The field of food is a black hole for agricultural experts in Burundi. The land is small, if not a very small area, whose management complicates the availability of land for cultivation. The division of land from father to son gradually diminishes even more land, which becomes smaller and smaller. The population continues to grow, especially the population in Burundi is growing enormously. It is rising at a rather high and alarming rate, from more than 8 million in 2008 to more than 13 million in 2030. This increase is estimated at 66.08%. In 2050 the population will even double. It will reach 26.2 million inhabitants and it could explode by the end of the century. It can go up to more than 62 million for a small country of less than 30,000 km2.
These statistics from ISTEEBU do not bode well and call on authorities to intervene to consider rapid population growth as one of the threats to Burundi’s survival in the future. There is an urgent need to think about, for example, birth control plans. But also the problem that completely persists is the unlimited feeding of this growing population. This requires a good agricultural policy that accurately calculates how much food is needed to feed the entire population of the country. And that’s why we need to have the financial resources for this policy. One of the problems of agriculture in Burundi, which are many, is the issue of financing.
How do you find capital to finance the farmer in his work? The Burundian state has always excluded this issue from the budget debate and left the agricultural sector at usurious rates to the birds of prey. Should we imagine that digital technology can do something in finding opportunities for capital accumulation? And is the role of the state necessary? We will look at all these questions to try to get answers to them.
The huge challenge Burundi will face in feeding its people is the financing of agriculture to ensure high production, processing production and its transformation. The issue of financing the agricultural sector remains problematic precisely because many, if not all, financial institutions ignore this world of farmers. Some bankers are starting to pay attention to the import and export of crops, especially coffee, tea or cotton, thanks to the digital management of the deposits that farmers have with certain banks. Not all banks have paid attention to farmers and their products yet.
The Igara Growers Tea Factory, in southwestern Uganda, has made it possible to increase profitability and repayment rates for loans to producers while reducing parallel sales. This was made possible through the use of digital farmer profiles in tea production planning and management. Also, by allowing the company to automate payments and facilitate other financial services, especially in the areas of loans and savings, tea growing became a credible commodity among financial institutions in Uganda. The other example comes from coffee, of course, and always in Uganda. The National Union of Coffee and Farm Entreprises, a Ugandan federation of coffee producers with more than 200,000 household members, used the digital producer profile to sell their product for a better price. At the same time, this federation was able to obtain its fair trade label, precisely thanks to a traceability premium paid by the buyers to the producers.
Another perfect example comes from Kenya. It’s about the cattle market in the countryside. Due to a lack of access to financial services, purchases in these markets are paid for in cash. And it exposes traders and sellers to personal risk and limits their access to other financial services because they have no transaction history. Therefore, financial services related to savings, credit and transfers for traders and herders should be introduced to facilitate trade in these livestock markets in Kenya. There are opportunities to develop the electronic wallet together with formal financial service providers. These instruments should therefore be introduced. It would be a first step towards improving culture and financial inclusion, which could enable the introduction of other financial services. These examples confirm that the computer, when used, can provide access to capital to finance agriculture and livestock.
In the case of Burundi, the mobilization of capital to finance agriculture may rely on digitalization for better management and for farmers to access it. Financial institutions, such as banks operating in Burundi, can each donate 10% of their profits to finance agriculture. This fund could be entrusted to a digital platform led by a specialized organization to allow loans to farmers and also collect savings from them. Banks will win on two points. New customers and direct debit of farmers’ savings.
The hand of the state is not only necessary, but also essential to increase the effectiveness of this organization. The state can provide this fund with at least 5% of its budget for the direct financing of farmers. This state participation puts it in the position of a central partner of this organization, in charge of the digital management of this funding. It is true that the difficulties in the agricultural sector explain the reluctance of financial institutions to invest in the diffusion of IT innovation to serve farmers. All this explains the limits of the financial products offered to actors in the agricultural value chain. On the other hand, some actors in the agricultural sector pay for services or their purchases to farmers through financial institutions: banks and cooperatives.
The key to ROI lies in market segmentation and coordination of the value chain. This is because farmers, input sellers, traders, processors, transporters and other actors in the agricultural value chain all have unique financial needs.
That is why the involvement of the State is necessary to guarantee the functioning of the entire value chain and to make this chain credible among financial institutions. In the case of Burundi, the state must play a leading role both upstream and downstream. Both in mobilizing funds, digitally setting up fund management infrastructure and ensuring through rules that all farmers can access it without any exclusion. This is how the Burundian state is starting to win the bet on its food supply. In our next editions we will talk about the organization of digital production.
ASH
