MICROFINANCE PAPER WRAP UP: “Digitizing Agricultural Payments: Lessons from Uganda’s Coffee Value Chain,” Published by CGAP, UN Capital Development Fund (UNCDF)

This is a summary of a paper by Amani M’Bale, Rashmi Pillai and Nathan Were; published by CGAP (Consultative Group to Assist the Poor) and UNCDF; June 2018; 40 pages; available at
https://www.cgap.org/sites/default/files/researches/documents/Working-Paper-Digitizing-Agricultural-Payments-June-2018.pdf

This paper focuses on the digitization of payments in Uganda for the coffee industry, which accounts for 20 percent of the country’s GDP. Mobile Money for the Poor (MM4P), a program of the UN Capital Development Fund (UNCDF), worked with Ugandan coffee exporter Kyagalanyi Coffee Limited to attempt to digitize the process by which 6,000 farmers in the Mount Elgon region of eastern Uganda get paid for their crop.

Coffee farmers in Uganda generally travel to washing stations to sell their beans. This often requires an overnight stay in order to receive cash payments the next day. Utilizing mobile money can relieve farmers of the need to stay away from home overnight. In addition, the use of digital payments creates a financial history that farmers can share easily with financial institutions if they wish to apply for loans.

Uganda is one of 19 countries in the world in which more mobile money accounts exist than bank accounts. Of the farmers targeted, approximately 20 percent had mobile money accounts at the start of the program in 2016. At the end of the two-year program, the service had “yet to achieve 50 percent” participation.

MM4P and Kyagalanyi Coffee estimate that it would take four to six years for a majority of the coffee farmers to accept digital payment over cash. They also underscore that multiple partnerships are necessary for success; this effort began with two organizations but grew to involve five additional partners, including mobile-money operators and payment service providers. Lastly, the authors point out that implementation strategies used for coffee farmers might not work well with farmers of other crops or in different regions.

By Michelle Fleming, Research Associate

Sources and Additional Resources

Digitizing Agricultural Payments
https://www.cgap.org/sites/default/files/researches/documents/Working-Paper-Digitizing-Agricultural-Payments-June-2018.pdf

CGAP (Consultative Group to Assist the Poor)
https://www.cgap.org/

UNCDF
https://www.uncdf.org/

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