MPesa eases farmers' inputs loan repayments

Mobile phone farmer photo by TechnoServe.jpg

A farmer displays a delivery confirmation message. One Acre Fund has improved loan repayment process with MPesa payments. Photo by TechnoServe.

The integration of the mobile phone money transfer in loan repayment plans has increased the access to farm input credit facilities, a step that is reducing poverty among small-holders.

The study dubbed ‘How digitizing agriculture input payment in rural Kenya is tackling poverty’ established that farmers accessing input loans from One Acre Fund (OAF) prefer repayment via mobile money service commonly called MPesa.

One of the reasons is that the farmers can pay the weekly remittances in segments.

If one is required to pay Sh500 per week, they can send in the money in bits of Sh100, Sh200, or even Sh50 according to their ability; they do not incur extra transaction costs.

In March 2016, OAF’s 208,000 farmer clients in Kenya received input loans of maize seed, fertiliser, and tree seeds. They also received other products such as solar lights or cookstoves, depending on their preference.

Each farmer had earlier made a Sh500 (US$5) deposit by the end of 2015, then began making payments on their nine-month loan.

“In 2015, farmers in Kenya with the OAF inputs and package of services earned on average Sh21,800 ($211) more annually from agricultural activities than similar farmers in similar areas,” the report says.

OAF is working with Citi Inclusive Finance in impelementin the digitisation.

Before digitisation of loan repayment, money was collected from the farmers by the field officers. Yet the offers are supped to train farmer on the best practices of boosting production.

The number of people employed in repayment processing fell to four, from 56 prior to digitization, with four out of five of these people being reemployed in more productive parts of the organization, the 2017 report reads in part.

The farmers are having more time with the officers, who are teaching them on best production practices of increasing yields.

The farmers also preferred the MPesa repayment method because of reliability. They get an instant confirmation message of their payment as well as the balance. Fraud resulting from officers who never delivered cash to the OAF account after collection decreased by 85 per cent, the report says.

The OFA case study was carried out by the United Nations’ based Better Than Cash Alliance.