Digital Rural Finance — Etienne Mottet on the rise of fintech in emerging markets

the rise of fintech in emerging markets
Etienne Mottet, the Head of Innovation at BFC, recently presented a Rural Outreach and Innovation Talk where he shared insights into how digital technology is being used to deliver financial services in rural areas. Etienne expanded on some of the key themes of his ROI Talk in a conversation with BFC’s Matthew Marwick. An edited transcript is provided below.

MM: What are the main overarching benefits of digital financial services to farmers in emerging rural markets?

EM: First, there can be natural benefits from establishing access to formal financial services, which for many clients would have been inaccessible beforehand. Digitalization can significantly decrease the cost of providing these services – meaning their reach can be extended to people who wouldn’t have been considered viable clients under a traditional, non-digital, cost structure. For example, customers who live in remote areas.
The cost and convenience advantages still apply to customers who already have access to financial services, but digitalization can also provide a vector for the provider to identify specific customer needs and adapt the service accordingly. Thus, digital finance can help improve the price, accessibility, and quality of the financial services provided to farmers.

What’s interesting is that these benefits don’t depend on the customer’s digital literacy. However, if farmers start improving their level of digital literacy and can become pro-active with digital tools themselves, then the potential benefits could become broader and more important.

Digital literate farmers will become empowered and better equipped to compare the available offers of financial products, which will in turn accelerate competition dynamics. Additionally, digital savvy farmers could also access real-time information on weather, market prices, available suppliers, and other pertinent insights which would better inform operational and financial decisions.
This progressive digital education of farmers should be coupled with the ongoing development of local initiatives geared towards stimulating rural innovation. An interesting approach that some digital platforms are taking is to provide useful agricultural information combined with financial offers. Examples of these types of platforms would be in Georgia or Golden Paddy in Myanmar.


MM: How do you expect these services to evolve in the coming years as they move towards a sustainable model?

EM: and Golden Paddy are both currently “general” tools – they are targeting farmers as a whole by covering many different types of harvests, presenting a broad selection of services on their platforms. Farmers can lookup weather information, compare product prices, access agricultural advisories, buy inputs, and so on and so forth. The strategy for these solutions is to attract sufficient users to their tool and then monetize their initiative by selling collected data or applying some form of fee to the transactions taking place on the platform.

Over the coming years, it is highly probable that these platforms will go through a process of specialization. They may notice that some specific functions of their product are generating more value than others, and this will likely focus their attention on the development of these particular services.


MM: Do you feel there is a limiting factor associated with awareness of digital financial services?

EM: In terms of awareness about available technologies, there are less and less people denying the fact that technology can help them improve the efficiency of their farming activity. However, there is still a big gap between being aware of the technological potential and actually taking steps to realize it.

Digital can bring value at any level of the ecosystem, from the financial institutions, to input suppliers or processors, to the farmers themselves. The key is to create trust based relationships between people who understand the business needs and who have a strong understanding of the potential of today’s technologies. Once this trust relationship is established, successful digital initiatives become much easier to achieve.


MM: Is internet availability affecting the growth of digital services?

EM: In general, internet coverage remains a limiting factor in many remote rural areas, and implementation of digital services have to be tailored to these specific circumstances on a case by case basis. There are still considerable differences in the level of internet access between various countries.


MM: What recommendations would you give to companies looking to launch an agriculture-focused digital service?

EM: The starting point of any digital venture should be the creation of a solution that addresses a real existing need or problem. This means that companies should look beyond simply launching a service similar to what has worked somewhere else in the world, but focus instead on understanding the local context and opportunities.

However, when considering the creation of a digital tool, the following pieces of advice are usually relevant:

  • The capacity to integrate your tool is paramount.
  • Use existing structures and tools as much as possible – there no need to re-create everything.
  • Aim to create a simple initial version of the service. Test and iterate. Over time the service will become more complex while still being robust.
  • Make sure there is clear ownership of the tool which is being developed.
  • Bring the endpoint users into the discussion at an early testing stage.


MM: Are there any other rural technology trends which we should be paying attention to?
EM: One trend which has the potential to make significant impact in rural areas is the development of the Internet of Things, and more generally the increasing ease of collecting and analyzing data in an automated way. The development of widespread and affordable small sensors, combined with smartphone applications allowing data visualization and analysis, could deliver great value to rural areas. One example would be a better understanding of the spread of crop diseases, but there are countless applications where day to day agricultural operations could be improved.