At 61, Ugandan farmer Nathan Kasendwa did not expect to be a posterchild for mobile innovation. But the rural farmer from Masaka district, about 130km south of the capital Kampala, is using mobile technology to improve his yield and get better prices for his crops.
He uses his cellphone and financial tools provided by a local virtual network for farmers to buy, sell and receive payments. “It makes daily management of my business easier,” he says. “This network allows us all to learn and widen our knowledge of farming.”
Despite decades of growing beans, coffee and bananas, Kasendwa had no credit rating before he joined the Mastercard Farmer Network. “Farmers and small-scale traders are invisible, because they trade in cash,” says Mastercard’s Yvonne Njeri.
This is not the first such financial enabler for small-scale farmers – Ghana’s Farmerline was an early leader – but it is noteworthy that Mastercard is exploring ways to stay relevant without the ubiquitous credit card that has defined its business.
Africa presents the ideal test environment for these initiatives because an estimated half of its 1.1bn population can’t afford bank accounts, nor qualify for credit cards. Instead, Africa’s population is leading the next revolution of payments: mobile money.
Kenya’s M-Pesa – the grandfather of mobile money services – processes over 1.7-billion transactions a year, accounting for more than 50% of Kenya’s GDP. This was worth $14,6bn – or $162m a day – for the quarter to June 2018, according to the Communications Authority of Kenya.
This new way of making payments without using formal banking infrastructure, or banks themselves, is not only an innovation in its own right, but is also enabling further innovation.
Companies like M-Kopa and Koko Networks have used M-Pesa to allow Kenyans to buy solar equipment and cooking gas. M-Kopa (which means “to borrow” in Swahili) users can use M-Pesa to pay off a $200 solar kit over a year.
Africa is encouraging innovation through its mobile ecosystem, says Mats Granryd, director general of the London-based GSM Association, the governing body for the mobile operator industry. “Mobile operators in the region are using mobile money to create new financial ecosystems that can deliver a range of innovative new services across multiple industry sectors, including utilities and agriculture,” he told The Economist.
With half the world’s mobile money accounts (396-million, says the GSMA) Africa is ahead of the curve in this new form of money. MTN, the continent’s largest cellular operator, plans to be “the biggest provider of mobile financial services in Africa” says its Group CEO, Rob Shuter.
Investment in fintech start-ups in Africa quadrupled last year to $357m, according to a GSMA report. Half of Africa’s population–some 623-million people–will be using mobile phones and accessing the internet on them by 2025, the report found.
“We were talking five or ten years ago about the digital divide and how to get everyone a phone,” Huawei deputy chairman Ken Hu told me. “Now a mobile has become a fundamental element for any social development.”
Before 2009 less than 10% of the population had any form of financial instrument, and had to use cash, says South African researcher Arthur Goldstuck. “Now 75% of the population have a financial instrument that not only allows for transacting but also for business development.”
A MasterCard study in 2017 found that the consumer cost of cash was 1.5-2% of GDP. “The burden of the cost falls on the lower income groups,” said Mark Elliott, division president of Mastercard Southern Africa. “Cash is the enemy of financial inclusion, and of the poor.”
