The Advent of Green Financial Inclusion
Climate change is a growing concern for central banks and financial regulators globally. Climate change leads to extreme weather conditions like drought and floods, which eventually displaces people, destroys crops, disrupts food supply, creates health risk, causes loss of property and job, deepens poverty and impacts economy. Hence, central banks and financial regulators recognize that to maintain financial stability it is essential to enable financial inclusion and build financial resilience amongst the vulnerable sections of the society so as to mitigate the impact caused by climate change. To address this cause, members of Alliance for Financial Inclusion (AFI) came together to devise ‘Green Financial Inclusion’ work-stream. Green Financial Inclusion links the financial inclusion and climate change challenges and focus on policies and strategies to build resilience to social, environmental, health and economic impact of climate change.
Establishing the Link between Green Financial Inclusion and Mobile Money
In the past decade, with mobile money accounts surpassing bank accounts in many emerging countries, mobile money has become an integral part of the financial inclusion strategy of multiple countries. Hence, it is evident that mobile money will also play an important role in Green Financial Inclusion. Mobile money can help to create resilience to climate change by facilitating service such as financial aid, pooling emergency funds, insurance, savings, credit, remittances and digital payments. In fact, there are already some examples of mobile money service enabling green financial inclusion. These examples are discussed in this post.
1. Post Disaster Payments and Fund Collection
The most direct use of mobile money is to facilitate post disaster payments. Mobile money can be used by governments and NGOs to quickly and cost-effectively disburse money to the people affected by the disaster. It can also be used to quickly pool funds from people during emergencies.
-> Social cash transfer to drought-stricken households – Airtel Money, Malawi
Between 2014 and 2016, over 2 million Malawians faced food shortages due to droughts and erratic rains that destroyed crops. The INGO consortium, in collaboration with Airtel Malawi ran an emergency social cash transfer program with an aim to mitigate the impact of famine. Under the program, the INGO consortium provided financial aid to hunger-stricken households via the Airtel Money service. In 2016, they disbursed more than MWK 40 billion ($54 million), enabling 250,000 Malawians to buy food and meet their nutritional requirements. By transferring funds monthly to the beneficiaries, cash transfers not only meet the immediate needs of households, but also enable people to spend money and make purchases, simultaneously injecting growth into local economies.
-> Pooling relief funds for cyclone-hit people – EcoCash, Zimbabwe
Cyclone Idai hit Zimbabwe on March 15, 2019; bringing heavy rains that led to floods, killing 344 people and impacting 270,000. EcoCash crowd-funded and collected donations from Zimbabweans citizens and the Diaspora. Within hours of hitting of cyclone on March 15, EcoCash created a digital wallet for the relief fund with Biller Code 320041 and launched it on next day March 16. The relief fund was created as a biller in the system and Zimbabweans can donate using this Biller Code just like they pay a bill. Zimbabwean Diaspora could donate though EcoCash Diaspora (international remittance) service. For this EcoCash created a relief fund digital wallet with mobile number +263786321671. Consumers can send money instantly to this number in the same simple and familiar way they remit money to their family and friends. RTGS$ 239,643 was collected by crowd-funding. The money was used for search and rescue operations and the purchase of food supplies for the impacted.
2. Mobile-Money Enabled Insurance Services
The crop-insurance services, with affordable premiums and payments processed by mobile money, are helping small-holder farmers to cope with losses due to excess rainfall and drought and re-plant in next season. Moreover, free or low premium hospitalization and funeral covers based on mobile or mobile money usage are helping low-income, vulnerable population to overcome financial shocks due natural calamities.
-> EcoFarmer Weather Indexed Insurance – EcoCash, Zimbabwe
Zimbabwe’s digital farming platform EcoFarmer offers weather indexed insurance service to farmers in the country. The service provides cover for potential loss to crop due to excessive rainfall or too many dry days. By paying a premium of 10%, farmers can insure their maize production from a minimum of $25 up to $625 per season. The service is popular with smallholder farmers as they need to pay as little as $2.5 to get a cover for $25. The premium can be paid through EcoCash, Zimbabwe’s largest mobile money service, used by 80 per cent of the country’s adult population. In case of crop failure, the claims are also refunded through EcoCash. This service provides assurance and peace of mind to farmers that they can go back to farming in the next season even in case of crop failure. Over 1.1 million farmers use EcoFarmer services. Smallholder farmers are also using EcoCash to get timely paid for their produce from buyers in distant locations. Timely payment provides adequate money for farmers to buy seeds and other material for next sowing season and increase their production.
3. Supporting Clean Energy Use
The mobile money services supports carbon emission reduction by facilitating use of clean and affordable energy sources. In many countries mobile money is promoting the use of solar energy for electricity and cleaner fuels like butane gas for cooking, by enabling payments for these services in small instalments.
-> Orange Energy ‘Pay As You Go’ Solar Service – Orange Money, Africa
In Africa, approximately 50% population does not have access to electricity. Orange Energy, a ‘pay as you go’ solar service, is helping households in off-grid areas of Africa to get access to solar energy. Orange offers subscribers a comprehensive solar kit including a solar panel, a battery and accessories such as LED light bulbs, mobile charger and radio. Customer can pay for the service in small monthly installments using Orange Money. Orange has installed solar kits in over 20,000 homes in off-grid areas in Madagascar, Cameroon, Burkina Faso, Cote d’Ivoire, Senegal, Guinea and Mali. This innovative service makes solar energy more widely accessible thanks to the great flexibility of mobile payments.
-> Payment for Cooking Gas – Orange Money, Niger
More than 90 percent of the households in Niger use coal or wood for cooking. This, in turn, results in significant deforestation, often over four times the area of Niger’s capital, Niamey. To prevent deforestation and environmental degradation, the government is encouraging people to use butane gas for cooking, which is sufficiently available in the country. Private gas distribution companies like Gani Gas are helping the government to accelerate the adoption of gas for cooking. To ensure easy availability and payment, Gani Gas has partnered with Orange to allow the purchase of gas bottles (gas cylinders) using Orange Money. Orange Money allows customers to make payments for gas in one go or in instalments. The ability to pay in instalments makes buying the gas more affordable. Hence, even low-income households are encouraged to switch from wood to gas.
These are just a few examples and in the future for sure we will see many other use cases where mobile money will be used to mitigate the impact of climate change. With its widespread reach in many emerging countries, mobile money ought to be leveraged effectively to strengthen the global fight against climate change.