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Blog » Digitization of CFIs: Key Enablers and Examples from Rabo Foundation

Digitization of CFIs: Key Enablers and Examples from Rabo Foundation

Created Oct 08 2020, 7:01 AM by Rubiga Sivakumaran

By Albert Boogaard and Rubiga Sivakumaran

With over twenty years of experience in agricultural finance in different departments of Rabobank and Rabo Foundation and working on digital innovations in smallholder finance in the last three years, Albert Boogaard was asked to give introductory remarks for the webinar on “Digitization of CFIs, why and how? Comparing experiences from Latin America and Africa”. This blog expounds upon Albert’s words during the webinar, providing examples and underpinnings to support his statements.

Working with about 250 different cooperatives (of which half are financial cooperatives) in 22 countries, Boogaard mentions that it is striking to note the diversity among these cooperatives. Whether they are of small, medium, or large size, or located in developing, emerging, or developed economies: all have different capacities and face different challenges. One of the things, however, that is equal among all cooperatives and countries and has not changed much over the past 120 years, is that they are very close to their members; understand their members’ needs very well; and adapt their products accordingly. Taking this into account, Rabo Foundation sees financial cooperatives as a means to an end, rather than a goal to itself.

At the same time, it is observable that more and more (especially small) cooperatives are under threat from digital finance, mobile network operators, and digital consorts of banks. This should not be a problem, but it can be if savings are taken from rural areas and afterwards not re-invested in rural areas. Therefore, Rabo Foundation aims to assist in maintaining the old cooperative benefits as mentioned in the previous paragraph, while combining them with the new opportunities that digitization offers.

They do this in various ways. For larger cooperatives for example, Rabo Foundation works with advanced analytics and satellite data because they can absorb that. For small to medium cooperatives, a different approach is required. Rabo Foundation and a team of experts from Rabobank for instance have worked with Aldea Global in Nicaragua to improve the efficiency of lending processes using data and data analytics, and to test new technologies such as handheld soil scanners and various remote sensing sources.

As experience shows, more than the innovations themselves is needed to seize the opportunities that digitization can bring: the enabling environment plays an important role as well. Key enabling factors are:

  • Digital literacy - especially for smaller organizations that are often affected by high staff turnover and scarce staff  in remote areas.
  • Digital infrastructure - a stable rural internet connection is key to apply Software as a Service (SAAS) concepts or have real time insights in remote branch networks when using on-premise software.
  • Willingness to change and adapt - while it is related to digital literacy, this point is also about a mindset and willingness to change and adapt existing procedures, also when this is not in the direct interest of all parties involved. Rabo Foundation has seen that new technology is important, but it will never work when it lands in an inflexible organization structure.

“While scale and professionalism definitely favor the digitization of CFIs, we also see opportunities for smaller farmer organizations. While many CFIs are able to benefit from technology it is also interesting to look at new concepts and business models based on new technology and existing cooperative structures”, Boogaard adds. Relating examples from Rabo Foundation’s portfolio are an app to digitize the operations of Village Savings and Loan Associations that help them to build up a digital track as individual or group and connect them to a bank.  Another example is an E-wallet that allows farmers who are part of small producer groups to save for farm inputs and receive top-up credits based on their data track record and performance.

All in all, it is safe to conclude that – given the right enabling conditions – many opportunities lie ahead for both CFIs and smaller farmer organizations. Curious to find out more about Rabo Foundation and the work they do? You can read it here.