How do digital financial services impact farmers? Three ways of collecting evidence
Digital financial services (DFS) are believed to have largely ‘solved’ the financial inclusion problem. Over the past fifteen years, mobile money has improved access to financial services for millions of people around the world.
More recently, a marked increase in smartphone ownership means that millions more can access banking apps, wallets and payments platforms. While DFS mostly provide access to payments, remittances, savings, services for credit and value chain coordination are also increasingly being launched.
While there are still gaps in access, of course, many organizations are turning their attention to better understanding how people actually use financial services. In particular, how has digitization impacted people's use of services such as payments, remittances, insurance, savings and credit? Do digital services have markedly different impacts than non-digital ones?
Given that this digital turn has happened recently, there is relatively little information publicly available on the impact of DFS. The DiFF project is collecting information on impact in three ways: through a systematic literature review, by interviewing farmers and by interviewing stakeholders.
First, we carried out a systematic literature review on the impacts of digital financial services on rural communities, with a particular focus on smallholder farmers. Our SLR shows that DFS are generally more convenient, faster, and save on some costs such as transport (though not necessarily lowering fees).
Results of our SLR on the impact of digital financial services
Economic impacts
Mostly positive impacts on non-farming economic outcomes
Positive impacts for farming, especially on farming trade, investment, and productivity due to the efficiency of digital tools, especially payments, and on the acquisition of knowledge when farmers join bespoke digital platforms
Little evidence for poverty reduction
Farming impacts have more connection with receiving payments than they do to making payments
Financial impacts
Transfers and remittances are less costly although mistakes and fees can cause disquiet.
Mobile handsets are a valued way to make and increase savings for both household and seasonal farming expenses
Efficient, affordable credit although technical errors and the exclusion of vulnerable farmers is a concern
There is very little evidence for the use or impact of agricultural insurance.
Psychological impacts
Positive impact on autonomy and problem-solving abilities, commonly connected to receiving digital payments.
Positive impacts on wellbeing and feelings of safety and trust is connected to making and receiving payments.
Evidence for psychological impacts are far more often related to women than to men.
The sentiment of evidence is also mixed: agency and wellbeing are undermined when people feel excluded by digital technology or harassed to make remittances.
Social impacts
Social impacts are connected to both making and receiving payments due to the reciprocity inherent in using financial services.
Impacts on close relationships (through mobile money remittances) and social capital (through mobile money distribution and engagement with mobile finance platforms) are generally positive.
Digital financial services can sometimes place a strain on or pose a threat to personal relationships.
After reviewing the literature, we interviewed farmers in Laos and Cambodia on the use of digital and non-digital financial services. This evidence shows that even when people do not use digital versions of products such as credit, they may well use digital products or practices as part of their credit practices, such as using mobile money to pay instalments of bank loans, or to borrow money from family and friends. We argue that we should therefore examine not only the effects of using specific digital financial services, but also look at how people combine different financial services or use them collectively.
Finally, we recognise that there is also a lot of unpublished knowledge about the impact of DFS among organizations that provide financial services or incorporate them in programs to serve farmers. To gather this knowledge, we are carrying out interviews on how different organizations are assessing the effects of DFS in different areas, and the extent to which this matches with the reality they see on the ground. As well as gaining a better understanding of industry practices, this study will explore how the research results of the DiFF project can be made useful to next users.
The results of this research will be published on this website, in reports and in journal articles. If you would like to be involved, you can contact Erin Taylor (erin@finthropology.com).
