The government, seems determined to promote more judicious use of fertilisers. The Prime Minister launched a nation-wide “Soil Health Card” (SHC) scheme in early 2015 to rejuvenate India’s exhausted soil. Using a grid-wise approach, representative soil samples from the fields are tested for nutrient content in designated chemical laboratories.
How SHC works
Accordingly, macro and micro nutrients needed by the soil are identified and translated into specific, measured quantities of fertilisers required. This information, printed on the SHC, is made available to the farmers in that grid through the state agricultural departments. Thirty million SHCs were issued in 2015-16 and the Ministry of Agriculture aims to cover the entire farming population by 2018-19. In addition, on a pilot basis, the soil health information is made available at fertiliser purchase points —Primary Agricultural Credit Societies (PACS) and POS devices-enabled fertiliser retail shops.
However, farmers still buy large amount of fertiliser, disregarding SHC recommendations.
MicroSave recently conducted a study into farming practices in two paddy-producing districts of Andhra Pradesh (West Godavari and Krishna) and elicited farmers’ views on fertilisers, soil health and SHCs. Though our findings relate to a select sample in a specific region, they are indicative of attitudes and practices of kharif paddy farmers across the country.
Farmers appear convinced that there is a perfect causal correlation between high fertiliser usage and more output. As a corollary, they believe their farmlands have ‘good soil health’ if they yield the desired output. Farmers are not concerned that they need not use increasing amount of fertiliser to ensure this ‘good soil health’! In fact, they are not sure that the advice based on the SHC can be relied upon; especially when they perceive that the yield might improve by using ‘just a little more’ fertiliser.
SHCs are not easy to use—they give general recommendations regarding the quantity of fertilisers required over the entire crop season whereas, in reality, fertilisers should be used in varying amounts over the different stages of the crop growth. So, even those farmers who start with the intention to use less fertiliser as a result of the SHCs ultimately have to fall back on their own judgement to decide on the amount of fertiliser to be used at each stage of the cropping cycle.
For present income flows
If crop growth appears to be below normal at the middle of the season, the farmer will usually apply large amounts of fertiliser. For farmers who have already bought bags of fertilisers, it is a sunk cost and so the prudent course of action is to apply more – even if the government’s SHC suggests otherwise. Maximising yield and fear of loss are the salient concerns.
The government has started to provide recommendations on the SHC as per the crops sown. But more needs to be done. The farmers need SHC recommendations tailored according to crop growth stages. Promotional campaigns must deconstruct the myth of “more fertilisers” as a panacea for better yields.
Soil health must be positioned as crucial to the long-term productivity of land, which will be irredeemably lost if the focus is only on present income flows.
A behavioural approach based on understanding farmers’ realities needs to be used. Many farmers are share-croppers seeking to maximise short-term yields with little care or concern for the long-term health of the soil. Others, who own their land, do not expect their children to farm and “live off the land”. So they aim to maximise short-term yields to finance the education seen as the passport to a job and freedom from the toil of farming.
It is essential that the government executes this initiative with attention to detail. The SHC scheme can go a long way in ensuring long-term food security of over 1.25 billion Indians.
Malawi aspires to achieve sustainable growth and economic development and become a middle-income country with a per capita income of US$1,000 by the year 2020. While Medium, Small and Micro Enterprises (MSME) play a critical role in economic growth and development in most economies, they often face a number of challenges in their quest for growth.
MicroSave conducted a study to understand the needs of MSME clients to give insights towards redefining the credit products and services to better serve this market niche. The findings indicated that most clients find it difficult to access ideal loan sizes to invest in their businesses due to inability to meet the collateral requirements, lack of proper business records, low cash flows and short loan repayment periods among others.
We bring forth more details on the findings and recommendations in this briefing note.
Rwanda aspires to progress from a low income, agriculture based economy to a middle income, knowledge based service economy by 2020. In its economic development, as per the vision 2020 document, Rwanda sees an important role of MSMEs who account for approximately 97% of businesses, contribute to 55% of the total GDP, and employ around 41% of the population.
MicroSave, conducted a study to assess the state of finance to MSMEs in Rwanda which revealed that though MSMEs are adequately served by financial institutions ( in terms of MSMEs accessing savings/current accounts from formal financial institutions), a significant number reported that their financing needs are rarely met by financial institutions. This briefing note elaborates on key findings of the research and how financial institutions can profitably serve this strategic and niche segment in Rwanda.
MSC’s Group Managing Director, Graham A.N. Wright, during a live talk with MFI experts in Luxembourg.In this video, Graham debunks the hype around digital credit. He goes on to state that digital credit is not a cause for celebration as it is instigating financial exclusion.
Agency banking offers the prospect of much greater access to financial services for large numbers of currently unbanked or underbanked individuals – through financial institutions rolling out financial services using third party agents. However, agency banking is simply the latest element in a much wider technology-driven revolution in banking.
Technology is redefining banking across the world. In Europe, most transactions happen online, branches have introduced biometric identification of customers, interviews with customers are conducted through video conferencing, documentation is scanned and digitised. In the UK, near field communication has allowed widespread contactless payments, cash in circulation is reducing.
Banking in the developing world is different from Europe. Generically, there are fewer branches, ATMs, and POS devices, lower levels of interoperability, low levels of merchant payments, and much lower percentages of access to financial institutions. Usage of informal or semiformal mechanisms – savings groups, deposit collectors, money lenders, friends and family – is much higher. Interestingly, the technology revolution has gained huge momentum here too.
In 2002, Stijn Claessens and colleagues wrote a paper “E-finance in Emerging Markets: Is Leapfrogging Possible?”, at the time this was a forward-looking paper. Today, we can say with certainty, that it is not only possible, but it is happening; and rapidly.
So, what factors are driving this leapfrogging? Technology and communications have created the launch-pad for change. The mobile phone revolution has enabled customers to have new channel for banking services in their pocket and have underwritten the extension of mobile money. Mobile money, in turn, has acted as proof of concept for agency banking, inasmuch as it has proven that financial services can be delivered through technology, communications and third parties.
However, there are fundamental challenges facing agency banking. Many bankers do not understand the business case for agency banking. Agency banking is channel, it is not, of itself a product, and merely facilitates transactions. For existing customers, agency banking risks being simply an additional channel for transactions the customer would have completed anyway, thereby adding to costs. Furthermore, agency banking is a low-cost channel. It is neither (in the bigger picture) an expensive channel to run, nor does it return massive revenue through just existing transactional business.
So, why do it? Under the right circumstances, agency banking can reduce costs; it can assist a financial institution to on-board new customers. It can reduce overcrowding in branches to clear branches for high value customers or service delivery. It can facilitate the generation of new payment business. Agency banking can facilitate new deposits and enable microloans. The real business case for agency banking is in the change it facilitates.
The right circumstances, probably the most important three words in this blog? So, what are the right circumstances?
Ability to onboard new customers easily: Financial institutions need to be able to use Agency Banking as key component of a strategy to on-board new customers. This will require not only digital identity, but also the ability of these institutions to access, free of charge, or at low cost, the national identity database and to use this to populate account opening forms. India has successfully used the Aadhaar bio-metric identity as a key component of opening hundreds of thousands of new digital accounts. In Kenya, banks have free access to the National Identity database.
Government to person payments: G2P payments have been an important primer for the system in India, and a significant contributor to mobile payments in Northern Kenya as many governments pay pensions, pay fertiliser and gas subsidies.
Interoperability: The ability to move money across the financial system and to link mobile wallets with bank accounts is important in the evolution of merchant payments.
Appropriate pricing: Interoperability will be significantly constrained if there is a significant cost to individual payments, transferring funds, cashing out funds across networks or financial service providers. Experience from Kenya suggests that merchant fees should trend towards 1% in the East African market. Cashing out fees across networks should be modest – if there are high cash out fees, then it restricts functional interoperability.
An enabling regulatory environment: In many markets, there is an uncertain regulatory environment – regulations take long to be drafted, legal amendments take years to pass through parliament. Intra-regulatory dialogue fails to reach consensus on the way forward for the digital finance industry.
A willingness to invest in digitisation of bulk payment streams: Where appropriate payment streams such as those in agriculture, particularly those with regular small payments, coffee, tea, dairy, can be used to drive rural payment systems. In other countries, payments to industrial workers and digitisation of the workers payment streams can stimulate urban uptake.
Managing for the Future
Even with the right circumstances, financial institutions must carefully manage their digital operations[1]. They need to ensure that they have:
Agent networks[2]which work with high levels of reliability: Strong agent network management, combining clear agent selection and de-selection standards, liquidity management systems, agent monitoring, clear reversal and complaint mechanisms.
Strong digital processes: Straight through processing, advanced real-time fraud detection and prevention, velocity mapping, clear reversal policies and customer service.
Product development[3]: Successful product development implies a clear understanding of customer value propositions and use cases. It is likely that digital credit will prove popular with financial institutions and their customers, but pitfalls such as portfolio at risk, and potential credit black listing are likely to at once constrain the sector, and stimulate improved informatics.
Managing Strategically
So, agency banking can create change, but it is part of a strategy which looks externally to the competitive environment, and internally towards opportunities to digitisation.
Competition and cooperation: There are occasions where the digital financial services industry can choose to cooperate. A clear case for this is in the provision of rural agents – where there may be insufficient businesses with liquidity to offer services to many financial institutions individually. This is the concept of shared agents which is being advocated by the Uganda Banker’s Association. A clear challenge for agents serving multiple providers is managing multiple e-floats, effectively dividing the e-float they have amongst many providers. A further case for cooperation is in the extension of a digital finance ecosystem and in the knowledge that making the system as a whole work for the customer can dramatically increase levels of adoption.
Fintech disruption: If there is a single lesson to be learned from the rapid uptake of over the top (smart phone based) lending platforms, it is that financial institutions will need to actively watch and engage with (learning from, collaborating with or co-opting as appropriate) nimble financial technology companies, as they find ways to bring efficiency and effectiveness to aspects of financial services.
Digitising the institution: Agency banking and the systems associated with it, is part of the trend towards digitising multiple aspects of banking internationally. Agency banking holds out a prospect of synergistic developments throughout banking operations, including the use of biometrics, centralisation of key functions such as account opening, strengthening customer service, digitising elements of loan decision making and loan documentation management, integration with national databases etc.
Informatics: A digital future implies digitising information and implies returns to information when properly managed. It implies the need for financial institutions to capture and use information streams, such as payments, to improve decision making, design new products and services, and segment customers by investing in digital finance capacity, data warehousing, and recognising the strategic importance of information[4].
The clear message from this blog
The time to invest in the digital future is now, tomorrow may be too late. For retail financial institutions, particularly those with a large customer base, agency banking exposes customers to digital channels, and offers a realistic prospect of customer graduation to self-initiated payment transactions, a further value addition for the financial institution.
[1] The Helix Institute of Digital Finance by MicroSave provides training in Digital Finance for more information see. http://www.helix-institute.com/training-courses
At The Helix Institute of Digital Finance, we have spent the last four years researching the different facets of strategic operations in digital finance that really drive success. We started with the Agent Network Accelerator (ANA) project which conducted large quantitative surveys of agent networks in ten countries around the world. We have interviewed over 34,000 agents in eleven countries namely; Tanzania, Uganda, Pakistan, Bangladesh and India, Nigeria, Indonesia, Senegal, Zambia and Benin. While we release country reports on the major findings, we also aggregate the data and teach the lessons learned on how to design and develop an agent network in courses at the Helix Institute. This is a presentation of the lessons learnt in four years of ANA project.
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The government, seems determined to promote more judicious use of fertilisers. The Prime Minister launched a nation-wide “Soil Health Card” (SHC) scheme in early 2015 to rejuvenate India’s exhausted soil. Using a grid-wise approach, representative soil samples from the fields are tested for nutrient content in designated chemical laboratories.
