Early Successes from Opportunity International’s Branchless Banking Initiative in Rural Tanzania
Tanzania’s agricultural sector has the capacity to dramatically reshape Africa’s economic outlook. However, most of the country’s farmers have little to no access to financial services, training, agricultural inputs (including fertilizer and high quality seeds) and local markets where they can sell their crops. Without these important resources, Tanzanian farmers cannot earn enough income from their crops to afford all of their household needs. As a result, many rural families are forced to make difficult decisions, including whether to send their children to school or pay for medicine for an ailing family member.
Opportunity International is dedicated to changing this. We are introducing our impactful agricultural finance initiative – which has already disbursed 164,000 loans to smallholder farmers in five African countries since 2009 – in Tanzania through a branchless banking initiative in the Southern Agricultural Growth Corridor of Tanzania (SAGCOT).
Opportunity International’s new head of branchless banking, Justin McAuley, is serving as chief on-the-ground implementer for the initiative. I recently spoke with him to learn more about the branchless banking model, early results from its implementation and his background in mobile technology:
Why is a branchless banking approach needed to reach Tanzania’s smallholder farmers?
Opportunity International’s branchless model enables us to provide financial services to Tanzanian farmers in very remote rural areas to increase their crop productivity and household incomes. A branchless approach to banking allows Opportunity International to avoid the relatively high costs associated with constructing and operating traditional, cash-handling bank branches in sparsely populated regions. In many cases the nearest bank branch is several hours from a farmers’ home, so the time and cost savings associated with branchless banking are also quite significant for farmers.
How does the branchless model work?
Tanzanian farmers receive financing from Opportunity International in the form of agricultural inputs (fertilizer, improved seeds, etc.) from a local supplier or a notification on their mobile phone stating that their loan has been disbursed. Farmers who receive a mobile notification can exchange it for cash at a local mobile money agent or transfer the funds directly to workers on their farm using their mobile phone. Opportunity International uses Vodacom’s MPESA mobile money service in rural Tanzania to disburse all loans and receive loan repayments. We are also in discussions with two other major telecommunications companies to continue expanding our mobile capabilities.
Opportunity International has also stationed loan officers and their supervisors within key agricultural communities to register new farmers for services and monitor the success of existing client farmers. We will provide these field staff with Android tablets that have a custom application for agricultural client management in the coming months after the technology is fully developed. Conducting all transactions digitally enables Opportunity International’s staff to avoid carrying cash and keeping vaults to temporarily store cash, providing them with significant convenience and security over a cash-based model.
As with our agricultural finance efforts in other countries, Opportunity International is working with local agricultural support specialists in Tanzania to provide our client farmers with agricultural training and connections to viable local crop markets. Access to these resources helps ensure that our clients have everything they need to sustainably improve their farming.
What have we learned and achieved so far in Tanzania’s agricultural communities?
This year, Opportunity International has established a branchless presence in Morogoro, located in the SAGCOT, and provided loans to 188 farmers growing rice and sunflowers. This is a remarkable achievement because many of these farmers had never worked with a financial institution before, meaning they haven’t had access to capital to maximize their productivity and earn a sufficient income.
One of the key lessons we’ve learned is the importance of working closely with telecommunications partners to ensure that local mobile money agents are incentivized to serve our clients and always have sufficient cash on hand if clients need to turn their mobile money into cash. Since all farmers growing the same crops often need loans at the same time, it is important for mobile money agents to be able to provide cash to many farmers at once.
[Opportunity International is providing rice farmers in several countries – including Tanzania – with the tools to sustainably increase their small incomes. This is just one of more than twenty agricultural value chains we’re facilitating across Africa. The above photo is of Eugenie Nyirabagenzi, a rice farmer that Opportunity International is serving in Rwanda]
How does your background in mobile banking inform your work in Tanzania?
I have focused on mobile banking and payments in my career for the past ten years. Before joining Opportunity, I spent six years working for Monitise, the world’s leading mobile banking and payments provider. If you have a mobile banking app on your phone, we probably created it. While at Monitise, I spent four years traveling monthly to India to launch a mobile payments company there with VISA. Spending so much time in India gave me a real desire to help the majority of the population in developing countries with little or no access to financial services. This coincided with a personal conviction that now was the time in my life to really start giving back. That’s when Opportunity International knocked.