January 29, 2015
Bill and Melinda Gates’ 2015 letter identifies four “big bets” that could lead us to a future with vastly reduced levels of poverty. Grameen Foundation supports these priorities and appreciates the risk-taking financing that the Gates Foundation has provided to our organization and many others. For our part, we are bundling two of these “bets” into a unified push to reduce rural poverty. We believe that bundling financial services with practical information on good farming practices, both enabled through the now nearly ubiquitous mobile phone, will go further in reducing farmer poverty and increasing yields than advancing either solution alone.
In international development we are prone to working in silos and also to fads. Our work over nearly two decades in advancing financial services for the poor, often through innovative uses of information technologies, has taught us how difficult it can be to create real value for poor people through practical, “last mile” solutions. But breakthroughs are possible.
Grameen Foundation is hearing loud and clear the need for this integrated approach from the rural poor themselves, as well as from other stakeholders. The farmers we meet in Africa and Latin America cite access to finance as one of their top constraints. This was echoed in a recent evaluation by GSMA’s mFarmer Initiative of mobile agricultural extension efforts, in which farmers ranked sourcing capital as their #1 need. Yet, overstretched extension agents using 20th century approaches typically aren’t able to facilitate the connections to credit, savings and insurance services that smallholder farmers need.
Global companies are also evaluating the role of mobile financial services in their supply chains. Our agriculture partners working in input and output markets, for example, want to see financial services paired with the agronomic information they provide.
These two “last mile” services – practical and relevant agronomic information and tailored financial services – are rarely delivered in a bundled, coordinated way to farmers. We believe that not only will a bundled approach create greater returns for farmers, but it will also create new business models that help drive the sustainability of both these efforts. We are testing this hypothesis in a number of our markets, including in Uganda with Opportunity International, a leader in the agricultural finance field. At the same time, we strongly support BRAC’s proposal to utilize grassroots organizations and other distributed human networks to make the promise of digital money generally—and these bunded services specifically—real to millions of poor rural families.
We often hear that “big data” can revolutionize the battle against world poverty. As always, the devil is in the details. The creative use of data is an area ripe for innovation in bundled approaches. Financial services providers shy away from agriculture because of the perceived risks, driven in part by poor visibility into farmers’ businesses, as well as by the costs of serving a dispersed rural audience. Farmers, on the other hand, often have a deep distrust of formal financial institutions and lack knowledge on how to most appropriately use financial products (e.g., credit, savings) to increase their income.
Using the data collected through mobile-enabled agricultural extension networks, we are solving problems for the financial services provider by helping them cost-effectively reach farmers and providing real-time visibility into agricultural businesses, which enables them to better manage risk. And these trusted agricultural extension networks can solve problems for farmers by connecting them to financing and providing information that improves their crop yields.
Joe Studwell’s new book, How Asia Works, (also cited by Mr. Gates in a recent thought-provoking article) provides a great example of this multidimensional approach. Studwell posits that East Asian economies maximized output in their agricultural sectors through a combination of technical support (agricultural extension), financing, and access to markets, all resting on a foundation of clear and equitable land ownership. When only one or two of these three were present, agricultural outputs did not rise as expected.
Rural farmers face as many challenges as corporate CEOs—with just a fraction of the money and information. They can’t afford to operate in silos. Grameen Foundation’s “big bet” is integrating these services will help farmers build stronger businesses and communities and give them greater control of their lives.