Definition
Mobile money payments are financial transactions made via mobile devices, allowing users to send, receive, and manage money without relying on cash or traditional banks. By offering low-cost, fast transfers, mobile money advances financial inclusion, particularly in remote areas. It can boost smallholder incomes, support agricultural investment, encourage savings, and provide a safer, more transparent alternative to cash, improving financial traceability and reducing risks like theft and corruption.
Lead Actors
Off-taker
Target Demographics
Off-taker; Service providers; Smallholder Farmers
Objectives addressed
Farmer related
Boost access to finance:
Mobile money payments can improve access to finance, accelerate transactions, and support the development of credit histories that may strengthen future borrowing opportunities. However, their effectiveness is currently limited to areas with sufficient network infrastructure, a challenge that is unlikely to be fully resolved in the short term. Additionally, as many mobile money services do not offer interest on wallet balances, the potential benefits of savings for farmers remain constrained.
Business related
Reduce cost-to-serve:
Mobile money payments can significantly reduce cost-to-serve for service providers by lowering transaction costs. Digital transfers eliminate the need for cash handling and reduce administrative work associated with manual payment processing. By streamlining transactions, service providers can operate more efficiently, lower operational costs, and extend services to remote or dispersed customers more sustainably and profitably.
Improve sourcing efficiency:
Mobile money payments can improve sourcing efficiency for service providers by streamlining transactions and reducing reliance on manual cash handling. Faster, more transparent payments can strengthen relationships with suppliers and farmers, improving reliability and traceability. Although setting up and maintaining mobile payment systems may increase operational costs in the short to medium term, particularly in areas with limited digital infrastructure, long-term gains in efficiency and supply chain reliability can outweigh initial investments.
Strengthen organisational processes:
Mobile money facilitates easier, quicker, safer and more transparent payments improving payment processes.
Contexts Best Suited to
Availability of mobile money infrastructure, cellphone coverage and high mobile phone penetration: to facilitate effective use.
Data literacy: to ensure farmers can use and understand it.
Limited access to conventional financial services: value-add is higher if it supports those not currently banked.
Data literacy: to ensure farmers can use and understand it.
Limited access to conventional financial services: value-add is higher if it supports those not currently banked.
Key Risks
Technological risk: potential system failures and cybersecurity threats.
Regulatory risk: regulation can change and require adjustments in operations.
Social risk: lack of trust amongst farmers, and limited financial and digital literacy could result in reluctance to use and accept mobile money payments.
Transaction costs: commissions associated with transactions might be (too) high.
Operational risk: lack of infrastructure might limit farmers' ability to convert their mobile money into cash, which in many rural areas is still the norm.
Side-selling: need for quick cash might also result in side selling.
Regulatory risk: regulation can change and require adjustments in operations.
Social risk: lack of trust amongst farmers, and limited financial and digital literacy could result in reluctance to use and accept mobile money payments.
Transaction costs: commissions associated with transactions might be (too) high.
Operational risk: lack of infrastructure might limit farmers' ability to convert their mobile money into cash, which in many rural areas is still the norm.
Side-selling: need for quick cash might also result in side selling.
Environmental Impact
Limited:
Mobile money payments may have indirect effects, such as enabling farmers to purchase more environmentally friendly inputs. However, the overall impact is low.
Ambition level
Low
Time
Where mobile money infrastructure is available, switching to mobile payments can generally be done with minimal time investment. The main challenge may lie in farmers creating mobile money accounts or adjusting their payment habits. This process can be accelerated by supporting farmers with account registration and providing guidance on using mobile payment systems.
Investment Need
If mobile money infrastructure is in place, the initial investment required to adopt mobile payments is relatively low.
External resources
- Academic article (2021): Benami, E., & Carter, M. R. (2021). Can digital technologies reshape rural microfinance? Implications for savings, credit, & insurance. Applied Economic Perspectives and Policy, 43(4), 1196-1220
- Academic article (2014): Kikulwe, E. M., Fischer, E., & Qaim, M. (2014). Mobile money, smallholder farmers, and household welfare in Kenya. PloS one, 9(10), e109804.
