IMF Podcast: Tayo Oviosu on Fintech and Nigerian Banking
Jun 16, 2017 20:14:19 GMT
Honorebu, Ogbeni Ogunnaike, and 1 more like this
Post by omohayek on Jun 16, 2017 20:14:19 GMT
This evening I had the good fortune to listen a very interesting IMF podcast on the activities of Tayo Oviosu's Paga, which is attempting to extend mobile banking services to the vast majority of Nigerians who don't have a bank account. While this might seem only of passing interest (I can almost hear you say, "Yawn, yet another fintech startup!"), it is actually of tremendous importance, particularly when it comes to Nigerian agriculture.
A point I've made in the past about the low productivity of Nigerian agriculture is that while knowledge of modern best practices and technologies may be a part of the problem, a much bigger issue is the inability of most farmers to access the necessary capital to invest in improvements. Tractors, fertilizer, irrigation systems, processing mills, biotech seeds - all of these things cost money, in quantities most Nigerian peasant farmers have no hope of ever acquiring by their own saving, given how little surplus they generate from what they produce.
In a country with a well developed financial system, the more ambitious peasant farmers would be able to gradually build up their credit ratings with financial institutions, and they could eventually couple good ratings with submitting the title to their land as collateral, lowering the risk of default enough for banks to lend the most trustworthy farmers the funds to invest in tools and projects that will bring them the biggest boosts in productivity - the addition of a single tractor to a farm that has been tended solely by hand can transform overnight the farm's output, which will enable the farmer to invest in newer seed varieties, or in renting additional land for the next year's harvest, or even in higher much margin activities like growing flowers for rapid delivery to European markets ... It could even something as humble as being able to afford to take an online course on scientific agronomy, to better understand how to manage the soil's yield while minimizing the costs of dealing with pests; this may seem trivial to city dwellers with white collar jobs, but to a farmer struggling to feed his family on a half-acre farm out in the countryside, even paying for an internet connected phone and a half-decent bandwidth plan might be beyond his means.
The long and short of it is that the importance of extending banking to the Nigerian masses is impossible to overstate, and the activities of groups like Paga will be crucial to making this happen, as Nigeria's commercial banks have no interest in dealing with the hassle of providing retail banking facilities to subsistence farmers, not when there are huge, riskless profits to be made through round-tripping (courtesy of the Dull Duo of Buhari and Emefiele). As you will discover on listening to the podcast, Paga is not yet at the stage where they're already building up credit histories for their clients, but it is something that Oviosu mentions them having on their radar, and we can only wish for Paga or a competitor to get there soon, so that farming becomes something young people want to get into because of its obvious profitability, not because yet another senile political buffoon is ignorantly hectoring them on a field whose difficulties he knows nothing about.
A point I've made in the past about the low productivity of Nigerian agriculture is that while knowledge of modern best practices and technologies may be a part of the problem, a much bigger issue is the inability of most farmers to access the necessary capital to invest in improvements. Tractors, fertilizer, irrigation systems, processing mills, biotech seeds - all of these things cost money, in quantities most Nigerian peasant farmers have no hope of ever acquiring by their own saving, given how little surplus they generate from what they produce.
In a country with a well developed financial system, the more ambitious peasant farmers would be able to gradually build up their credit ratings with financial institutions, and they could eventually couple good ratings with submitting the title to their land as collateral, lowering the risk of default enough for banks to lend the most trustworthy farmers the funds to invest in tools and projects that will bring them the biggest boosts in productivity - the addition of a single tractor to a farm that has been tended solely by hand can transform overnight the farm's output, which will enable the farmer to invest in newer seed varieties, or in renting additional land for the next year's harvest, or even in higher much margin activities like growing flowers for rapid delivery to European markets ... It could even something as humble as being able to afford to take an online course on scientific agronomy, to better understand how to manage the soil's yield while minimizing the costs of dealing with pests; this may seem trivial to city dwellers with white collar jobs, but to a farmer struggling to feed his family on a half-acre farm out in the countryside, even paying for an internet connected phone and a half-decent bandwidth plan might be beyond his means.
The long and short of it is that the importance of extending banking to the Nigerian masses is impossible to overstate, and the activities of groups like Paga will be crucial to making this happen, as Nigeria's commercial banks have no interest in dealing with the hassle of providing retail banking facilities to subsistence farmers, not when there are huge, riskless profits to be made through round-tripping (courtesy of the Dull Duo of Buhari and Emefiele). As you will discover on listening to the podcast, Paga is not yet at the stage where they're already building up credit histories for their clients, but it is something that Oviosu mentions them having on their radar, and we can only wish for Paga or a competitor to get there soon, so that farming becomes something young people want to get into because of its obvious profitability, not because yet another senile political buffoon is ignorantly hectoring them on a field whose difficulties he knows nothing about.