A new mobile application is directly connecting small-hold African farmers with food processing companies, greatly expanding their market access and reducing the role of middlemen. The digital portal encompasses the entire sales process from purchase requests, price negotiation, delivery arrangements and payment transfer. It is hoped the scheme will help farmers gain access to loans and it could potentially benefit 1.5 billion people around the world.
Results & Impact
The trial connected 2,000 farmers with 127 purchasing companies of differing sizes. Farmers who wish to apply for loans will be able to prove that they have a sustainable revenue stream through the app, which tracks records of sales.
MasterCard Nairobi Lab for Financial Inclusion, Cafedirect Producers Foundation, Gates Foundation
MasterCard partnered with technology firms and farmers’ representatives to develop 2Kuze, a mobile application that connects small-hold farmers directly with buyers in a secure online portal. Prospective buyers log requests for goods and purchase price via text message, which notify farmers of the request. Farmers are able to respond directly to the potential buyer and offer either all or part of the goods they have requested. Both parties then negotiate the sale price. If a deal is reached, a MasterCard-linked agent is deployed to the farmers to collect the produce and transport it directly to the purchaser. Money is transferred to the farmer through their preferred method: mobile money, bank transfer or cash.
An initial trial was launched in Kenya in January 2017. 2Kuze will be rolled out in Tanzania and Uganda during 2017
Cost & Value
2Kuze was funded through an $11 million grant from the Bill and Melinda Gates Foundation to the MasterCard Lab for Financial Inclusion in Nairobi.
The pilot was launched before any revenue model for the platform had been decided upon. As a result, farmers and buyers were able to use it for free with no charges anywhere in the system. It is hoped that transaction and referral fees can be incorporated into the platform
2Kuze will be rolled out to Uganda and Tanzania during 2017. The long-term aim is to take the platform to other parts of Africa, Asia and South America.
MasterCard is rolling out a mobile application, 2Kuze, that directly connects small-hold farmers with buyers for their produce. Providing farmers with greater market access should increase their returns, and the sales record contained within the database will help them apply for loans by allowing them to demonstrate a sustainable revenue stream.
2Kuze, Swahili for “let’s grow together”, was trialled in Kenya in January 2017 with an initial 2,000 farmers, 27 medium- to large-scale buyers and 100 small-scale buyers. MasterCard hopes to roll the program out to Tanzania and Uganda by the summer of 2017.
Small-hold farmers (who work on plots of one-two acres or less) make up 80% of Africa’s agricultural workers and are among the poorest. Long trips to market and a lack of access to end purchasers (most produce is sold through agents operating on behalf of large processing firms) put small-scale farmers at a significant disadvantage. This is particularly true for women, who make up half of Africa’s agricultural workers. They face even greater barriers to marketing their goods because of additional responsibilities around the house and therefore often have to take whatever price is available where they live.
Although mobile technology offers a strong platform for overcoming these challenges (46% of Africans have a cell phone), previous phone-based exchanges have struggled. This is partly because the technology behind them has often not been sufficiently widespread (for example, they they have relied on smartphones) but also because farmers were not always able to take advantage of the information such systems provided them with. For instance, while farmers might be made aware of the market value of their crop, in practice this did little more than inform them of the degree of exploitation they faced.
2Kuze was developed through a partnership between MasterCard, the Bill and Melinda Gates Foundation, local technology firms and non-profit agriculture groups that represent as many as eight million farmers. The concept was to design a new system that would mirror as closely as possible existing practices and encompass the full process of buying and selling produce, rather than acting solely as a payment or information system.
To use 2Kuze, producers and purchasers are first registered on the system by appointed MasterCard linked agents, ensuring the portal is a safe and secure environment. Prospective buyers then log requests for goods via text message, notifying farmers, along with their desired purchase price. Farmers are able to respond directly to the potential buyer and offer either all or part of the goods they have requested. Both parties then negotiate the sale price. If a deal is reached, an agent is deployed to the farmers to collect the produce and transport it directly to the purchaser. Money is transferred to the farmer through their preferred method: mobile money, bank transfer or cash. Payments go through the agents, allowing a cash purchase to easily take place.
Although middlemen remain a part of the system, 2Kuze provides far greater transparency and product access, significantly reducing the likelihood of farmers being exploited. Quick Response codes allow farmers to track the delivery of their goods as well as changes in prices.
The efficiency of 2Kuze and its digital footprint also offer significant advantages for farmers. It has been estimated that just half of farmers’ output ultimately ends up being eaten by consumers, resulting in a significant loss of potential earnings. MasterCard hope that by reducing the barriers between agricultural producers and food processors, less of this waste will occur. The informal nature of the marketplace makes it difficult for farmers to apply for loans, given the absence of a tangible record of their transactions. By recording each sale, it is hoped that 2Kuze can open up access to additional finance for farmers.
Although 2Kuze has been developed with Africa in mind, MasterCard hope to ultimately bring the platform to other parts of the world. It is thought that as many as 1.5 billion people could benefit from it globally.
(Picture credit: Wikipedia)