As the world grows ever more interconnected, we can easily take for granted the ease with which transactions can be initiated or completed. Our requests can be processed and received instantaneously, and that this increased connectivity has no doubt increased productivity and, according to some studies, economic prosperity and efficiency. Lest we take these new functions for granted, we should take care to remember that this technology is not readily available to all peoples of the world. Enter the World Bank, which is working closely with Paraguay’s Crédito Agrícola de Habilitación in order to bring this kind of technology to several Paraguayan agricultural workers. This solution is predicated on data that shows that access to mobile technology can increase economic productivity.
So why Paraguay? Despite agricultural activity contributing to twenty percent of the nation’s GDP and employing nearly a quarter of the nation’s labor force, financial challenges continue to mire economic progress. For starters, not even ten years ago, eighteen percent of workers could actually obtain credit. Farmers attribute this startlingly low statistic most to, in order of frequency,1) high interest rates, 2) information requirements, and 3) physical distance. Furthermore, a great deal of these sales are done informally, with no records and documents of the transactions or sales. Many products are often sold well below market value because of a combination of difficult access to markets and an immediate need for cash. There are some farmers whose sales are directly incorporate into larger chains, but unfortunately, these are not very liquid gains.
That the World Bank partnered with Crédito Agrícola de Habilitación is amazing, as the two seem to be a perfect match. After all, Crédito is tasked with increasing access to financial tools for micro and small agricultural producers, also called MSAPs. The World Bank is helping out by designing a mobile factoring scheme that allows MSAPs to request and conduct confirmed credit sales with other registered buyers. All steps of the sale are documented and registered via the mobile scheme, and will actually allow MSAPs to request credit from buyers who in turn provide proof of confirmed credit sales via documents such as deferred checks. Crédito then discounts those checks and cancels the credit at the checks maturity date.
Now, this program is still very much in a testing phase, but the outcome is looking good, as four transactions have been completed from 2013-21014. Three of MSAPs served as point people for the small cooperatives (Cooperativa Guayaivi Unido and Cooperativa Pacova Poty), and were in charge of preparing the sales. There are currently legal restrictions in place that prevent this new system from going fully electronic, so for now there will have to be a mix of ink and electronic processes. Crédito is also working to provide more MSAPs with mobile devices as well as training on how to use the platform to their advantage. This is certainly a step in the right direction.
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