How $1 scratch cards are helping farmers invest for the future

Africa’s smallholder farmers are on the front line of climate change, facing a warming world and increasingly frequent droughts. Their produce feeds the continent, but they often lack the finance to invest in vital seeds and fertilizer to make their fragile agricultural holdings sustainable. Many of them struggle to feed their own families.

Now their fortunes have been dealt a further blow by COVID-19, which has undermined local food markets, hitting earnings. It is an alarming mix that spells increased hardship for hundreds of millions of small farmers who make up 80% of the world’s poorest people – those living on less than $2 a day.

Strengthening their precarious livelihoods is critical to ensure stability and resilience against future shocks, with the population of sub-Saharan Africa projected to double by 2050. It is also essential for the environment, since without improvements in crop yields the only route to higher production is increased land cultivation, leading to more deforestation.

The traditional development approach of offering credit to smallholder farmers has not sufficiently worked, due to a lack of bank accounts and a reluctance by low-income growers to take on financial risks.

But there is another way. With the widespread availability of mobile phones and the arrival of internet services in many villages, tens of thousands of farmers have discovered a new and simple method to invest little-by-little for quality seed, fertilizer, tools and training that can transform their fortunes.

Since 2011, my organization myAgro – a social enterprise recognized as a Schwab Foundation 2020 Awardee – has pioneered a mobile layaway scheme that allows farmers to put aside small amounts of cash during the dry season to pay for inputs that will significantly increase their harvests when the rains come.

It has proved to be a life-changing innovation for farmers like Adama from Mali, who are battling shrinking yields amid climate change. Poor rains last growing season could have spelt disaster for her family if it had not been for one plot that received fertilizer. The extra yield saved Adama from pulling her children out of school and skipping meals.

With rainfall ever more erratic, access to fertilizer and drought-resistant seeds are more necessary than ever for farmers like Adama. It is also going to be vital to feed communities in Africa and elsewhere in the wake of the coronavirus pandemic. The United Nations World Food Programme believes that the number of people suffering from acute hunger in low and middle-income countries could nearly double this year to 265 million.

The appeal of the layaway scheme is that it allows farmers to put away small amounts of cash, whenever they can, by buying scratch cards for as little as $1 from vendors. The system mirrors the widespread practice of buying small amounts of cellphone credit on scratch cards. The vendor simply enters a code into their phone to register the investments in the farmers' accounts and the seeds and fertilizer are delivered when payment is complete.

Farmers avoid the stress of building up debt and, by squirrelling away small amounts over the season, they can skirt around cultural pressures to divert cash needed for their fields to other uses. That is particularly important for women, who grow the lion’s share of food on smallholdings but who are often excluded from decision-making. The mobile layaway payments provide them with all-important privacy and flexibility.

Today, myAgro has nearly 90,000 customers in Mali, Senegal and Tanzania and our goal is to reach 1 million by 2025. At that stage, we should reach a tipping-point that will encourage private sector partners or governments to replicate the model and speed its adoption further.

In addition to receiving seeds and fertilizer, the farmers we work with also get agricultural training delivered by a network of more than 1,800 “village entrepreneurs” equipped with smartphones. Ultimately, of course, it is results on the ground that count and the financial returns have been impressive, with harvest yields increasing by 50-100% and profits up by around 50% – equating to an extra $110 per year for each farmer.

By giving growers a digital tool to invest their own cash, I believe we can help close the yawning gap in the finance needed to future-proof smallholdings. It is a major challenge. Mastercard estimates that credit provided by informal and formal financial institutions currently only meets $50 billion of the more than $200 billion required for smallholder finance across sub-Saharan Africa, Latin America, and South and Southeast Asia.

The good news is that technology is on our side. Mobile phone ownership rates are now around 80% in many sub-Saharan African countries, bringing widespread democratization of information – from market prices to weather forecasts. Cellphones are also opening up opportunities for other ventures, giving Africans access in their pockets to everything from Uber-style tractor rentals to pay-as-you-go solar energy.

Addressing the vulnerabilities of African agriculture is a big task – but part of the solution starts with a small scratch card.