Page 245 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

payments to agro-dealers, etc.). To address the mobile phone deficiencies, in 2013, the government
piloted an alternate solution – the Token Authentication Program (TAP) that did not require mobile phone
service. This solution addressed some problems such as low mobile coverage, but the overall program
remains under significant strain. One major issue has been ‘enumeration’ – uniquely identifying all
eligible beneficiaries. It has been very difficult to locate farmers, define an eligible farmer, assign unique
identifiers, avoid fraudulent registrations, and so on. Another major issue has been distribution fraud
and chaos, worsened by the appointment of new dealers to ensure geographic coverage. Many problems
surfaced, including: the appointment of unqualified agro-dealers such as friends/family; government
officials requiring bribes to process agro-dealer redemption requests; and new agro-dealers crowding out
traditional agro-dealers. To address the enumeration challenge, the government is pursuing the National
Agricultural Payment Initiative (NAPI) which includes a farmer database based on biometrics, a no-frills
bank account with the Bank of Agriculture, and a chip card for identification, redemption, and access to
other services.
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• Digital liquidity impact: While the GES program needs improvement to achieve its goals, it offers several
valuable lessons, one of which is separating the evaluation of eMoney from overall ISP issues such as
distribution network design. eMoney can improve robust ISPs or worsen weak ones by enabling high
scale fraud. A well-designed program is therefore critical. With a functioning ISP as an assumption, the
key question is whether ISPs can drive digital liquidity (i.e., the propensity to receive, retain and spend
money in electronic form). The answer seems to be ‘yes’ but mostly by indirect means.
• ISPs are a good vehicle for encouraging SHF adoption of eMoney (an enabling first step in digital
liquidity). ISP programs can be quite large. For example, in Nigeria, GES voucher redemption figures
reached eight million in 2014. These programs can be inclusive, targeting both non-commercial and
commercial farmers.

• ISPs do not directly increase a SHF’s digital liquidity since the subsidies are not accessible to them.
The payments go directly to the agro-dealer or, if sent to the SHF, cannot be used for anything except
inputs, at least theoretically.
• ISPs can increase the digital liquidity of agro-dealers, which could result in eMoney payments to BoP
employees. However, a flawed ISP implementation can worsen liquidity if agro-dealers experience
long redemption timeframes.
Trader credit (agricultural items)
• Concept: SHFs often obtain credit from downstream and upstream partners (e.g., agricultural traders who
buy from SHFs and resell to larger buyers). Traders will often provide upfront cash to SHFs and deduct
the amount owed from the crop purchase several months later. The eMoney version would involve the
trader dispensing funds electronically.

• E-value proposition: It is unclear how strong the value proposition could be. These transactions, although
significant in size, do not happen very often. There may be some benefit if the disbursement can be done
remotely, or if a digital record is useful (e.g., helping a trader obtain bank loan).
• Examples: Trader credit is primarily relevant to SHFs selling in tight value chains. In the Pakistan diaries,
97 per cent of the SHFs used trader credit, but through cash advances only. It is not known whether an
eMoney version is happening in any measurable way in other countries.
• Digital liquidity impact: These payments are relatively large and could be an ongoing source of eMoney
for electronic purchases if retained in this form.
Store credit (local suppliers)

• Concept: Farmers transact electronically as a way of recording the purchase and repayment. This would
involve the purchaser issuing the merchant an “e-IOU” at time of purchase. Future repayments would
reduce the IOU balance. Additional functionality, such as interest charges could be added.

10 Expanding and replicating GES TAP. African Fertilizer and Agribusiness Partnership. October, 2015.

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