Menekse Gencer
Mobile Money:
A Foundation for Food Security
Food security exists when all people, at all times, have physical and eco-
nomic access to sufficient, safe and nutritious food to meet their dietary
needs and food preferences for an active and healthy life. (FAO, 1996)
Let me begin by explaining that I am not a food security expert but a mobile finan-
cial services professional. In 2010, I was asked by the World Economic Forum to
join their forum as an expert in mobile financial services. The specific focus of this
forum was agriculture. To prepare for the forum, I researched the money-related
issues around agriculture and the ways mobile money could be used to resolve
these issues. When I returned, die USA. state department asked me to present my
views on how mobile money can address areas of food security. The genesis of this
report derives from work done for the World Economic Forum and the state
department.
THE PROBLEM
The world’s population is estimated to rise to nine billion by 2050. With two bil-
lion more mouths to feed by 2050, it will be necessary to produce 70 percent more
food than today.1 Meanwhile, climate change continues to devastate current and
future crops with droughts, floods, and fires. With population pressure increasing
demand and natural disasters decreasing supply, world food security will continue
to be one of the top humanitarian and economic concerns worldwide.
If we look at the dimensions of food security, financial resources and access to
data/information are critical in six areas:
1. Money: Adequate income to sustain a family’s food needs
2. Prices/Markets: Transparent prices and liquid markets that impact the
Menekse Gencer is the CEO and founder of mPay Connect, a consulting service that
helps clients launch mobile financial services. Before founding mPay Connect, MS.
Gencer led PayPal Mobile’s business development efforts in North America. Sie
recently published a report for the World Economic Forum that was distributed at the
Davos Annual Summit on mHealth and Mobile Finance. Menekse has been featured
on the cover of Fortune Small Business Magazine, and was recently chosen by the
UNS. state department as one of 37 technology leaders.
© 2012 Menekse Gencer
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Menekse Gencer
Figur 1. Access to money and data underpin all dimensions
affordability of the food to consumers
3. Infrastructure/Distribution: Adequate infrastructure and distribution net-
works to ensure that food is successfully warehoused and distributed without
waste to those consuming it
4. Nutrition/Safety: Quality of the nutrition and safety of the food to be eaten
5. Sustainability/Resources: Degree of resource availability and sustainability of
supplies for food creation in the value chain
6. Production: Quality of crop yields due to investments in areas such as farm-
ing equipment and fertilizers
Zum Beispiel, if we consider the areas of production and income to pay for
food, we find a precarious cycle that is exacerbated by lack of financial access. In
his “New Variant Famine” hypothesis, Alex De Waal, a British writer and researcher
on African issues and director of World Peace Foundation, linked the issue of
health with farming. He argued that when crop yields are low, smallholder farm-
ers—the vast majority of the population at the base of the global economic pyra-
mid—do not earn enough to feed their families. This can lead to malnutrition,
which would impact the health of the young and the elderly—those most suscep-
tible to health problems. The women of the family, who are the caretakers, würde
be burdened with tending to ill family members. These are the same women who
typically harvest the crops as well, since nearly two-thirds of all farmers are
Frauen. Since the women would be tending to the sick rather than to the harvests,
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Mobile Money: A Foundation for Food Security
Figur 2. Precarious cycle further exacerbated by lack of financial services
crop yields would decline further. Mit anderen Worten, a precarious cycle of low crop
yields, low income, malnutrition, further health problems, and lower farming pro-
ductivity would occur. To make matters worse, during times of desperation, girls
or women in the family could turn to or be forced into sex work to earn money,
thus possibly adding HIV to the family’s health problems.
Taking this one step further, we begin to consider how the lack of financial
access adds additional problems to this already precarious cycle. An exogenous
event such as a drought, flood, or fire will cause crop yields to decline. Without
access to insurance or credit, these smallholder farmers are left with little to no
income to feed their families, and certainly no money to invest in fertilizers, farm-
ing equipment, and other supplies that would benefit their crop yields in future
seasons. Even without exogenous events, farmers will likely not invest in better
supplies due simply to the concern that droughts, floods, usw. may occur. Farmers
understandably would be more likely to save money to plan against potential
income loss due to crop failure than to invest in better farming equipment and
supply. To make matters worse, in the case of malnutrition or the spread of HIV,
these families have no insurance to help pay for health care.
At the base of the pyramid, around 70 percent of the world, oder 2.5 billion peo-
Bitte, rely on the food value chain for their income.2 Most are smallholder farmers.
While it is unlikely that mobile money can change the course of population or cli-
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Figur 3. How can mobile money increase food security?
mate trends, it can have a positive impact on food security issues. In every catego-
ry of food security, access to financial services has a positive impact.
Zum Beispiel, better access to financial tools such as savings and credit
smoothes out farmers’ incomes so they can afford to buy food for their families.
Credit provides the liquidity needed for farmers to invest in farming equipment or
supplies, such as the fertilizer or seeds needed at a certain time of year. Micro-
insurance provides a safety net for smallholder farmers by reducing the financial
effects of droughts and other natural disasters. Knowing this, farmers can invest
their money in better farming equipment and supplies to improve future crop
yields, rather than saving it in case crops fail in the future. Access to credit enables
manufacturers to purchase supplies and retailers to purchase food when their
inventories are running low, even when their cash supplies are low. Through bet-
ter transparency of market prices obtained over a mobile phone, farmers not only
can find buyers remotely but also can lock in prices by receiving payment from
buyers using mobile payments, which reduces the risk of future market fluctua-
tionen. Fast mobile payment settlement increases organizations’ motivation to par-
ticipate in food dissemination when consumers are using food vouchers. And,
finally, the electronic trail of money enables better traceability of the food value
chain to help identify where tainted food supplies may have originated.
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Mobile Money: A Foundation for Food Security
WHAT MAKES MOBILE MONEY UNIQUE IN ADDRESSING THESE ISSUES?
Mobile money involves using the mobile phone as a channel to conduct payments,
account management, and other financial services. The majority of the world’s
population does not have access to bank accounts or computers, but they do have
mobile phones. The vast majority of the population has had no other method of
payment other than cash because they have been left out of formal financial serv-
ices due to lack of access to bank branches, minimum deposit requirements, Und
lack of necessary documentation to register for bank accounts.
Mobile money services change these dynamics by enabling the unbanked to
register mobile money accounts and by providing access to electronic payments
through the customer’s existing mobile phone for the first time. For the 1.7 Milliarde
people with mobile phones and no bank accounts,3 this innovation represents the
first electronic money account that can be used in lieu of cash. These accounts
require less registration documentation and have few or no deposit requirements.
Using the infrastructure of existing prepaid airtime top-up agents of mobile net-
work operators and other entities, mobile money users have access to “human
ATMs” in their remote villages to get cash in and out of the system, in lieu of bank
branches and ATMs.
By using these mobile money accounts, unbanked populations not only have
access to faster payments over remote distances, but also to fundamentally new
services such as credit, savings, leasing, and insurance that were previously not
verfügbar. These new services are possible because of the significantly changed cost
structures of delivering financial services without the need for bank branches, card
Infrastruktur, or cash management (up to 98 percent cost savings over tradition-
al banking access).4 Zusätzlich, by formally having access to electronic money
accounts, mobile money users who previously conducted their financial lives in
cash are now able to build a financial history, which can serve as a foundation for
obtaining access to credit and other financial instruments in the future.
EXAMPLE CASES: INSURANCE, LOANS, PAYMENTS
The combination of new technologies and mobile money can fundamentally
change an entire set of services associated with food security for the base of the
pyramid. Consider, Zum Beispiel, the idea of insurance for smallholder farmers. In
die Vergangenheit, these farmers have been unable to purchase insurance because the cost of
infrastructure for insurance services did not allow for a sustainable business case.
Given that these farmers live in remote areas and have small crops, sending an
auditor out to assess the farmland, managing the cash for premium payments, Und
then sending an auditor to assess a claim was cost prohibitive for the insurance
company. Heute, this is changing. With the use of index insurance and weather sta-
tions that automate the measuring of rainfall, sunlight, and soil conditions, data is
collected remotely to determine whether a crop should yield a positive or negative
harvest, without the need for auditors. Using the mobile phone, farmers pay the
premiums for micro-insurance when purchasing seeds, and claims are paid to
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Menekse Gencer
farmers using mobile payments. The cost of auditing, cash management, Und
claims management are dramatically reduced. The Kilimo Salama program run by
the Syngenta Foundation in Kenya is piloting this concept with great success. Der
pilot has shown that farmers now invest their additional earnings into farming
supplies, rather than saving that money for potential crop failures.5 This yields bet-
ter crops overall. One can imagine that these programs could be globally scaled in
the future and that further benefits could be achieved by leveraging existing earth
satellites that collect data on farming conditions in addition to, or in lieu of, weath-
er stations.6
There are other examples where mobile money is now being used to increase
food security. In Zambia, Mobile Transactions, a mobile money services provider,
has been leveraging mobile payments to increase the speed of payment to organi-
zations disseminating food to the poor who are using food vouchers. By reducing
the settlement of payment from months to minutes, the new method increases the
participation rates of food disseminators.
In Kenya, Nuru International, an NGO focused on ending extreme poverty, Ist
using mobile payments in its program, which includes farm loans for fertilizers. In
this program, farmers will be able to pay down their loans using mobile money
instead of spending more than two hours walking to repay the loans at a bank
branch. Endlich, in Senegal, mobile services provider Manobi is enabling farmers to
secure fair market prices using the mobile phone and to purchase supplies remote-
ly via their mobile phones. This is improving market linkages and efficiencies in
the production value chain.
VORAUSSCHAUEN
Natürlich, access to mobile financial services is only one of many issues that will
need to be addressed to enhance food security in the future. It will not solve the
need for enhanced education, better distribution, or attention to climate change.
Jedoch, it is an important lever in the issue of food security. As the 630 mobile
network operators in the world continue to build 90 additional new mobile money
systems to augment the already existing 150 systems today, and as more unbanked
farmers adopt these systems, the limitations and friction associated with cash will
eventually become a thing of the past. Enabling electronic payments and access to
new financial services for the smallholder farmers and others in the food value
chain will bring a new promise of safety, reduced risk, and access to funds.
Through new payment mechanisms, Kredit, insurance, and savings, mobile money
will enable smoother income for the poor and allow them to buy food for their
Familien. It will enable better liquidity in selling and buying food and create more
efficient markets. With micro-insurance, smallholder farmers will be able to invest
extra income in better supplies and equipment to increase crop yields, rather than
saving the funds to plan against crop failure. With faster electronic payments in the
value chain, more participants will be motivated to distribute the food, and better
traceability of food supplies will increase food safety. Zusamenfassend, mobile money may
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Mobile Money: A Foundation for Food Security
ultimately prove to be one of the most important foundations for food security in
the next decade.
1. How to Curb Rising Food Prices, CNN, Oktober 17, 2011.
2. Business Strategies to Enhance Food Value Chains and Empower the Poor, World Economic Forum,
2009.
3. CGAP and GSMA.
4. How to Achieve a Compelling ROI from Mobile Financial Services, FiServ, 2009.
5. Interview with Syngenta Foundation, 2010.
6. Interview with NASA Earth Satellite research scientists, 2010.
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