Page 244 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

DrumNet was donor funded from 2003 to 2009 and operated in several value chains throughout Kenya. It
was serving over 3,000 farmers when the main donor withdrew additional funding. Although certain regions
approached break-even, the service was not scaling fast enough in the donor’s opinion. DrumNet leadership
evaluated their options, keeping several lessons in mind:

• Valuable solution: Buyers, agro-dealers, and banks valued the service, and farmers could be quickly
mobilized to form groups (a group representative interacted with DrumNet). Field costs could be kept
relatively low after initial marketing and training exercises. Although value chains differ by crop, they
share general processes (produce collection, payment) that an ICT-driven process could improve.
• Platform was not robust enough: The DrumNet platform was not sufficiently ‘hardened.’ Too much time
and resources were wasted on personnel transporting paper forms from the field to headquarters and
then manually entering data into the DrumNet database. Regular platform breakdown also raised costs
and created customer service problems. DrumNet needed significant software re-development.
• Funding: Operating DrumNet as a donor-funded entity left it prone to inconsistent cash flow and
requirements which were incompatible with commercial development (e.g., expanding before it was
ready).

In need of capital to support a technical upgrade, DrumNet created a JV with a Kenyan ICT firm. The arrangement
was essentially a ‘sweat equity’ deal in which the ICT firm would build the next version platform in exchange
for equity. Shortly after forming the JV, the ICT firm landed a large contract and redeployed resources to that
project. DrumNet did not continue.

• Digital liquidity impact: Solutions such as this are certainly elegant and offer a broad value proposition.
The impact on digital liquidity is less clear. Other than injecting eMoney into agro-dealers, a solution
of this nature probably does not create any more liquidity than bulk payments to farmers would. But,
perhaps this type of platform can eventually "virtually aggregate" farmers? DrumNet launched this service
targeting farmer groups in tight value chains. But only seven per cent of farmers are in tight value chains.
Another 33 per cent are in loose value chains.
• Could enhancements to these platforms enable independent farmers to graduate into tight value
chains?
• Could these platforms help farmers in loose value chains sell in a more sophisticated manner within
local markets?
• Other issues: Was the concept simply too early? The service relied on mobile phones extensively. When
DrumNet launched, mobile penetration was much lower and functionality more limited. To accommodate
this deficiency, farmers had to nominate a point of contact (Transaction Agent) to interact with the
DrumNet platform on their behalf. This limitation coupled with a weak platform created a weak stakeholder
experience.

Input subsidy programs (ISPs)
• Concept: Governments, NGOs, and other entities encourage usage of fertilizer and high quality seeds by
subsidizing part of the cost. In one version, eligible farmers redeem an e-voucher or equivalent token at
agro-dealers and pay the remaining balance; agro-dealers collect their funds by submitting e-vouchers to
the subsidizing entity. In another version, eligible farmers receive a cash transfer only usable for certain
purchases. Non-commercial and commercial SHFs can participate in these programs.
• E-value proposition: Farmers experience the benefits of high-quality inputs for the first time, or at least
save money repeating an existing practice. Agro-dealers generate extra sales. Governments improve food
security and constituent incomes, and can reduce their involvement in procuring and distributing inputs.
• Example: In 2011, faced with declining agricultural productivity, the Nigerian government announced
several remedial measures including the Growth Enhancement Support (GES) scheme, an input subsidy
program. Implementation during the first few years relied on mobile money and experienced a variety of
problems, some mobile-related (network coverage, low phone/SIM ownership, phone loss, lack of airtime,
etc.) and some program-related (no reliable national ID scheme, supplier exploitation of farmers, delayed

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