Meet OKO Finance: Building climate resilience through digital financial inclusion in Africa
Israeli start-up OKO Finance have a clear objective: to be known and trusted by smallholder farmers across Africa as the market leader in crop insurance, to protect farmers from loss of income due to adverse weather and to provide access to financial tools.
And by winning the ITU Virtual Digital World 2020 SME Awards, the fledgling fintech is one step closer to meeting its goal.
The Awards focus on the innovative use of digital technology for social impact. OKO creates and distributes crop insurance to smallholder farmers in emerging markets using simple mobile technologies and automates claim verification with satellite data and images. The company‘s success, according to CEO Simon Schwall, lies in adapting existing basic mobile capacity to the specific customer environment rather than in advanced technological innovation.
“There is nothing revolutionary here, but we use a different set of tools to make our product as inclusive as possible.“ -Simon Schwall, OKO Finance
Payments are collected through mobile money accounts, embedded in most African networks, meaning that even those without smart phones can take part. Communication with customers who may be illiterate, or uncomfortable writing in local languages, happens through a voice messaging service and a newly-launched WhatsApp chatbot, as well as automated text messages.
“We saw that our customers who have WhatsApp don‘t chat with text messages, but prefer to exchange voice notes, because it is easier,“ explained Schwall. “So we created a voice note chatbot so people who cannot read or write can still listen to information, respond by choosing an option and then navigate through a menu to access more information and register for insurance.“
Finding a customer journey to match levels of literacy and digital skills on the ground in Mali, where OKO started out, was a process of trial and error. Case studies and best practice from other markets could not simply be replicated – a Facebook campaign to recruit new customers, for example, would fall flat as the platform is little used and largely irrelevant for this target group, said Schwall. An initial SMS chatbot, asking a series of questions by voice or text to establish basic criteria to build an insurance quote, such as where a potential customer lives or what crops they grow, also failed miserably.
“Many customers couldn’t read or are not confident [reading], so they didn’t want to use it,“ explained Schwall. “And the people who used it saw there were many steps, with an SMS to pay each time, so it started to become too expensive.“ OKO learnt that all good ideas in theory need to be tested in reality at small scale in the context of local markets – even if it means starting from scratch.
Financial inclusion and climate resilience
The impact of its crop insurance business model is two-fold. By providing insurance to people who have never previously been served by financial institutions, OKO is not only reducing farmers‘ risk of losing income when bad weather hits, but also providing much-needed access to microcredit to buy seeds or fertilizer and grow businesses.
Financial inclusion is accompanied by climate resilience. As seasons become ever more unpredictable, and weather events intensify in many parts of the world, crop insurance can stabilize farmers‘ income streams and better equip them to face the effects of climate change.
“We have a solution that makes people who are vulnerable to climate change (and to climate risk in general) more resilient,” noted Schwall, “while bringing compensation for lost income.“
Scaling up across Africa
In the short term, OKO is planning the second full season of insurance in Mali, aiming for 30,000 paying customers, covering more crops and more regions. Full-scale commercial services are scheduled to launch across Uganda throughout 2021, following a series of successful pilots. Beyond geographical expansion, the fintech hopes to establish itself as a bigger player in the microfinance space. And as smartphone usage and network bandwidth increase across the content, OKO intends to provide new services such as weather alerts, agricultural advice, or market information.
“Our goal is to be the leading service for crop insurance in Africa,” affirmed Schwall.
Scaling up calls for new partners and investors – and winning awards is an important opportunity to gain credibility here. OKO have some experience with this, having won first place in the AFI Alliance competition for financial inclusion in 2019.
Now Schwall hopes the telecommunications sector will also be on board: “Winning the ITU Digital World SME Award will be reassuring to mobile operators we want to partner with and investors who sometimes doubt our capacity to find key partners to allow us to scale. It will also make us more credible when we go and talk to other UN organizations we would like to work with, such as UN Women, UNDP or UNDCF.”
Schwall notes that the presence of start-ups from other countries can act as a catalyst, transferring technology and services: “In some cases companies come from eastern Africa to western Africa, or the other way round, so countries need to be open to bringing innovations from abroad, replicating the benefits of good practices and services. This will eventually lead to more people launching their own businesses, more people being trained, more jobs in the ecosystem.”
OKO Finance sees the major challenges to increasing access to digital services in Africa as connectivity, cost, and digital literacy. The majority of the company’s customer base also suffer from basic illiteracy, a further cause of exclusion and marginalization. Schwall suggests governments and industry work together to develop basic networks for rural areas providing essential services at low or no cost, re-examining taxation policies on over-the-top services such as WhatsApp, and even exploring whether privacy policies should be considered only after meaningful connectivity has been established.
Schwall is also keen for international organizations to provide standards or open APIs across multiple markets so that companies such as OKO can scale up without having to redesign customer journeys or sign new local partnerships in each new market. This would also make it easier for innovations from bigger markets, such as Kenya or Nigeria, to be launched in smaller neighbouring countries, he said.
This year’s competition, the ITU Digital World Awards 2021, will launch in March, and are open to any start-ups or SMEs using technology innovatively with real social impact – like OKO Finance.
Image credit: Shehzad Lokhandwalla via OKO Finance