“If we’re serious about financial inclusion, we have to be serious about financial inclusion for smallholder families” says Michael Tarazi, CGAP Project Manager for the Smallholder Diaries project in Tanzania.
Over the course of a year, CGAP conducted a study with 270 smallholder families in Mozambique, Tanzania and Pakistan to understand how financial services might better suit their needs.
Smallholder farming households account for 2 billion people, the largest segment of those living on less than $2 a day.
Their goal was to find out more about the financial lives of smallholder households in order to build a database on this important group of people. They observed key similarities and differences across the families, including what they do to mitigate risk and diversify income sources, but also their awareness and usage of mobile money.
Traditionally, financing for smallholders focused on loan lending for specific agricultural purposes. Yet the study found these families accumulate income from a far wider range of sources than from agriculture alone. This suggests that most financial services available to them so far, fail to reflect the full scope of their needs.
It is hardly surprising then that mobile money is barely existent in the lives of smallholder families.
According to the data collected, not a single household from either Pakistan or Mozambique had ever used mobile money. This is despite the fact that 82% in Pakistan, and 21% in Mozambique, had previously heard of it. On the other hand, 19% of families in Tanzania claimed to have some experience with mobile money; albeit a small percentage given that 98% had prior knowledge of these services.
Yet these figures cannot be properly understood without knowing the extent to which mobiles generally feature in their lives.
For example, less than 50% of the households In Mozambique own either a mobile phone or a SIM card, similar to Pakistan at 56%. For Tanzania, the only country in the study having used mobile money, the figures rise moderately to 65-70%.
Though it is often the case that just one member of the family owns a mobile phone or SIM card; sometimes it is a delegated person in their village or community. However, the numbers are still not hugely different.
In Mozambique, 55% of households had used a phone, even a borrowed one, in the last year, increasing to 73% in Pakistan and 74% in Tanzania.
As CGAP state in their research, the Smallholder Diaries points to a crucial gap between basic access to a phone, and the ability to perform financial transactions with it. Digital financial solutions remain important tools to explore and expand, but must be carefully matched with the abilities and needs of each customer profile.
To see more data from this study, please click here.