But, as with other farmers and PCs we met, Kwame didn’t always have money to lend, and output would suffer. Moreover, Moses’ track record with Kwame was informal and could not serve as a credit history to pursue formal loans.



To address this challenge, in 2016 Farmerline and BFA partnered through the FIBR program to develop an app that: 1) builds a digital trail of farmers’ borrowing and repayment history with PCs and, 2) links PCs directly with the bank to access additional sources of capital. As illustrated below, the digital trail can be used by banks as a proxy for a formal credit history to support loan applications. In addition, the app links PCs directly to Farmerline, thus allowing them to apply for and disburse loans to farmers using a mobile money platform.

Making Tech Work: How Local Know-How Can Improve Digital Financial Inclusion Solutions in Challenging Markets
The farmer-purchasing clerk loan process

Next, Farmerline received a Field Partner loan from KIVA to launch a pilot, which ran from October 2016 to March 2017. A total of 101 loans worth a combined US$ 9,400 were disbursed through 18 PCs. By the end of the pilot, 69 out of the 101 loans had been paid in full. This is a lower repayment rate than what the PCs had reported for the informal loans they had been giving farmers.



Although the pilot confirmed an appetite for loans among farmers, it also revealed the need for the product design to more closely reflect knowledge, ideas and understandings on the ground. Farmerline concluded that loans needed to match the particular timelines, mental models and digital comfort levels of the farmers for the app to succeed as originally hoped. While PCs like Kwame could account for these particularities intuitively, Farmerline needed to account for them through careful, sensitive and flexible design.



The cocoa growing season in Ghana runs from November to January but, during the pilot, most of the loans were disbursed between November and December with a three-month repayment period. Since November and December are the peaks of the season, by the time loans were disbursed, it was too late to utilize inputs (fertilizer and pesticide) and farmers expressed less demand for the loans. Furthermore, when repayments were due in the following year, after the major harvest period, farmers found it difficult to repay since their income from cocoa sales had already tapered off. Farmerline realized that loans should be disbursed between May and August to purchase inputs in time to prepare the fields, with a target repayment date in November or December to match farmers’ revenue streams.



Prior to the pilot, credit extended by PCs functioned as an advance to be deducted from cocoa revenue at the end of the season in one bulk payment. The farmers did not think of repayment in installments, rather they imagined PCs “owning” a portion of the revenue at the moment it was earned.

When Farmerline introduced monthly installments, the concept escaped most farmers. As long as the loan was repaid within 3 months, they did not believe it to be in arrears. Thus, any payments made before the end of the term were considered optional “savings” toward the loan rather than obligatory fixed payments.

Additionally, cocoa farmers don’t use calendars. Instead, key events such as market day hold more meaning than arbitrary dates. Setting repayment dates to calendar days, such as December 15th, meant little to farmers in terms of planning repayment, and Farmerline resolved to pick dates more relevant to farmers.



While smartphones allowed PCs to avoid numerous trips to the banks, which were expensive and inconvenient, most PCs were new to smartphones and required a good deal of training to understand and use the app. Many PCs even asked younger relatives to operate the app for them. All of them continued to keep a written record of their loans, thus negating any promised gains in efficiency. Moving forward, Farmerline is considering training a member of the local community to serve as a support agent for the app.

Similarly, using mobile money in remote regions was a challenge. PCs reported that a lot of the time mobile money agents did not want to cash in transactions, topping-up the PCs’ mobile money wallets, since this did not generate agent fees. Instead, agents would force PCs to remit the money, in which the agents accept cash and then use their float to transfer funds to Farmerline’s mobile money account – a process which earns the agents commission. However, along with generating fees, this process also creates delays in logging the payment, thereby flagging loan payments as late and undermining the value proposition of the app. Furthermore, often agents would not have enough float to complete the transactions, so the process would stall.

In spite of these challenges, Farmerline feels the app has promise to offer better and more services to farmers and is resolved to address the issues above. It aims to use the app to partner with a financial services provider to extend credit, inputs and potentially savings products to at least 5,000 farmers by the end of 2017. As part of this goal, it will continue to fine-tune its products and processes to reflect the local needs and know-how of its customers – an approach that other technological solutions serving similar markets would do well to consider.


Asa Nyaga is an associate at BFA, a NextBillion partner, working on financial technology projects that seek to enable access to financial services for people and communities who are financially excluded.

Photo credit: Department of Foreign Affairs and Trade, via Flickr.

Homepage photo: Stars Foundation, via Flickr.

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