How BK’s Ikofi could fix farmers’ financing woes

Bank of Kigali Chief Executive Diane Karusisi during the launch of the platform last week, at Transform Africa Summit 2019. / Courtesy

Bank of Kigali, last week, launched a financial product dubbed, ‘Ikofi’, that aims at helping turn around the outlook, financing and perceptions of the local agricultural sector.

The innovation, under its digital department headed by Regis Rugemanshuro (Chief Digital Officer), is a product and result of undertaking studies to establish causes of challenges that have long held farmers financial inclusion.

Currently, local  farmers who are responsible for about 30 per cent of the Gross Domestic Product access  about 6 per cent of all loans issued largely  due to lack of data and information that financiers can rely on.

Unlike other sectors and businesses in the local economy, the setup of the agriculture sector has made it impossible to keep track of aspects, such as the value of investment and value of returns, which could be used for decision making by financiers.

The scarcity of data, especially among small-scale farmers, has made most agriculture operations ineligible as lenders often rely on data that proves the profitability of an investment to determine its feasibility.

With data that shows the amounts invested throughout an agricultural season, marketing of output, prices and profits, farmers’ risks perception would go down consequently creating avenues of lending to farmers.

Ikofi will bridge this data gap through its system that has been built to among other things keep track of inputs and investments of the agriculture process. 

Regis Rugemanshuro, Chief Digital Officer of Bank of Kigali, and Minister for Agriculture Geraldine Mukeshimana, during the launch of the platform. (Courtesy)

By providing an avenue through which farmers can receive government subsidies and make payment for farm inputs at agro-dealer outlets, Ikofi will be able to track the investments into a farmer’s operations to determine value of investments.

Ikofi will further collect data on the outputs of the farm produce, market prices and performance of produce to determine the profitability of the venture. This will introduce the much-needed data to the sector enabling farmers to have a basis and justification of credit sought for agriculture initiatives.

The platform has also foreseen loopholes that could derail the process and moved to fix them. For instance, aware that farmers could take credit claiming their proceeds are meant for agriculture purposes only for them to divert them for other purposes.  Under the Ikofi platform, funds meant for agriculture inputs cannot be diverted or withdrawn for uses other than direct purchase of agro-inputs from dealers.

Bank of Kigali’s Chief Executive, Diane Karusisi, said that among other impacts, the platform will also ensure that funds borrowed or given are not diverted for other purposes.

“The tool among other things will ensure that money lent to clients is used for purposes it was borrowed for. That means that the loans cannot be cashed out and used for other purposes,” she said.

This not only makes it possible to track have reliable data, it also improves investment consistency of farmers.

Karusisi added that their studies had also shown that not all farmers have access to phones hence the introduction of Near Field Communications (NFC), enabled key fobs that farmers can use as their digital wallets with provisions to make payments and receive money all the while having a track record of the finances.

Farmers are able to send and receive money free of charge (zero transaction fee), anytime, to anyone, anywhere in Rwanda using their phones and the receiver’s existing phone number.

Speaking during the platform’s launch during transform Africa Summit, the Chief Digital Officer of Bank of Kigali, Regis Rugemanshuro, said that solution is designed with the intention to grow ventures of farmers and open up for inclusion in the formal banking ecosystem.

This is BK’s second solution for the agriculture sector, which will build on impact of the existing one. BK Group under its TecHouse subsidiary runs Smart Nkunganire System.

The system is a supply chain management system built in collaboration with Rwanda Agriculture and Animal Resources Development Board (RAB), to digitalise the end to end value chain of the Agro-Input Subsidy programme.

Currently, the system has over 1.4 million farmers and is under use by stakeholders including agro-dealers for farmers to receive their agro-inputs, advisory messages and market information among many other benefits.

The platform also works closely with the national savings scheme ‘Ejo Heza’ for farmers seeking to save their proceeds. This will further boost their credit ratings as they will have proof of their savings and financial behavior.

Farmers can join IKOFI by dialing *334*2#, upon which they will enter other requirements such as their National Identity card numbers among other instructions. 

Bank of Kigali is running a promotional campaign for farmers joining the platform under the “One million per week Campaign”. Bank of Kigali for the next 30 weeks, will be awarding a new entrant onto the platform with Rwf1 million. The winner is selected from new members onto the platform.

Jacqueline Mukantirenganya, from Kirehe District, was the first winner of Rwf1 million, and was awarded during the launch last week at Transform Africa Summit.

Government stakeholders say that the development is a welcome intervention enables farmers to formalise their operations and scale their operations.

The Minister for Agriculture, Geraldine Mukeshimana, said the innovation by the bank provides an avenue to increase financial inclusion among farmers as well as their access to credit.

Eric Rwigamba, the Director General of the Financial Sector Development at the Ministry of Finance, said that the solution can serve to reduce risk perceptions as they will provide information to financiers.

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