Bringing Mobile Wallets to Nigerian Farmers

It’s no accident that agricultural production in Nigeria is more than just a source of sustenance; it is a significant driver of economic growth. In fact, in 2013 alone, our country’s economy received an approximately six percent boost from the agriculture sector. What’s more, that growth has helped foster more transparency, less corruption, and—crucially—greater financial inclusion in a country that is home to millions of smallholder farmers.

A woman holds up money in a market stall
A woman holds up money in a market stall. Photo by Anjali Banthia.

How did we do it? With support from the Nigerian national government and state governments and in partnership with others in the private sector, my organization, Cellulant, has spent the last two and half years developing a mobile wallet network that extends to tens of thousands of villages and some eight million farmers. Of these, approximately three quarters are active users of this digital financial service receiving direct subsidies that cut the cost of fertilizer by 50 percent.

This is a contrast to an earlier, non-digital scheme that began in 2011, which—despite upwards of $180 million in government spending—failed to make a dent in smallholder farmers’ production costs. In fact, according to a just-released CGAP Focus Note, Nigeria’s own Federal Ministry of Agriculture and Rural Development estimated that only 11 percent of subsidized fertilizer actually reached smallholder farmers.

Not surprisingly, agricultural productivity was slipping even as government spending increased. Meager yields and incomes, in turn, were driving youth and able-bodied citizens out of rural areas, effectively “exporting” poverty from Nigeria’s otherwise fertile farmlands to overcrowded urban areas.

That grim trend called for innovative thinking. What we were after, though, was more than technology for its own sake; we wanted to create viable markets for goods and services by stimulating production—literally from the ground up.

Enter the mobile wallet. The Nigerian government recognized early on that hard-won subsidies—so crucial to supporting smallholder farmers—would have little impact if they weren’t getting to those who needed them most. That’s why our agricultural ministry launched the 2012 Growth Enhancement Support scheme, which used mobile technology to transfer fertilizer subsidies directly to farmers.

The switch meant that the government was no longer in the business of procuring and distributing fertilizer. With government bowing out of the supply chain and instead transferring cash directly to smallholder farmers, these producers could shop for their own fertilizer through a newly created market of private-sector agribusinesses. More importantly, farmers were getting the fertilizer they needed: According to CGAP’s Focus note, the direct subsidies have helped up to twice as many farmers—at a sixth of the cost.

The virtuous cycle didn’t end there, though. The cash transfer system was built on a first-of-its-kind database that now includes 10.5 million farmers. The data is a first step toward bringing these otherwise unbanked farmers into the financial mainstream, encouraging providers to view them as potential clients.

The good news is that models for such interventions already exist. The Nigeria Risk Incentive System for Agriculture Lending, or NIRSAL, enables key agricultural sector participants, including farmers, to access finance at single-digit interest rates, using innovative forms of security for their borrowing.

For example, agro-dealers can borrow using stock as collateral and previous trade history as a reference. For their part, farmers can borrow as groups using mechanisms such as cross-guarantees. The approach has worked so far. Between March 2012 and today, Nigeria has injected more than 20 billion naira (about $122 million) in loans to key agricultural sector participants.

With more than 40 million transactions through the mobile wallet system in just two years, it’s clear that smallholder farmers in Nigeria are poised to adopt digital financial services more broadly. This is especially important because, for many, our mobile wallet is their first experience with mobile financial services. In fact, we estimate that as few as 10 percent of the country’s farmers have a bank account.

As early uptake of mobile wallets proves promising, we aim to further expand the spectrum of digital financial services available to farmers. A first step is to add biometric information to the existing database of farmers served through the Growth Enhancement Support scheme. So far, we’ve collected more than 100,000 such biometric “signatures,” which we’re working to incorporate into a smart-chip system that, we hope, will take financial services to the “last mile” of clients in Nigeria’s rural farmlands.



This Focus Note introduces some recent developments in digital financial services for smallholder farmers. The case studies identify traditional pain points in serving this segment, discuss how DFS are being used, and highlight some initial obstacles and successes.
Sub-topics: Payments


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