FACILITATING AGRICULTURE THROUGH DIGITALIZED FUNDING SOURCES

1. FACILITATING AGRICULTURE THROUGH DIGITALIZED FUNDING SOURCES BY UCHE UWALEKE PhD FCA ACS ACIB ACTI ACMR MNES PROFESSOR OF FINANCE AND CAPITAL MARKET & CHIEF ECONOMIST, SECURITIES AND EXCHANGE COMMISSION, NIGERIA

2. FACILITATING AGRIC THROUGH DF OBJECTIVE • Highlight some of the digital solutions to agriculture financing in aid of ICAN members consultancy practice or entrepreneurial quest OUTLINE • Introduction • Benefits of Digital funding • Digital Solutions to Agriculture Financing • Conclusion

3. ‘Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness’ Thomas Jefferson

4. INTRODUCTION • In the 60’s agriculture used to be the mainstay of the economy. The sector was then the highest earner of foreign exchange for the country and Nigeria was largely self sufficient in food production. • The sector, which is the highest employer of labour in Nigeria, has enormous potentials. • Nigeria is home to vast amounts of arable land and a large diverse production base that includes many high value cash crops, offering significant opportunity for development and investment.

5. …Introduction • Sadly, following the discovery of oil, the sector was neglected for so many years. • Consequently, it is characterized by low level of inputs and low yields. • The exports to GDP contribution has fallen in recent decades, as oil and gas production dethroned agriculture

6. ..Introduction • However, the Agricultural sector is beginning to show some promise in recent times • It recorded steady growth throughout the country’s recent economic recession and supported macroeconomic stability against a backdrop of volatility in the global market.

7. ..Introduction Source: Central Bank of Nigeria Statistical Bulletin (2017)

8. …Introduction Source NBS • In terms of real GDP, the sector grew by 3.17% in Q1 2019 from 2.46% in Q4 2018 and 1.91% Q3 2018.

9. ..Introduction Crop production under the agric sector grew by 3.27% in Q1 2019 from 2.48% in Q4 2018.

10. …Introduction .’ Livestock grew by 0.88% in Q1 2019 from 2.35% in Q4 2018.

11. …Introduction .’ Forestry grew by 2.19% in Q1 2019 from 1.73% in Q4 and 3.72% in Q3 2018.

12. …Introduction Fishery grew by 7.09% in Q1 2019 from 1.97% in Q4 2018 and 0.84% in Q3 2018. .’

13. …Introduction • Much as the modest progress recorded so far is encouraging, the agric sector faces a number of challenges notable among which is Limited Access to Finance: • Thesector is challenged by poor access to financial services. Most of the farming population is unbanked or under banked • Smallholder farmers in particular need Credit to finance investments, while insurance helps to mitigate risk.

14. …Introduction • Agricultural Finance is essential: • To purchase, lease or hire farmland, for crop or livestock production. • To procure farm machinery and equipment like tractors • To hire and recruit labor in the farm. • To purchase inputs like fertilizers, insecticides. • For incidental and recurrent expenses like fueling of machines, veterinary services.

15. Digitalized Funding

16. What is Digitalized Funding? • Digitalized funding is the act of providing financial resources through a form that can be processed by a computer. • DF is made possible by a series of rapidly changing technologies and business trends • It can be a quick way to raise finance for agriculture

17. BENEFITS OF DF • Digital payments facilitate access to financial services for smallholder farmers by lowering transaction costs of agricultural financiers . • If a farmer has access to a digital transaction account (e.g., a mobile money account), the lender can simply disburse the funds directly to that account and be repaid via the same means.

18. …BENEFITS OF DF • Agricultural value chains entail numerous transactions between all types of stakeholders: farmers, input sellers, creditors, local buyers, and global agribusinesses. • Digital payments help by shortening transaction times and improving transparency through quicker, traceable payments. • For agribusinesses procuring from a large group of distributed suppliers, digital transactions ensure greater security, speed and efficiency.

19. Digital FundingSolutions

20. DFS- Digital Wallet • The digital wallet also known as the “e-wallet” is the most widely used service by smallholder farmers. • Through the use of the e-wallet farmers can borrow the funds they need to manage their farms.

21. DFS- Digital Wallet • An example of the e-wallet solution being applied is the Tigo Money Rwanda. • Tigo Money Rwanda is a mobile money service that provides Tigo mobile subscribers with an e-wallet account, which enables access to a variety of financial services including payments, savings and credit

22. DFS- Digital Wallet • In Kenya, Digital agricultural credit has recorded a lot of success with m-Shwariloanwhich has reached millions of customers. • Developed by Commercial Bank of Africa and offered through the M-Pesa mobile money platform by Safaricom, m-Shwari allows M-Pesa users to apply for and receive short-term loans directly on their mobile phone, as well as earning interest on digital savings deposits.

23. DFS- Digital Wallet • Tulaa is a digital lending platform that links input suppliers, farmers, and commodity off-takers. • It also provides financing to farmers for agri-input purchases and coordinates their delivery through existing retail networks or paid field agents. • Tulaahas thousands of farmers using its platform in Ghana and Kenya.

24. DFS: E-commerce • E-commerce is the facilitation of commercial transactions via a digital platform. • E-commerce is advertised as means of providing business-to-customer services that will link smallholder farmers with businesses and suppliers further up the value chain.

25. DFS: E-commerce • A notable platform that provides e-commerce services is AgUnity. • AgUnity, established in Indonesia, isan e-commerce platform accessible only via smartphone that provides farmers and farming cooperatives access to on-farm production advice, trading markets, a payments method as well as basic banking/ financial services.

26. DFS: E-commerce • myAgro is a non-profit enterprise with primary operations in Senegal and Mali that offers smallholder farmers a way to make small payments over time that add up to the cost of an inputs package. • Farmers, or groups of farmers, can elect a specific amount they would like to establish as a goal, which translates into the total inputs requested for a plot. Once they have established their goal, farmers can purchase scratch cards at affiliated myAgro stores.

27. DFS: E-commerce • After purchasing the cards, farmers load the value of the card onto their account by entering the appropriate details – a 14-digit code from scratch card plus farmer ID. • And because the myAgro platform keeps a ledger of the scratch card entries by individual farmer, it can provide running balances so farmers can track their progress toward purchasing the inputs package.

28. DFS- Digital Equipment Leasing Platforms • An example is the “Hello Tractor” company which provides compact tractors to farmers. • Once a client has completed the online registration and payment, the compact tractor is delivered to a location of the clients choice • Farmers that have mobile devices can also access a code to connect with a booking agent.

29. DFS- Information Sharing as enabler • Information Sharing: Smallholder farmers usually are not up to date on agricultural best practices. • With the availability of this information, smallholder farmers can improve their practice, identify threats to their production activities and compare experiences to learn more from the agricultural community.

30. DFS- Information Sharing as enabler • An example of a digital platform that provides information servicesis aWhere • aWhereutilizes satellite imagery to provide businesses with agronomic and weather intelligence for agricultural decision making. • The data it utilizes are sourced from satellites, weather stations, and ground radars. • It aggregates this data so that organizations and governments can use it to make informed decisions on crop management, planning, and funding policy.

31. DFS- Information Sharing as enabler • Another example is Econet’sEcofarmer platform which provides information services on agricultural practices and insurance.

32. DFS- Agency Banking • Smallholder farmers in rural areas may have access to mobile phones but may not be literate enough about its uses. • Agent banking may provide a solution to this as the platform for funding will be entrusted to an agent that the community is familiar with. • In Bangladesh, Bank Asia provides agents with one of several devices like POS terminals, laptops and smart phones whose target are smallholder farmers .

33. DFS: Crowd Funding • Crowd funding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet. • Crowd funding is a form of crowdsourcing and alternative finance.

34. DFS: Types of Crowd Funding

35. DFS: Farmcrowdy

36. DFS: Porkmoney

37. DFS: Some crowd funding platforms for agric projects. • Farmcrowdy • Efarms Nigeria • Farmfunded • Thrive Agric • EZ Farming • AgFunder • Cropital • PieShell • Kickstarter • Indiegogo

38. CONCLUSION • DFS can be quite useful in the agric sector. • Indeed, DFS offerings can effectively cater to a wide range of actors across agri-value chains – from smallholder subsistence farmers to international commodity traders. • Government should encourage innovative and other digitalized sources of agricultural financing in Nigeria as these have potentials of growing the Sector and making it one of the major contributors to the nation’s economy. • One way this can be facilitated is through the provision of enabling infrastructure especially power and internet access

39. Motivational Quotes • Life has two Rules: (1) Never Quit (2) Always remember rule 1.- Unknown author • “A man without a smiling face must not open a shop” – Chinese Proverb