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Cell phones for smallholders February 1st, 2015 by

In his sweeping history of Africa, Martin Meredith says that the continent’s economy is now growing rapidly, in part because of cell phones, for sharing information and for managing money (2014 The Fortunes of Africa: A 5,000-Year History of Wealth, Great and Endeavour. Johannesburg: Jonathan Ball Publishers).

He doesn’t give any examples, so I thought I would provide some here. Somali herders used to take their flocks to the arid coast, and wait for a buyer. If many days passed, the owner of the flock would become impatient paying for feed and water in town. The livestock might have to be sold at a low price, after a frustrating wait. Now herders ring ahead, find out the price for livestock and decide if the time is right to make a trip to the coast (Richard Dowden 2009 Africa: Altered States, Ordinary Miracles. London: Portobello).

In northern Ghana, where distances are great and money is short, farmers used to go to town to buy fertilizer, only to find that none was available. The wasted travel expenses were a needless inefficiency. Now farmers ring ahead, and ask their input dealer in town if fertilizer is available before taking the trip.

The cell phone works just as well in Latin America. In Guatemala I met a fruit farmer, who explained that cell phones have made his life a lot easier. When he has citrus to cell, he calls his dealer (el coyote), who deposits the payment in the bank, and then comes up and collects the tangerines. Neither the buyer nor the seller is carrying cash, which helps to keep them safe from bandits, the scourge of modern Guatemala.

In lowland Bolivia I have seen banana buyers send out a guy on a motorcycle. This banana rep goes from farm to farm, arranging for fruit to buy on a certain date. Then the rep calls the buyer, who brings in a truck, and meets each smallholder family by appointment, at the farm gate, loads the bunches, and pays in cash. (There aren’t that many bandits in Bolivia.)

These cases show that cell phones help to increase efficiency by lowering transaction costs. They avoid wasted expenses, for the benefit of buyers and sellers. The second efficiency of cell phones is using them as banks.

A young African colleague recently told me that he was tired of hearing about Africa always being in last place. I told him that was changing. Africa was the world’s leading innovator using cell phones for financial services.

“Really?!” he said, brightening instantly.

Really. I have seen people saving money on their cell phone in Mali, Kenya, Uganda, Malawi and elsewhere. The phone companies encourage entrepreneurs to set up little branches where money can be received in amounts large and small, and saved electronically. The customer can withdraw her money later, or send it to anyone she cares to, as long as that person has access to a cell phone. Saving and sending money is basically as easy as buying air time.

I’ve heard that some of the banks are opposed to the deal, and are trying to have governments regulate cell phone savings out of business. Shame on the banks. If they don’t have the imagination to work with smallholder farmers, they shouldn’t punish the people who do.

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