Mastercard is launching a mobile payment platform to help farmers be more aware of the needs for produce sales in East Africa, calling it the first use case from technology developed at Mastercard Labs in Nairobi, Kenya, which opened in 2014.
The 2Kuze digital platform will connect small farmers, agents, buyers and banks to determine which farmers have products buyers seek, and for farmers to be notified when buyers want to make purchases.
Mastercard recognized the need to address the problems facing small farmers in what is currently only a cash-in and cash-out process, with farmers essentially waiting for potential buyers to show up at their property and make an offer.
"We recognized this large population, about 40% to 50% of households in East Africa, falling into this category and facing the problem of capturing a greater percentage of the wholesale value of their goods," said John Sheldon, senior vice president for innovation management for Mastercard Labs. "It's all about how the supply chain works."
Mastercard is testing 2Kuze in Kenya with partner Cafedirect Producers Foundation, which will supply agents that are familiar with the process and currently working with 300,000 small farmers globally. More than 2,000 farmers are testing 2Kuze in Kenya.
Kenya, Tanzania and Uganda are initial target markets for Mastercard, seeking small farmers producing coffee, tea, grains, pineapples, mangos or bananas.
The agents will register buyers and farmers onto the 2Kuze platform, and those buyers will start the process by placing an order for their market. The order is relayed to farmers through a short messaging service that will work on any type of mobile phone.
The agent collects all of the acknowledgements from farmers who can match the produce orders, and pays the farmer with mobile money, a bank transfer or cash when collecting the produce. The agent then delivers the products to market and takes in funds from buyers.
Currently, those small farmers working on two to three acres make about $2 to $4 a day, Sheldon said. With 2Kuze, which means "let's grow together" in Swahili, the farmers can expect their income to at least double.
The system provides tools for the farmers that go beyond what they would get by using M-Pesa, the standard mobile payment method in the more urban areas of Africa.
2Kuze has its roots in financial inclusion projects and the creation of Mastercard Labs that Mastercard started through a partnership with Gates Foundation. As such, the farmers using 2Kuze also have the option to expand their financial holdings and opportunities; they do not need a Mastercard account to participate.
For the first time, these transactions will be digitized and logged in with Mastercard if the farmers want to use the transaction data as the beginning of a risk assessment tool, Sheldon said. "If they want to request a micro loan from the bank, they would have the data on which to base those decisions."
Mastercard's approach with 2Kuze is an offshoot of the card brand's "vast opportunity to develop economies as we move more to the electronification of payments," said Gil Luria, analyst with Los Angeles-based Wedbush Securities.
"Mastercard has to look at a five, 10 or 20-year time frame and go beyond the markets driving growth right now and move into underdeveloped markets where many may be unbanked," Luria said.
Mastercard first revealed its Mastercard Labs concept in 2010, citing its need to accelerate the process of turning innovative ideas into payments products that could generate revenue.
To further this goal, Mastercard has to lay the groundwork in global markets in need of financial-inclusion solutions the card brand can deliver at a cost structure that is sustainable, Luria said. "They can start to build a customer base and provide this to a population that can't afford interest rates or bank fees or maybe have merchants who can't accept card payments."