Knowledge Hub

The implications of Ghana’s new Digital Financial Services policy on Mastercard Foundation Fund for Rural Prosperity participants.

By Barbara Wiafe, Mastercard Foundation Fund for Rural Prosperity

From its very inception, the Mastercard Foundation Fund for Rural Prosperity has intended to harness the creativity and capacity of the financial sector and agribusinesses to innovate, increase access to and deliver financial services at scale. Bodies of work from multiple players, and insights emanating from the Fund itself, show that key drivers of innovation include digital technology and digital financial services. This is why the Fund is excited about the launch of Ghana’s Digital Financial Services (DFS) policy, a first for the continent, and what this could mean to the Ghana-based Fund participants in particular.

The DFS policy, was launched on 18 May 2020 by Ghana’s Ministry of Finance, and has the objective of improving the effectiveness of DFS in the country. This has come at an opportune time, given the Covid-19 pandemic situation, where most aspects of digital technology are now deemed virtually essential to assuring the continuity of business operations in Ghana, and indeed globally.

As detailed in a recent blog written by CGAP, who provided technical support for the development of the policy, the DFS policy is a four-year plan (2020-2023) covering the following 6 pillars:  

1. Market Infrastructure: Develop a purpose-built infrastructure for DFS and strengthen existing payment platforms.
2. Digital Payments: Prioritize the digitization of payment use cases.
3. Support Fintechs: Support the growth of Fintechs through initiatives that promote investment, growth and diversification.
4. Enabling Regulation: Create a regulatory framework that supports innovation competition and financial inclusion.
5. Governance: Develop a framework for enhancing governance of the DFS ecosystem.
6. Capacity Building: Build the capacity of regulators to supervise a DFS ecosystem characterized by growing use and a proliferation of providers offering new digital financial products and services.

Several of the 43 actions items articulated in the policy are of significant relevance and utmost importance to the two Fund participants in Ghana working in the agribusiness and fintech space; Farmerline and SyeComp.

Farmerline:

With grant support from the Fund, and powered by Mergdata technology, Farmerline’s work involves scaling its 399 Services to help rural farmers gain access to high quality inputs, financial literacy, and best agricultural practices through innovative mobile, financial and information content services. Farmerline has turned this unfortunate Covid-19 global pandemic into an opportunity to leverage digital technology even further to serve their farmers, their rural community, and communities around Ghana’s borders. With their #LeaveNoFarmerBehind initiative, Farmerline has translated vital WHO Covid-19 safety messages into French and local Ghanaian languages to sensitize the public about the risks and symptoms of Covid-19 and how to protect against infection.  Through this work they have gained global recognition and were recently featured in the Africa Edition of CNN Africa Covid Heroes.

SyeComp:

SyeComp, another Fund participant, is a market leader in deploying satellite technology to empower agribusinesses. MfarmPay, their core product, develops a credit score based on rich alternative data – including data gathered through satellite - which financial institutions can use for unsecured lending. This boosts smallholder integration into the formal financial market. In response to Covid-19, Syecomp also launched their Farmer Helpline Channel, providing public health advise to the smallholder famer community and agribusiness clients through both dial-in and WhatsApp options.  Furthermore, through their partnership with Croplife Africa, they have also expanded their digital direct services and information advisory on various agricultural inputs to over 60,000 farmers.

Most notably in our discussion around the DFS policy with Elorm Allavi, CEO SyeComp was the need for practicalities, and a stronger DFS ecosystem to encourage investments.

 “..pragmatic support to tech start-ups is lacking so Ghana-based technology companies prefer exploring other favourable markets which tend to have higher investor appetite. Ghana-based fintechs hope the development of the DFS policy response will lead to improved regulatory compliance, strengthen the local DFS ecosystem, and propel investments to scale services.” Elorm Allavi, CEO SyeComp.

Drawing on Elorm’s and wider insights from the Fund learning agenda with the portfolio across 15 countries in Sub-Saharan Africa, agribusinesses and fintechs are faced with multiple challenges in this space:

• Access to a safe space to innovate digital financial products and services. The DFS policy outlines how the regulator can be more proactive to support the growth of fintechs. One such recommendation is to set up a regulatory sandbox to allow for fintechs to develop and trial more innovative products. Remittance products and services, e-commerce services and digital payments are all core to “pro-innovation” agribusinesses. As such, a policy that facilitates fintechs is a welcome one, so that they have a safe place to innovate digital products that respond to their customer needs while making them more attractive to local investors
• The prohibitive cost and inadequacy of infrastructure. High cost and inadequate DFS infrastructure are barriers that impede the overall growth and development of digital financial services. Establishing purpose-built infrastructure for DFS as indicated in the DFS policy will enable agribusinesses and fintechs find cost effective ways of providing reliable digital financial services to the rural communities - where demand is high but access low.
• Lack of reliable and unique forms of identification. The absence of a single, reliable form of identification for farmers and members of rural communities makes it very difficult to accurately profile farmers and rural clients. A comprehensive roll out of the market infrastructure detailed in the policy, which links a biometric ID, Ghana’s digital addressing, and interoperability functions, will help Fund participants and others in better profiling farmers, capturing their transactional data, and ultimately addressing their various financial and agricultural needs.

This DFS policy is welcome as a first step towards addressing such challenges and providing a more enabling environment for innovative agribusinesses and fintechs to grow and transform the lives of rural communities. According to Fund participants, how well this policy supports their businesses and others like them will be dependent on the effectiveness of the policy implementation, and of course on the willingness of businesses themselves to buy into the same.

The Fund looks forward to the policy acting as a driver of growth in the DFS ecosystem in Ghana and for it to serve as an example to other countries across the African continent, in order to further support the gains made in delivering financial inclusion to rural communities so as to transform lives.

Barbara Wiafe,
West Africa Portfolio lead
Mastercard Foundation Fund for Rural Prosperity.