Transforming agribusiness in developing countries: SDGs and the role of FinTech

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University of Groningen

Transforming agribusiness in developing countries

Hinson, Robert; Lensink, Robert; Mueller, Annika

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Current Opinion in Environmental Sustainability DOI:

10.1016/j.cosust.2019.07.002

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Hinson, R., Lensink, R., & Mueller, A. (2019). Transforming agribusiness in developing countries: SDGs and the role of FinTech. Current Opinion in Environmental Sustainability , 41, 1-9.

https://doi.org/10.1016/j.cosust.2019.07.002

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Transforming

agribusiness

in

developing

countries:

SDGs

and

the

role

of

FinTech

Robert

Hinson

1

,

Robert

Lensink

2

and

Annika

Mueller

3

TransformationofagribusinessiscriticalinlightoftheAgenda forSustainableDevelopment.FinTechandtheintegrationof FinTechwithother(green)technologiesaswellaswithdigitized agricultureplaysanimportantrolewhenitcomesto,for example,SDG12,specifically,responsibleproduction,asit canmitigatetrade-offsandenhancesynergiesbetween environmentalandsocialSDGs,forexample,1and15, increasingprofitabilitywithoutadditionaluseofnatural resources.Importantlimitationsandrisksneedtobe addressed,however,fordevelopingcountriestofullybenefit fromthepotentialthatFinTechholdsinthiscontext.Mitigating factorsincludemassiveinfrastructureinvestmentsand large-scalecapacitybuilding.Rigorousresearchoneconomic sustainabilityandcost-effectivenessofnewerFinTechmodels isneededtomakesoundpolicyrecommendations.

Addresses

1_University_of_the_Free_State_and_University_of_Ghana_Business_School, UniversityofGhana,VoltaRoad,Accra,Ghana

2

FacultyofEconomicsandBusiness,UniversityofGroningenand DevelopmentEconomicsGroup,WageningenUniversity,Nettelbosje2, 9747AE,Groningen,TheNetherlands

3_Faculty_of_Economics_and_Business,_University_of_Groningen. Nettelbosje2,9747AE,Groningen,TheNetherlands

Correspondingauthor:Lensink,Robert(B.W.Lensink@rug.nl)

CurrentOpinioninEnvironmentalSustainability2019,41:1–9 ThisreviewcomesfromathemedissueonSustainabilityscience: inclusivebusiness:amulti-stakeholderissue

EditedbyNickyPouw,SimonBushandEllenMangnus ForacompleteoverviewseetheIssueandtheEditorial

Availableonline29thAugust2019

Received:08May2019;Accepted:16July2019

https://doi.org/10.1016/j.cosust.2019.07.002

1877-3435/ã2019TheAuthors.PublishedbyElsevierB.V.Thisisan openaccessarticleundertheCCBY-NC-NDlicense( http://creative-commons.org/licenses/by-nc-nd/4.0/).

Introduction

The U.N. General Assembly’s adoption of the 2030 Agenda for Sustainable Development (ASD) [1] identified sustainability as the core guiding principle for development efforts at every level, from local to global.TheASDcomprises17sustainabledevelopment goals (SDGs) that specify targets and indicators for achieving social and environmental sustainability, with

simultaneous considerations of economic sustainability, across multiplethemesof development.

Decisive progress toward the SDGs will require transformative changes of food and fiber value chains [2,3]. Notably, agribusiness has enormous impact on SDGs pertaining to social sustainability (e.g. 1 – no poverty,2–zerohunger,and10–reduced inequalities) aswellasenvironmentalsustainability(e.g.13–climate action and 15 – life on land): it is responsible for the economicstatusofthemajorityoftheworld’spoor[4]and providesfood,feed,otherconsumptiongoods,and indus-try inputs.Agribusiness occupiesover40percentof the earth’slandsurface[5]andisresponsibleforabout1/4of

annual greenhousegasemissions[6].

Trade-offs mayarisebetweenthetransformationof the sectorinlinewithoneSDGandanother[7],asexemplified bythepotentialtrade-offbetweenincreasedfood produc-tionandterrestrialecosystemprotection[8].Consider,for example,anagribusinessmodelbasedonmassproduction withintensiveuseoflargetractsofland:Anexpansionin cropland and the accompanying additional agricultural waterwithdrawalforirrigationwillresultinimprovedfood security (SDG 2, see Ref. [9]) but weakenbiodiversity conservation(SDG15,seeRef.[10])andseverelythreaten freshwater ecosystems (SDG 6 – clean water and sanitation, see Ref. [11]). However, the extent of such trade-offs is context dependent [12]. Decoupling economic progress in the context of agribusiness from natural resource use in line with SDG 12 (responsible consumption and production) and, more generally, transformingagribusinessaccordingtoacoherent,unified approach toward allSDGs that mitigates trade-offs and enhancessynergiesthusrepresents,inlightoftheASD, oneofthemostcriticalchallengesofourtimes.

Keymitigatingfactorsprominently includetechnology[7]:In particular, recent innovations in FinTech—anemerging industry that uses technology to provide and facilitate financial services [13], with financial intermediation services delivered through mobile phones, computing devicesusingtheinternet,orcardslinkedtosecuredigital payment systems [14] – andtheintegration of FinTech withother(green)technologiesandadvancedapplications of data science in agriculture, have shown immense potentialinthisregard.Throughoutsectiontwoweprovide severalexamplesofhowtrade-offsofthenaturementioned intheprecedingparagraphcanbemitigatedusingFinTech incombinationwithother(green)technologies.

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Besides that, and more generally speaking, FinTech offers new ways of expanding in a responsible manner theinclusionofthefinanciallyexcluded–small-holders, as well as small-sized and medium-sized enterprises – intothefoldsoffinancialsystembyprovidingthemwitha widerrangeoffinancialservicesandproducts,andturning theminto generatorsofassets [15].Thus,FinTech isa keyfrontierintheexpansionofthepracticeofinclusive business.Thisexpansionismainlyfacilitatedby innova-tion through the introduction of, for example [16]: distributionchannelsthatcanencompasssparsecustomer basesspreadoverdifficult-to-accessruralgeography; cost-reductions achieved through economies of scale and/or moreefficientoperationsenablingprofitableinclusionof low-margin customers; and last but not least, new, low-cost products or services that meet the needs of previouslyunderservedorexcludedpopulations.

This review synthesizes recent literature pertaining to FinTech in the context of agribusiness in developing countries,focusing on the post2016 period. Itoutlines impact pathways from FinTech to SDGs, drawing on examples from sub-Saharan Africa, and argues whether andhowthepotentialbenefitsofFinTechforsupporting SDGs while mitigating trade-offs across the pillars of sustainabilitycanberealized,andunderwhichconditions this is most likely. It also highlights limitations and possiblerisksin thisendeavor.

Inall of that, thediscussionis centeredaround mobile money and mobile financial services,4 as these are the most widely adopted forms of FinTech in rural sub-Saharan Africa and have been interlinked with many other technologies as well as digitized agricultural systems.

FinTech

and

agribusiness

Thediscussioninthissectioniscenteredaroundmobile moneyandmobilefinancialservices.Thesetermsarenot meant to exclude digital payments and digital finance from the discussion. While a systematic distinction betweentheterms–thatareoftenusedinterchangeably intheliterature,with‘digital’,however,referringtothe enduserrequiringaccesstodigitaldevices(asopposedto a simple text-based mobile phone) – can be useful, as generallyspeakingaccesstotheinternetenhances possi-bilities [17],we insteadexplicitly mention therole of the internet wherever access is critical, as most of the servicesoutlinedbelow(oratleastsomeequivalents)are

accessiblewithoutinternet. Thispoint hasto be evalu-atedpositivelyintermsofaccessibility.

Mobilemoney

Initially,mobilemoneyplatforms(MMPs)andassociated mobile wallet technologies, which enable electronic transactions via mobile phone, were designed for person-to-person (P2P) money transfers [18], offering thepotential for wideaccessibility [19].Mobile money has been among the most rapidly adopted innovations throughouttheworld[18].Thisrapid,wideadoptionis supportedbytheproliferationofmobilephones,aswell as the speed, flexibility, convenience, and affordability associatedwithmobilemoneyusage[20,21].

A key application of mobile money is the sending and receivingofremittances.Currently,roughlyaquarterof unbankedadults in sub-Saharan Africa remitfunds uti-lizing cash or OTC services [17].Mobile money P2P transfershaveemergedasanalternativewiththecaveat thatOTCservicesstilloutperformmobilemoneyservices in terms of cost-effectiveness in much of sub-Saharan Africa;yet,thesendingandreceivingofremittanceshas becomethe main use of mobile money in sub-Saharan Africa [17]. Mobilemoney canthus serve as acritical conduitforfinancingforsmallholderfarmersandleadto increased investment in agribusiness. Impacts on environmental sustainability are, however, ambiguous as productivity gains may not be achieved in environmentallyfriendlyways.

Mobilefinancialservices

Asthescopeof MMPsexpanded,users becameableto use them for making deposits, withdrawals, making person-to-business payments, paying taxes, receiving payments from businesses and governments, saving, lending, borrowing, taking out insurance and making investments[18,20],5leadingto wide-spread inclusion of theunbanked intothe financial system[22,23]. The provisionof theseservicesmayhavepositiveeffectson health(SDG3),employment(SDG8),education (SDG 4), and poverty alleviation (SDG 1) through increased productivity([21,24]).Asnotedearlierinthecontext of MMPs,though,theimpactonenvironmental sustainabil-itymaybeambiguous.However,initiativesthatintegrate mobilefinancialserviceswithother(green)technologies (sub-section‘Digitalcropinsurance’),aswellas interop-erabilitybetweenMMPs,monitoringtechnology,andbig data platforms (possibly interacting with digitized agricultural systems) (sub-section ‘Data science, FinTech, and the SDGs’), hold enormous potential to enhancesynergiesbetweenthepillars ofsustainability.

2 Sustainabilityscience:inclusivebusiness:amulti-stakeholderissue

4_Other_promising_FinTech _applications_include _distributed_ledger technology(blockchains),whichcaninteractwiththeInternetofThings (IoT)toimprovesystemorchestration,monitorsocialand environmen-talresponsibilityorprovenanceinformationinagriculturalsupplychains (e.g.traceproducetoimprovesocialandenvironmentalaccountability; [56]),lowertransactioncosts,easefinancingandmobilepayments,and generallysmooththemanagementofsupplychainswhilemaintaining integrityandsecurity.

5_Reminders_and_other_nudges,_for_example_in_form_of_text_or_in-app messages,areoftenemployedascost-effectivewaystohelpcustomers meetself-determinedgoals,increasesavingsandsupportloan repay-ment([57]).

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Integrationofmobilefinancialserviceswithother (Green)technologies

Anumberofinitiativesintegratemobilefinancialservices with other (green) technologies. In ‘Solar panels’ and ‘Digitalcropinsurance’wegivetwoexamples.

Solarpanels

One example of the aforementioned initiatives is the provisionofpaymentplansforgreentechnologies.A par-ticularlyinterestinginitiativeinlightofSDGs7(affordable andcleanenergy)and13allowshouseholdsthatlackaccess toelectricgridstousemobilemoneyaccountstofinance pay-as-you-go solar-powered energy. Especially in sub-SaharanAfrica,wherealmost600millionpeoplelackaccess to electricity[25],theseinitiativesarepromising,alsoin termsofincreasing agribusinessefficiencyinlinewithSDG 12,asmonitoring(e.g.groundsensors)andmechanization (e.g.irrigation)devicescanbesolarpowered.Examplesof such services include M-KOPA in Kenya and Fenix in Benin,Nigeria,Uganda,andZambiathatbothofferdigital financingplansforsolarunits.

Digitalcropinsurance

FinTechhelpspoorfarmersbuildresilienceto weather-related shocks, which is increasingly important as agri-culturesuffersfromtheeffectsofclimatechange[26]. Greaterresiliencecanbeachievedthroughclimate-smart agriculture (CSA), which entails stress-tolerant seed varieties [27].However,manyfarmers havelosttrustin improvedseeds[28,29]andinvestonlyinthepresenceofan affordable,high-quality insurancesystem[30].

DigitalFinTechcanhelpincreasetheadoptionofavailable index insurance by integrating innovations in the data infrastructuretoimprovethecorrelationofindexinsurance payouts with actual damage. Such innovations include remote satellite sensing (e.g. [31,32]) and picture-based monitoring of crop health—a cost-effective option that combines smartphone technology with digital payment featurestoensurethatfarmersreceiveinsurancepayouts ifdigitalpicturesshowdamageoninsuredplots[33,34].In describing an experiment in India, Hufkens et al. [35] proposethatsmartphone-basednear-surfaceremote sens-ingissuperiortoalternativeslikesatelliteremotesensing whenitcomestocapturingtheprogressionofcropgrowth.

FinTech which encourages the adoption of insurance against weather shocks6 thus transforms agriculture in line with SDGs 1,2, and 10but also12, 13,and 15by inducing farmers to engage in CSA (e.g. [27,36,37]). FinTechisthus thefirstlinkin achainwhichcanlead to greater adoption of CSA, increased resilience as a

result, and consequently, higher profitability, which in turnleadstogreateraccesstoFinTech—increasing agri-cultural output without necessarily using additional naturalresources.

Datascience,FinTech,andtheSDGs

The examples provided in sub-section ‘Integration of mobilefinancialserviceswithother(green)technologies’ implicitlytouched onthecrucialrole ofdatasciencein transforming agriculture in line with the SDGs. Inthis section,weelaborateonthisroleinthecontextofseveral recent FinTech applications centered around digital platforms, and point out how artificial intelligence (AI) andmachinelearningcangreatlyenhancethebenefitsof suchintegratedsystems.

Digitalmarketplaces

Farm-levelinformationondigitalplatformscanbeused to create digital marketplaces,asystem design solution accessibleviatext-basedmobilephonesordigitaldevices thatconnectsstakeholdersand furtherssocialand envi-ronmental SDGs,for example, byreducingfood waste. An example is The Digital Green Loop system which helpsIndianfarmerstoconnectwithlocalentrepreneurs and transporters to sell produce to wholesalers, eliminating costly, time-consuming marketplace activitiesandreducingdelays[38].

Aparticularlyexcitingexampleofadigitalmarketplace for inputsisHelloTractor,operatingin Kenya, Mozam-bique andNigeria, besidesseveralAsian countries[39]. HelloTractorallowsfarmerstorentorbuysmarttractors via a digital interface, in which farmers and owners of smarttractors caninteract andtransact.

Agronomicadvice

Recent initiatives link technological innovations (often specific to agricultural contexts) to centralized digital platformsthatcanstoreandanalyzedatagatheredfrom farmersurveys,aerialmonitoring,and/orgroundsensors. Theoutcomeofsuchananalysiscanbeusedbyfarmers to inform their decision-making, sometimes via direct feedback mechanisms but often via organizations that provide agronomic advice. For example, providing financial serviceprovidersaccess to suchdataplatforms (via MMPs)helps mitigatetheoften severeproblemof asymmetric information betweenthem and smallholder farmers, opening uppossibilities forincreased accessto credit as well as new insurance models, and, in turn, allowing and incentivizing these financial organizations to providetargetedagronomicadvicetotheirclients.

Anexample includesarecentprojectin Uganda,where loans,marketlinkagesanddroughtinsurancearebundled togetherwithweathertipsandmadeavailabletofarmers throughtextmessages[40].Thesystemusesinformation collected by satellite systems and matches it with

6_Smartphone_technology_also_enables_the_development_of compre-hensivepackages,suchasthosethatbundlecreditandsavings oppor-tunitieswithinsurance,accesstoimprovedseeds,andadvisoryservices, toimprovesmallholders’resiliencetoweathershocks.

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informationgleanedfromtraditionaldatasourcesto pro-videfarmers withindividualizedagronomicadvice.

AI,machinelearning,andfullyintegrateddigitized agriculturalsystems

When it comesto theinterplayof varioustechnologies withinagriculturalsystemsandthepossibleintegrationof such agricultural systems with MMPs, the degree of optimization of agriculturalpractices in line with SDG 12–viathemechanismsandpathwaysdescribedin sub-section ‘Agronomic advice’ – obviously depends on a numberof parameters: thecomposition ofstakeholders (notably,whetherfinancialserviceprovidersarepresent); theexactnatureoftechnologiesemployed;thedegreeto which these interact within the system; the level and speedof dataanalysis performed;aswellas the mecha-nisms throughwhich agronomicadvice/feedback to the farmerisprovided andimplemented.7Inshort: towhat degreelargevolumesofhighqualitydatacanbe gener-atedandusedeffectively bythevariousstakeholders.

An example of a (close to) fully digitized agricultural systemis theone provided byIlluminum Greenhouses inKenyathatcombinessolar-poweredsensors,data ana-lytics,andautomateddripirrigationsystems.Agronomic advicearrivesonandcanbeimplementedviatext-based phonebytheenduser.

In their most advanced form, fully integrated digitized agriculturalsystemscomprisedatacollectiontechnologies

suchasin-groundoron-groundsensorsconnectedtothe InternetofThings(IoT),whichuploaddatainrealtimeto ananalyticsplatformthatemploysAIandmachinelearning toprovideprescriptiverecommendations,whichareinturn communicatedtofullyautomatedmechanizationdevices connectedtotheIoT[41].

While such systemsby themselves are ableto increase productivityandsavenaturalresourcesatthesametime (e.g.lowerwateruse),interoperability/synergiesbetween MMPs and suchsystems (with mobile financial service providersbeingabletoaccessasuitablydefinedsubsetof thedataandcustomizeproduct bundlesin response, as outlinedinsub-section‘Agronomicadvice’),representa truegamechangerintermsoftransformingagriculturein light of SDG 12 by minimizing trade-offs between environmental and social sustainability, that is, SDGs 13and15versus1,2,and10.Thisisshownschematically inFigure1 below.

Forillustrationpurposes,onemightthinkofasystemthat combines IoT-connected solar-powered sensors which uploadcrop-information in real timeto a dataanalytics platformthatemploysAIandmachinelearningtoinform automateddripirrigationsystems,whichareinturnalso connected to theIoT.Iffinancial service providerscan gleaninformationaboutcropconditionsthroughMMPs being interconnected with the analytics platform, the problem of asymmetric information is mitigated, and accesstocreditandinsuranceproductsgreatlyincreases.

Figure1

IoT-Connected Monitoring Devices (e.g., solar-powered on-ground

sensors)

IoT-Connected Automated Mechanization Devices Analytics Platform

(employing, e.g., AI, Machine Learning)

MMP

Data Data

Customized Product Bundles, e.g., Credit, Insurance, Market Linkages

Farmer

Transformation of agriculture in light of SDG 12 by minimizing trade-offs between environmental and social sustainability, i.e., SDGs 13 and 15 versus 1, 2, and 10

Fully Integrated Digitized Agricultural System Access via Digital Device Access via Digital Device Data Finance

Current Opinion in Environmental Sustainability

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The pathway to relevant SDGs in this example is as follows: in line with SDG 12, the implementation of theagriculturalsystemoutlinedinthisexamplereduces waterusage(comparedtolesssophisticatedsystems)by drip-watering plants exactly when and to the precise extent needed – thus enablingincreases in agricultural output (SDGs 1, 2, and 10) without the necessity for farmland expansion (SDG 15). In addition, increased accesstocreditandinsuranceallowsthefarmertoinvest into cropvarieties thatare more robusttowardsclimate change (SDG13),thus loweringtherisk ofcrop-failure (oncemore,SDGs 1,2,and10).

Limitations

and

risks

Successful mobilemoneyservices,for example,M-Pesa in Kenya[42],haveencouragedabeliefthatFinTech caninduce sustainablegrowthin poor,agrarianareasof sub-SaharanAfrica.However,itshouldbekeptin mind that past lessons learnt about the cost effectiveness of classic FinTechapplications like mobilemoney cannot readily be applied to the future as new, unforeseen products are being introduced, contexts are changing, andthegreaterinclusivitythatisaimedforimpliesthat thecharacteristicsofthecustomerbasewillbechanging aswell.Thus,existingempiricalevidencemightproveto have limited external validity and further research on economicsustainabilityandthecost-effectivenessofnew FinTechproductsaswellasclassicFinTechproductsin new contexts is needed. With this caveat in mind, especiallytherecentextensionsofclassicmobilefinancial servicesdiscussedinsub-sections‘Integrationofmobile financial services with other (green) technologies’ and ‘Data science, FinTech, and the SDGs’ highlight the potential of FinTech to transform agribusiness in line withSDG12.Thefollowingsub-sectionsdiscussfurther limitationsandrisksin thisprocess.

Infrastructure,investment,andregulation

In most sub-Saharan African countries, particularly the rural areas that host most agribusinesses, the lack of resources,distancetonetworks,andinadequateelectrical or communications infrastructure limit the adoption of FinTech [21,43,44]. More broadly, implementing key aspectsoftheParisAgreementwouldrequirean invest-ment of US$3.3–4.5 trillion annually in critical SDG sectorsindevelopingcountries,yetfundinggapsremain ofaboutUS$2.5trillionannually[45],andin2010–2014, only 0.33%of worldwide investments in FinTech took place inAfrica[46].

Thereisevidencethatoverallruleoflaw[47]iscriticalin thisrespect. Commonlawenvironmentshavealsobeen shown to be helpful ([43], finds that the adoption of FinTech is muchhigher in commonlaw as opposedto civil lawAfricannations, which might indicatethat the superior protection against risk, for example, better investorprotections,availableundercommonlaw incen-tivizesinvestmentsin FinTech).Further,when design-ing an appropriate regulatory framework to promote adequate investment into FinTech, certain specific features of FinTech should be taken into account, for example, the fast pace of innovation and lowentry-barriers[48].Whilebestpracticesregardingthe design(process)havenotyetbeenestablished[47],some keyconsiderationsandglobaltrendshaveemerged.For one, regulators must carefully define their main objec-tivesbeforetacklingregulationasdifferentgoalsareoften atoddswithoneanother,forexample,boostingfinancial inclusionversusincreasingcompetition[47].Inaddition, when evaluating various approaches, special attention needs to be focused on cases that touch on critical socio-economic priorities (e.g. financial inclusion) or entail systemic risks. Generally speaking, a framework that allows sufficient flexibility and continuous, fast updates to regulation seems desirable [49].8Indeed, in Kenya and South Africa, the two leading centers of FinTech in sub-Saharan Africa, the governments took apiecemealregulatoryapproach,withoutanyspecificlegal frameworkfor FinTech[47].

Overall,differentsub-SaharanAfricangovernmentshave so far taken a variety of approaches to FinTech regulation, some ‘hands-off’, some ‘wait and see’, and othersmoreforward-looking.Infact,itispossiblethatthe morerigidregulatoryapproachtakenbysomesub-Saharan countries contributedtotheirrelativelackof successin thepromotionofFinTechcomparedtoKenyaandSouth Africa.

Furthermore, taking into account local context and conditions is crucial. Revisiting the example of Kenya andSouthAfricain thiscontext,thedifferencesinlocal conditions betweenthese twonations, andtheir conse-quences,makethebestcaseforthisapproach:Kenyahas amorecomprehensiveandinclusiveend-to-end(supply to demand) ecosystem with extensive usage of apps, whereas South Africa is more advanced on the supply sideandcanbecharacterizedasavasttechnologicalhub that fosters design and creation of FinTech.9 Indeed,

7

Forexample,afarmermightreviewinformationgatheredbysensors andmake/implementdecisionswithouttheinvolvementofananalytics platform; orshemightimplementrecommendations providedbyan analyticsplatformusingstandard,asopposedtoautomated, mechaniza-tiondevices.

8_One _way _to _promote _FinTech _in _a _flexible _framework _that _has sparkedgreatinterest istoinstallregulatorysandboxes:young firms innascent marketscanbegrantedleeway intheformofwaiversor modificationsofrules,orofficialassurancesofnon-enforcementduring an incubationperiod when they experiment withnew products or services([49]).

9_We_thank_and_paraphrase_the_comments_of_an_anonymous_referee whobroughtthistoourattention.

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intrinsically similar FinTech products have had vastly differentexperiencesin termsoflocal demand inthese twocountries(e.g.thesuccessofSafaricom’s M-Pesain Kenya, versus the relative failure of Vodacom’s and MTN’s mobile money platforms in South Africa). In summary, local context must inform the design of regulationandthereisno‘onesize fitsall’.

Inaddition,peerregulationandmarketdisciplinecanact asreinforcingtoolsforofficialregulation.Peerregulation brings with it the desired flexibility as it is able to accommodate, under the same regulatory umbrella, a large range of context-specific standards [50], with the caveatthatitshouldonlybegivenanotableroleinthe regulationofFinTechproductsthatdonotpose consid-erableriskstoendusers.PeerregulationinFinTechmay taketheformofaratingssystemforaproductorservice substitutingforofficialregulationsofthesame[49].Such asystem,forexample,existsforthedigitalmarketplace HelloTractormentionedin sub-section‘Digitalmarket places’.Generally,whilepeerregulationcaninprinciple be a cost-effective and democratic means of putting checks and balances in a rapidly evolving environment where standardization is inherently difficult [50], hard empiricalevidenceaboutitsefficacyiscurrentlylacking.

Turning to the potential role of market discipline in aiding official regulation, the situation is not always as clear-cutinthecaseofFinTechsincenon-marketforces might be prominent, at least in the initial stages, for example, the government might give FinTech preferential treatment, or FinTech products might be introducedinanenvironmentwheretheyaresubsidized bydevelopmentorganizations.

Overall,thediscussionssurroundingofficialregulation,as wellastheroleofpeerregulationandmarketdisciplinein thecontextofFinTechmakeitclearthatmoreresearchis needed from a number of different perspectives.10 Of note, multipleuniversities and academic institutions in Africa – in cooperation with other organizations—have initiatedFinTech incubatorsandaccelerators,andtheir increased involvement in impact evaluations/other policy-relevantanalyseswouldbeextremelyvaluable.

Digitaldivides

EvenifFinTech iswidely promoted,it canensure and promoteinclusivegrowthonly ifitisadopted andused by disadvantaged groups, including smallholders. In developing countries, smallholders often are first-time users of FinTechand may havelow general [17] and digital[21,51]literacy,whichlimitstheirtake-upanduse of mobile financial services [52]. Nielsen [51] laments

digitalizationdivides:FinTechinnovationsindeveloped countriesseparateendusersfromthedesignand devel-opmentprocess,creating‘design–actualitygaps’.Another divide occurs due to differences in the socio-economic status of developers and end users such that digital technologiesarerarelytailoredtotheirparticularneeds. More empirical evidence about these digitalization dividesandtheassistancerequiredbyilliterateandpoor enduserstospanthem isneeded.

Thereisalsoanemergingriskofanewformofinequality, with entire geographic areasand populations(partially) excludedfrom newtechnologies,andthenew world of data and information. Such inequalities can stem from human capital differences: The success of particular forms of FinTech, especially if big data are involved, cruciallydependsontheavailabilityof skilledlabor, for example,datascientists.However,whenitcomestodata science,largeandimminenthuman-capitalshortagesare predictedtoincreasedrasticallyworldwide [53], includ-ingin Africa.In thisparticularcase, shortagesin devel-oped countries are likely to lead to ‘brain-drain’ in the developing world, further exacerbating the situation in sub-Saharan Africa. While local initiatives (e.g. http:// www.datascienceafrica.org/) and outsourcing of data science to other regions are helpful, more actions – in terms of local and foreign-aided capacity building measures–areurgentlyneededtomitigatethesedivides. Furthermore, SDG 10 can be undermined in a most severeformifprovidersdecidetodiscontinueprovisions ofspecificFinTechservicestopoorruralcommunitiesto savecosts[54].

Issuesindataethics

Inallofthis,multipleissuessurroundingdataethicspose aseriousrisk.Theseincluderespectfordatasovereignty and data privacy, which call for proper data protection measures to be put in place. In particular, for mobile wallettechnology,issuesrelatedtosecurityandidentity fraud are key impediments. A promising solution is biometric identification using, for example, fingerprint oririsscanners.Anexampleofsuccessfulimplementation of biometric identification is the eWallet system in Nigeria, where the government allocated vouchers to mobile wallets (eWallets) of farmers, which could then beusedtoobtainimprovedinputsfromagro-dealers(see

https://cellulant.com/blog/agritech-in-africa-how-an-e- wallet-solution-powered-nigeria-governments-ges-scheme/).

Whileitislikelythatbiometricidentificationtechnology reduces fraud enormously, rigorous research on its efficiencyandscalabilityfromacost/benefitperspective isscarce.Availableevidence[55]paintsamixedpicture, withhighrolloutcostsandheterogeneouseffects across borrowertypes(fingerprintingincreasedrepaymentrates forhigh-risk borrowersonly).

10_The_regulatory_sandboxes _mentioned_earlier_may _in_fact_provide near-ideal conditions to conduct rigorous evaluations of different approachestoregulation.

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DogreentechnologiesaffectthelimitationsofFinTech? An interesting questionthat arisesis whether there are differences, in terms of their limitations, between FinTech in general and FinTech used in combination withgreentechnologies.Onthisissue,wethinkthatmost ofthelimitationsthatweoutlinedinsection‘Limitations andrisks’naturallyapplyboth,forexample,theissueof dataethics.However,certainpointsmayapplydifferently toFinTechthatiscombinedwithgreentechnologies.For example,itisconceivablethatcertaintypesofinvestors, likethoseinterestedintheso-called‘triplebottom-line’, may bemore willing to invest theirfunds in the latter. FinTechthatisusedincombinationwithgreen technol-ogiesmightalsobemoreconducivetoinclusivebusiness, for example,FinTechthatincludessolarpanelsmaybe accessible tothose unconnectedto electricitygrids(see sub-section ‘Solar panels’). Similarly, the presence of green technology on the supply side may encourage consumer demand of the agricultural product as well. However,ourreadingoftheliteraturesuggeststhatthere is no clear verdict yet on the differences between FinTech in general and FinTech used in combination withgreentechnologiesintermsoftheirrisksand limita-tions,mainlyduetothepaucity,atthispointintime,of rigorousimpactstudies.

Conclusion

Newsourcesofdata,(green)technologies,andanalytical approachesincombinationwithmobilefinancialservices can create a digital ecosystem, in which tackling the transformation of agribusiness in developing countries in line with the ASD seems more possible than ever. Also,thelimitedhardempiricalevidenceontheefficacy of classic FinTechtechnologies suchas mobile money, gives reasonforhope.

Yetourreviewalsouncoversseriouslimitationsandrisks such as: underinvestment in infrastructure, including physicalcapital,constrainingaccessandimplementation; shortagesofhumancapitalthat,togetherwiththe previ-ouspoint,mayleadtodivergenceacrosstheagribusiness sectors in developing and industrialized nations; and ‘digitaldivides’aswellasexistentcompetinglower-cost products,suchasOTCservicesinthecaseofremittances, constraining the adoption of FinTech. These are clear impediments in the path towards complete financial inclusion and the transformation of the agribusiness sector in line with SDG 12. Our review further shows thatseveralconditionsneedtobefulfilledfortheserisks tobesufficientlymitigated.Perhapsmostimportantlyto ourreaders,weidentifya‘knowledgegap’inourcurrent understandingofthecost,benefitsandscalabilityofthese technologiesdue toalackof rigorousresearch onthese issuesaswellaspossiblelimitationsinexternalvalidityof olderstudiesduetochangingendusersandcontext,allof whichlimittheusefulnessofpredictingthetrajectoryof their applicationsandimpact oninclusivebusiness. We

thus hopethat thisreview will spur researchersto take heed ofthesegaps andtry toanswersomeof the ques-tionsraisedto aidfact-basedpolicy formulationtowards promotinginclusivebusinessbyrealizingtheSDGsinthe agribusinesssector indevelopingcountries.

Funding

This work was supported by NWO-WOTRO [project ‘Information transparencysystem as alow-cost scalable solution to farmers’ access to credit and services in Ghana’, ApplicationnumberW08.250.203].

Conflict

of

interest

statement

Nothingdeclared.

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Transforming agribusiness in developing countries: SDGs and the role of FinTech

University of Groningen