Expanding the Boundaries of Mobile Banking: Reaching the Rural Poor

This post is written by Lee Babcock, Managing Director, Mobile Strategy for ACDI/VOCA.

Photo credit: ACDI/VOCA

Photo credit: ACDI/VOCA

I work at the intersection of mobile banking and the rural poor. For nearly 50 years my organization, ACDI/VOCA, has created market linkages for smallholder farmers to reduce poverty and expand economic opportunities. The people we work with are not usually near a city and they have few resources, often making only a subsistence living off of their crops. But increasingly, they do have a mobile phone.

For a development practitioner, the proliferation of cell phones among the rural poor is a golden ticket, a new infrastructure directly into households at the base of the pyramid. Even beyond mobile finance, cellphones can provide solutions at every link along the agricultural value chain—e-vouchers, credit scoring, SMS broadcasts of weather and prices and much more—to help lift smallholders out of poverty.

The rural poor are a huge and untapped market. ACDI/VOCA’s research on mobile finance for agriculture and our mobile banking projects are helping build this rapidly emerging body of knowledge. In Indonesia, for example, we’ve brought together a commercial bank, input suppliers (e.g., seeds and fertilizer) and a large cocoa buyer to help cocoa farmers access high-quality inputs while mitigating credit risk for the bank. The bank distributes the loan to the input supplier so the farmer can buy inputs. At harvest, the farmer delivers cocoa to the large cocoa buyer, and when accounts are reconciled, the profit is electronically transferred to the mobile wallet account the farmer has with the bank.  

Potential abounds for farmers at the base of the pyramid, commercial banks, mobile network operators and other ecosystem participants. But fulfilling that potential requires a concerted effort.

These are the core components that would make mobile banking work for the largely unbanked, rural poor in agriculture. And keep in mind, this is no marginal segment—agriculture is the largest contributor to GDP in most, if not all, developing countries.

  • Trust is vital.  Smallholder farmers have long been disenfranchised. They also tend to be illiterate and distrustful of banks and other large entities.
  • Building trust will involve promoting financial literacy and building a greater understanding among the rural poor about the features and benefits of mobile banking. This may mean creating image-based mobile banking curricula to educate farmers. This curricula should cover broader financial literacy to include personal financial management content on spending, savings and borrowing.
  • Public or private sector organizations that are already working with this population should serve as key partners bridging the gap between rural beneficiaries and the ecosystem of mobile-banking stakeholders.
  • Specific products and services need to be tailored for the rural poor. This might include mobile microinsurance products and microcredit with repayment terms matched to crop cycles.

Rural communities make up the fastest-growing market for mobile applications, including mobile banking. Our responsibility as development professionals is to leverage this technology on behalf of the base of the pyramid. The possibilities are exciting and vast—mobile banking can do for the base of the pyramid what commercial banking did for the industrial revolution.


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