NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, July 22, 2015

As a result of mobile money financing schemes, farming businesses, most of which are in rural areas in Africa are able to enjoy agritrade financing in form of loans, subsidies and free inputs facilitated mainly through phones. The main advantage of mobile money financing for agriculture is the elimination of cash handling by other individuals during the transfer of the money from the financing individual/organisation to the farmer or agribusiness operator. This reduces or eliminates corruption, outright theft or violence that could result when individuals have to carry cash around.

It has been proven that mobile money financing option is the most viable means for governments and private investors to release funds to farmers or other agribusiness operators if agriculture in Africa is to experience the much needed significant development.

Last year in Nigeria, millions of registered farmers were reported to have enjoyed financing in form of fertilizer subsidies and free inputs through an e-wallet scheme that eliminates middlemen by sending personified electronic subsidy coupons to farmers’ phones.

Akinwunmi Adesina, Nigeria’s immediate past minister of agriculture said last year November, “We are now able to reach 92 percent of the farmers registered in our farmers’ data base with fertilizer, seeds and other essential inputs because the identification of the farmers enabled us to initiate an electronic wallet system through which all farmers in the data base are sent their farm subsidy coupons which they then redeem at the point of purchase of farm inputs from the private suppliers.

Annually, since 2012, each farmer enjoys about US$30 fertilizer subsidy, excluding subsidies for other inputs through an electronic coupons sent to their phones. In 2014, based on reports, with about 92 percent of 14million registered farmers said to have got access to two bags of fertilizer each, which costs N5,500 to N6,000 at 50 percent of the price, this means about 12.8 million farmers received N38.4billion financing in form of fertilizer subsidies in Nigeria in 2014.

Agritrade financing is being enhanced through telecom companies as farmers feel more secure using mobile phone services than going directly to banks.