Digitization of Agribusiness Payments in Africa Building a Ramp for Farmers’ Financial Inclusion and Participation in a Digital Economy SEPTEMBER 2020 © 2020 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. RIGHTS AND PERMISSIONS The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. CONTENTS Acknowledgments iii Abbreviations and Acronyms iv EXECUTIVE SUMMARY V 1. INTRODUCTION 1 2. FINDINGS AND INSIGHTS FROM THE GLOBAL FINDEX SURVEYS 4 3. FINDINGS AND INSIGHTS FROM THE AFRICA AGRIBUSINESS PAYMENTS SURVEY 8 4. OPPORTUNITY, CHALLENGES, AND RECOMMENDATIONS 14 5. CONCLUSION 20 APPENDIX A: REFERENCES 22 APPENDIX B: AGRIBUSINESSES THAT PARTICIPATED IN THE AAPS 25 APPENDIX C: AFRICA AGRIBUSINESS PAYMENTS SURVEY QUESTIONNAIRE 26 LIST OF FIGURES AND BOXES Figure 2.1 Individuals Receiving Payments for Sale of Agricultural Products in the Past Year (%) 4 Figure 2.2 Agricultural-Payment Channels (% among Agricultural-Payment Recipients) 4 Figure 2.3 Saving and Borrowing (%) 5 Figure 2.4 Use of Formal Financial Institutions among Agricultural-Payment Recipients Who Save or Borrow (%) 5 Figure 2.5 Agricultural Payments Channels, by countries in SSA (%) 6 Figure 2.6 Decrease in Agricultural Payments through Cash Only across SSA Countries between 2014 and 2017 7 Figure 3.1 Firms behind the Data 8 Figure 3.2 Commodities Procured 9 Figure 3.3 Digital Farmer Payments by Agribusinesses (%) 10 Figure 3.4 Digital Payment Withdrawal Channels (%) 10 Figure 3.5 Agribusiness Firms Reporting at Least Some Digitization of Payments to Farmers (%) 13 Figure 4.1 Key Challenges with Digitizing Agribusiness Payments to Farmers 14 Figure 5.1 Digitization of Agribusiness Payments to Farmers: A Schematic Representation 21   i Box 1: KTDA: A Producer Organization-Driven Model of Digitization 11 Box 2: VegPro and TruTrade: The Full Converts 12 Box 3: Olam: Ecosystem Challenges to Digitizing Agribusiness Farmer Payments 15 Box 4: Kyagalanyi Coffee, Uganda: Importance of Alignment of Government Policy to Facilitate Digital Payments 16 Box 5: AB InBev: Blockchain-based Agribusiness Payments to Farmers 18 ii ACKNOWLEDGMENTS This report was prepared by Ajai Nair, Senior Financial Jain, Chief Treasury Officer and Head of Corporate Com- Sector Specialist, and Minita Varghese, Financial Sector munications and Marketing, ETG, for sharing information Consultant, under the guidance of Mahesh Uttamchandani, and insights. Our gratitude is also due to International Practice Manager. Minita Varghese also implemented the Finance Corporation colleagues Esra Diker-Yilmaz, Senior Africa Agribusiness Payments Survey, the supply-side Investment Officer; Anup Jagwani, Manager; Meritxell survey of agribusinesses in Africa, that was used to collect Martinez, Operations Officer; Ernest Bethe, Principal data and insights from select major global, regional, and Operations Officer; Vengai Chigudu, Senior Investment national agribusinesses operating in Africa. Officer; Matthew S. Leonard, Operations Officer; and Beza Hailu, Operations Officer, and to Panos Loukos, Leora Klapper, Lead Economist, and Dorothe Singer, Senior Insights Manager, GSMA’s Agritech program, for Senior Economist, provided guidance and inputs on the making introductions to several firms that participated in demand-side analysis that leveraged the Global Findex the survey. data. Christopher Ian Brett, Lead Agribusiness Specialist; Panos Varangis, Global Lead, Agriculture Finance; and Parmesh Shah, Lead Rural Development Specialist; Hans Harish Natarajan, Lead Financial Sector Specialist, Dellien, Senior Operations Officer; Juan Buchenau, Senior provided guidance and inputs on the supply-side survey, Financial Sector Specialist; and Ahmed Faragallah, Senior analysis, and recommendations. Additional inputs were Financial Sector Specialist, provided peer-review inputs. provided by Emilio Hernandez, Senior Financial Sector Additional review inputs were provided by Diego Arias Specialist, and Max Mattern, Financial Sector Specialist. Carballo, Lead Agricultural Economist; Julian Lampietti, Charles Hagner copyedited, Aichin Lim Jones designed, Practice Manager; Gerhardus Koch Coetzee, Lead Finan- and Framing Plus Studio provided production services of cial Sector Specialist; Jamie Anderson, Senior Financial the report. Sector Specialist; Ivan Daniel Mortimer Schutts, Senior Operations Specialist; Delia Buisi Dean, Consultant; The authors acknowledge the contribution of the agribusi- Anneke Fermont, Regional Sustainability Manager, ness firms that responded to the survey and shared confi- Kyagalanyi Coffee Ltd.; and, Daniele Tricarico, Insights dential data. We would particularly like to thank firms that Director, GSMA Agritech Program. agreed to be included in the report as case studies and to Katie Hoard, Global Director, Agricultural Innovation and Lastly, this report could not have been produced without Sustainability, AB Inbev; Siddharth Satpute, Programme generous financial support from the Financial Inclusion Director, Digital Olam; Jenny Rouquette, CEO, TruTrade; Support Framework program funded by the Government Atul Patel, Senior Outgrowers Manager, VegPro; Alfred of the Netherlands and the Bill and Melinda Gates Njagi, Operations Director, and Simeon Rugutt, Financial Foundation. Controller, Kenya Tea Development Agency; and Anish   iii ABBREVIATIONS AND ACRONYMS AAPS Africa Agribusiness Payments Survey CICO cash in, cash out DFS digital financial services KTDA Kenya Tea Development Agency NBFI non-bank financial institution PSP payment service provider SACCO savings and credit cooperative organization SSA Sub-Saharan Africa All dollar amounts are U.S. dollars unless otherwise indicated. iv   EXECUTIVE SUMMARY This report presents the rationale for digitization of agri- reported receiving such payments into an account in business payments in Sub-Saharan Africa (SSA), assesses Ghana, Kenya, Uganda, and Zambia. In contrast, in Ethio- the current status of digitization, and identifies key actions pia and Madagascar, two countries with the largest share that governments, agribusinesses, and development part- of individuals who report receiving agricultural payments, ners can take to help accelerate digitization. virtually all recipients indicated receiving such payments in cash. Agriculture employs over half the population in SSA, yet most farmers in the region do not have access to formal Our analysis suggests that access to mobile money financial services. The 2017 Global Findex survey finds accounts is a key driver of digitization of agricultural that among individuals in SSA who report receiving pay- payments. In Kenya and Ghana, 37 percent of ments for sale of agricultural goods, fewer than one in six agricultural-payment recipients receive payments into a reports receiving the payment through an account, and mobile money account; in Uganda and Zambia, this share among those who report saving and borrowing, only one is 28 percent and 27 percent, respectively. These coun- in four saves at a formal financial institution, and only one tries are among those with the highest uptake of mobile in five borrows from a formal financial institution. money: the share of adults with a mobile money account is 73 percent in Kenya, 51 percent in Uganda, 39 percent Farmers, agribusinesses, and the rural economy stand to in Ghana, and 28 percent in Zambia. gain from increased digitization of agribusiness payments. Digitization can advance financial inclusion of farmers Our survey of select agribusinesses active in SSA sug- and thereby help them smooth consumption, make gests that while most agribusinesses are making efforts productivity-enhancing investments, and better manage to digitize their payments to farmers, the levels of digiti- their vulnerability to shocks through improved access to zation are still relatively low. The survey included savings, credit, and insurance products. For agribusiness responses from 29 global, regional, and national agribusi- firms, digital payments can help improve not only effi- nesses operating in more than 17 countries in SSA. While ciency but also transparency by bringing better visibility to nearly four-fifths of the firms reported making at least how and when farmers are paid, thereby enabling them to some digital payments to farmers, only one-fifth reported comply better with their commitments to sustainability. that most of the farmers in their supply chains are paid Lastly, regular digital payments from agribusinesses can benefit the rural economy more broadly by strengthening $ the rural digital financial services (DFS) ecosystem through improving the business viability of DFS agents, encourag- Digitization potential: ing merchants to accept digital payments, and enabling $6 billion more e-money usage for local payments. Our analysis of Global Findex 2017 data shows that while average levels of digitization in SSA is lower than in other Potential # of farmers to benefit: regions of the world, variation is wide between countries. 17.8 million farmers Over 30 percent of recipients of agricultural payments   v digitally. Most of the surveyed agribusinesses recognize the delivery of weather-based crop insurance through the the opportunity and report having initiatives to increase platform (Box 5). digital payments to farmers. We estimate the digitization potential among the firms responding to the survey at There are, however, several challenges to accelerating over $6 billion and potentially benefitting nearly 18 mil- digitization of agribusiness payments to farmers. In many lion farmers. countries, these include foundational challenges, such as limited connectivity, poor digital literacy, and a weak reg- Lastly, our analysis also shows that digitization of agricul- ulatory environment for digital payments, and proximate tural payments can be a driver to expand financial inclu- challenges, such as limited availability of cash-in, cash-out sion of farmers. The 2017 Global Findex survey finds that points and opportunities to use e-money. Thus, a rapid among agricultural-payment recipients in SSA receiving expansion of digitization of agricultural payments would payments into an account, 20 percent report opening require strengthening the foundational drivers of the their first account to receive an agricultural payment. Veg- national digital economy and the ecosystem for rural DFS pro, one of the AAPS respondents who only pay farmers as well as actions targeted at agricultural payments — digitally, reports that it has also facilitated access to credit both agribusiness procurement payments as well as agri- at preferred interest rates for around a quarter of their cli- cultural inputs payments. The figure below presents a ents (Box 2). And Inbev, another AAPS respondent which schematic representation of the multipronged effort partners with BanQu, a blockchain-based platform, needed to accelerate digitization of agricultural payments reports that one of its subsidiaries in Uganda is piloting and the benefits that could flow from these efforts. Digitial platforms, Rural DFS ecosystem Agricultural inputs payments Digital financial Agribusiness services - savings, procurement credit and insurance payments Farmer Other merchant payments Digitial infrastructure Digital skills vi   We make the following recommendations to support efforts to digitize agricultural payments in SSA: • Governments should strengthen the foundations of their national digital economy and the enabling environments for agritech, fintech, and e-commerce: These actions are critical since improvements in these areas make it more feasible for agribusinesses to digitize their payments to farmers and increase farmers’ ability to use digital payments. • Governments should also take targeted actions to strengthen the rural DFS ecosystem: Targeted actions are needed to strengthen the rural DFS ecosystem since rural areas face specific challenges related to their geography. These include actions to increase the density of CICO (cash-in-cash-out) agents in rural areas and increase the opportunity for rural residents to use e-money. The former would make it easier and less costly for farmers and others residing in rural areas to convert e-money to cash and vice versa and the latter would reduce the need to make these conversions. • Agribusinesses need to build an industry consensus on the value of digital payments to farmers as a key driver of achieving their sustainability goals: While there is consensus on the need to advance sustainability, there is limited attention so far on the strong linkage between sustainability goals and the value of digital payments to farmers. • Agribusinesses should strengthen partnerships with payment service providers (PSPs) and better leverage the opportunity presented by the fintech revolution: Partnerships can be a win-win opportunity for PSPs, fintechs, and agribusinesses. Digitization of agribusiness payments presents a large revenue opportunity for PSPs, agribusinesses can negotiate better pricing structures for bulk payments, and fintechs can play a key role in building a bridge between the two. • Development finance partners should support targeted initiatives on agricultural-payments digitization: Development partners can play an impactful role in facilitating scaled-up support for agricultural payments digitization. The report highlights two projects supported by the World Bank with components on digitiza- tion of agriculture payments. The COVID-19 pandemic has reinforced the urgency of digitization of agribusiness payments to allow firms and digitizing payments to avoid disruptions to the supply farmers to stay resilient, maintain the supply of food and chain and maintain economic activity. The ongoing crisis other agricultural commodities, and combat the negative provides additional impetus to accelerate the pace of shocks to income caused by the pandemic.   vii Digitization of Agribusiness Payments in Africa   1 1. INTRODUCTION while the AAPS has a broad coverage, it is not representa- tive of all agribusinesses in SSA, and hence the findings presented are also not representative of all agribusinesses Background active in SSA. Finally, payments received by farmers for local sales, government payments to farmers, and pay- This report aims to present the rationale for digitization ments by farmers for purchase of agricultural inputs and of agribusiness payments in Sub-Saharan Africa (SSA), farm workers are beyond the scope of this report. assess the current status of digitization using demand- and supply-side data, and identify key actions that can The report is organized in five sections. The rest of this help accelerate digitization. The report draws on an section presents the rationale for digitization of agribusi- analysis of financial-inclusion data from the Global Findex ness payments in SSA. The next section provides demand- database, a survey administered to select agribusinesses side data and insights based on Global Findex data, while active in SSA (henceforth referred to as the Africa Agri- section 3 provides supply-side data and insights from a business Payments Survey, or AAPS), and case studies of survey of 29 major global, regional, and national agribusi- select agribusinesses that responded to this survey. The nesses. Section 4 highlights the digitization opportunity in Findex data analysis leverages questions in the survey that agribusiness payments in SSA, discusses the challenges to identify whether the respondent had received payment digitization, and identifies key actions that stakeholders against the sale of an agricultural good; how the payment can take to help accelerate agricultural-payments digitiza- was received — in cash or through a digital means, tion. Finally, section 5 summarizes the report’s key findings defined to include an account at a bank or non-bank and proposes additional research and other actions that financial institution, mobile money account, or a card — can help operationalize the recommended actions. and, if an account holder, whether the account was opened to receive an agricultural payment. The AAPS was Why Digitize Agribusiness Payments to Farmers? administered to purposefully selected agribusinesses active in SSA, with either a regional or national scope. Financial inclusion is key to inclusive growth, and access Some firms were added to the survey since they were to a transaction account is the critical first step. There is known to have an active digitization program, but this was now global consensus that financial inclusion of individuals not a requirement for inclusion in the survey. and enterprises is critical to inclusive growth and poverty reduction.1 Transaction accounts are defined as The broad coverage of the Global Findex survey and accounts (including e-money or prepaid accounts) held AAPS allows a regional and cross-country assessment of with banks or other authorized or regulated payment ser- the status of agricultural-payment digitization in SSA. The vice providers (PSPs) that can be used to make and receive Global Findex survey data covers 27 countries in SSA, payments and to store value (CPMI and World Bank spanning different income levels. (See section 2 for full list Group 2016). Financial inclusion allows individuals and of countries.) The AAPS reflects responses from 29 agri- enterprises to transact, save, borrow, and insure — all of businesses operating in more than 17 countries in SSA and which are factors that contribute to inclusive growth and includes firms with a global, regional, and national foot- poverty reduction. print. (See appendix B for the full list of firms.) In SSA, agriculture plays a significant role in income While the Global Findex and AAPS permit a data-driven generation, growth, and poverty reduction. Agriculture assessment of agricultural-payment digitization in SSA, contributes 15.6 percent of the gross domestic product, they have some key limitations. The analysis of Global and approximately 54.6 percent of the population in the Findex data focuses on respondents who report receiving region is employed in the agriculture sector.2 The food payments, in cash or digitally, against the sale of agricul- market in the region was valued at $300 billion in 2017 tural goods. While these respondents are a good proxy and may be worth nearly $1 trillion by 2030 (AGRA 2017). for farmers who market at least some portion of their produce and represent a significant share of the farming population, they are not representative of all farmers in 1. https://www.worldbank.org/en/topic/financialinclusion/brief/ the region. Further, since the survey is not focused on achieving-universal-financial-access-by-2020 these respondents, it results in a limited sample of agricul- 2. Agriculture sector consists of activities in agriculture, hunting, foresting and fishing. 2018 World Development Indicators, tural-payment recipients and does not allow disaggre- World Bank, https://databank.worldbank.org/ gated analysis for gender or specific value chains. Similarly, source/2?series=SL.AGR.EMPL.ZS&country=. 2   Digitization of Agribusiness Payments in Africa However, while evidence is strong regarding the impact of by urban and rural consumers (AGRA 2019). These include agriculture growth on poverty reduction, agriculture- large enterprises as well as micro, small, and medium-scale sector growth remains low, and levels of poverty remain enterprises that play a significant role in the post-farmgate high in many countries in the region.3 These factors, supply chain, from logistics and processing to distribution together with emerging consensus on the linkages and retail. These businesses already provide a significant between financial inclusion, inclusive growth, and poverty share of the credit needs of the farming sector, but since reduction, suggests that financial inclusion of farmers is this financing is primarily aimed at meeting agricultural critical for agriculture-sector growth and thereby for accel- needs, the non-agricultural financial-service needs of the erating poverty reduction in the region. farmers remain unaddressed. Furthermore, since the data on financing provided by these agribusinesses often Yet most farmers in the region do not have access to remains proprietary and is not reported to credit bureaus, formal financial services. The 2017 Global Findex survey it limits the ability of other providers to use this data to finds that among individuals in SSA who report receiving provide financial services to farmers.6 agricultural payments, a good proxy for farmers who are selling at least some portion of their produce in the mar- Digitization of payments by agribusinesses to farmers ket, fewer than one in six reports receiving an agricultural can act as the ramp to broader financial inclusion and payment through an account.4 And among those in this better use of these accounts. Digitization of payments population segment who report saving and borrowing, refers to a payment being made electronically into a only one in four farmers saves at a formal financial “transaction account.”7 Digitization of agribusiness pay- institution, and only one in five farmers borrows from a ments can be a driver of expanding access to transaction formal financial institution. Most rely on saving in kind or accounts for farmers. According to 2017 Global Findex, cash at home or depending on family and friends or 13 percent of account owners globally reported having informal service providers such as savings groups, savings opened their first account to receive private-sector wages, collectors, and money lenders. The access and usage government payments, or payments for the sale of agri- levels are likely to be much lower if all farmers and farm cultural goods. And among agricultural-payment recipi- workers are included.5 This lack of access to formal finan- ents in SSA receiving payments into an account, 20 cial services has severe financial implications. When faced percent report opening their first account to receive an with a bad harvest or significant livestock loss, farmers agricultural payment (Demirgüç-Kunt et al. 2018). For bear the entire financial risk of such a loss since they lack those already having an account, receiving payments for access to financial tools that could help them manage sale of their produce into these accounts offers the oppor- these risks (Klapper et al. 2019). Reliance on informal pro- tunity to use these accounts better (Better Than Cash viders can be quite costly and risky, not only putting the Alliance 2018). safety of savings at risk but also limiting access to credit and insurance. For farmers, digitization of agricultural procurement pay- ments has numerous benefits. It can ensure timely and Agricultural output value chains present an untapped safe payments, increase savings, and contribute to increas- opportunity to drive financial inclusion of farmers. Eighty ing agricultural productivity. In Rwanda, the digitization of percent of Africa’s food consumption is through purchases payments from tea factories to small-holder tea producers reduced the time from delivery of tea leaves to payment from 5 to 15 days to a maximum of three days (Nair, Ono, 3. GDP growth originating in agriculture is estimated to induce and Mapfumo 2018). In Malawi, farmers who were offered income growth among the poorest 40 percent at levels three times larger than growth originating in the rest of the economy (de Janvry and Sadoulet 2009). Average poverty in the region was 41.4 percent, according to the latest data 6. ISF Advisors and the Rural and Agricultural Finance Learning available for 2015. World Bank, Poverty and Equity Data Lab estimate that that value-chain actors, typically agribusi- Portal, http://povertydata.worldbank.org/poverty/region/SSF. nesses, supply approximately $30 billion of farmers’ financing 4. The term farmers is used to include all agriculture-sector pro- needs out of a total estimated demand of $240 billion in ducers, including individuals producing livestock and involved agricultural and non-agricultural finance (ISF Advisors and in marine fishing and aquaculture. Mastercard Foundation 2019). 5. National surveys of smallholder households in Mozambique, 7. As previously defined, a transaction account refers to any Uganda, Tanzania, Côte d’Ivoire, Nigeria, and Bangladesh by account that allows the user to transact and to store value. the Consultative Group to Assist the Poor (CGAP) find that These include bank accounts and accounts of other authorized the proportion receiving payment into an account is less than PSPs, such as mobile money providers and specialized provid- 2 percent (Anderson and Sobol 2018). ers, such as B-Kash in Bangladesh or Zoona in Zambia. Digitization of Agribusiness Payments in Africa   3 direct deposit into savings accounts for crop-sale proceeds consumers and ensure implementation of ethical procure- and took this option saved more in the months immedi- ment practices, thus bolstering their reputation and ately before the next agricultural planting season and reducing reputational risk. Further, registration of farmers increased both spending on agricultural inputs and crop for digitization of payments can also be an opportunity to values in that season (Brune et al. 2016).8 Receiving digital assess the demand for value-added services such as agri- payments empowers farmers to have better control over culture-advisory services and to provide such services if their income. It reduces travel time and transaction costs there is a business case to do so. to collect their payments, and having a transaction account allows farmers to make other transactions such as utility Lastly, digitization of agribusiness payments can play a payments, school fees, and person-to-business payments key role in supporting the rural digital financial services through digital channels. The transaction history that (DFS) ecosystem. A key obstacle to financial inclusion in farmers accumulate can provide a basis for formal finan- rural areas is insufficient demand for DFS agents and cial service providers to assess creditworthiness, opening limited digital payments to merchants, making the rural an avenue to formal credit, insurance, and savings prod- agent and merchant business unprofitable. By increasing ucts that equip them to deal with income shocks and the transaction volumes necessary to support rural DFS smooth consumption, thus improving overall well-being. expansion, digitization of agribusiness payments can gen- erate business for both rural DFS agents who offer cash-in, For agribusinesses, digitizing procurement payments can cash-out (CICO) services and DFS merchants who accept improve efficiency, transparency, and traceability. Cash digital payments, thus expanding the CICO network and payments can be risky and costly, and manual reconcilia- opportunities to use e-money, respectively (GSMA 2018a). tion of payments is a lengthy process that is prone to errors. The Better Than Cash Alliance estimates that mak- Notwithstanding the multiple benefits discussed above, ing cocoa payments to farmers in cash costs Ghana’s current levels of digitization of agricultural payments are licensed buying companies nearly 3.6 percent of their rev- low, reflecting the many challenges that digitization enues, and that the cost for their agents is nearly 15 per- initiatives need to address. These challenges relate to cent of their revenues (BTCA and World Cocoa Foundation basic infrastructural constraints, such as limited outreach 2020a).9 Digital payments not only support operational of formal financial institutions in rural areas and inade- efficiencies by reducing the cost of payments but also quate mobile connectivity necessary for delivery of mobile allow agribusinesses to make more transparent transac- money services, as well as constraints associated with the tions. It allows agribusinesses to trace procurement down- overall ecosystem for rural DFS. These challenges are stream to the farmer, allowing them to gain trust among discussed in more detail in section 4. 8. In addition, Duflo, Kremer, and Robinson 2011 found substantially increased fertilizer consumption in Kenya (over 50 percent) when farmers are offered the opportunity during harvest time to buy fertilizer vouchers for a subsequent season. This mechanism can be seen as equivalent to a commitment savings mechanism. 9. The bulk of the costs to licensed buying companies is interest costs incurred on cash advances received from the Cocoa Board, but the costs also include salaries for additional staff needed to manage cash payments. The primary cost for the agents is the loss of cash due to theft and cost of transport. 4   Digitization of Agribusiness Payments in Africa 2. FINDINGS AND INSIGHTS FROM THE hence, a natural target for digitization initiatives. While GLOBAL FINDEX SURVEYS this population segment is much smaller than the propor- tion of the population employed in agriculture, it rep- The Global Findex database enables cross-regional and resents a natural target for digitization since respondents cross-country comparison of financial inclusion of individ- receive at least some payments on sale of agricultural uals who report receiving agricultural payments. In addi- commodities.11 This section discusses some salient findings. tion to asking respondents about financial inclusion, the 2014 and 2017 Global Findex surveys also asked whether In 2017, nearly one-third of adults in SSA reported having they had received any payments for the sale of agricultural received agricultural payments, and most receive these products in the past 12 months and whether they received payments in cash only. As can be seen in figure 2.1., SSA payments in cash or through one of the four identified has the largest proportion of adults who report receiving digital channels.10 Taken together with financial-inclusion agricultural payments (30 percent), which is about twice the indicators, the response to this question allows an estima- average for developing economies and equivalent to tion of the scale of current digitization and an indicative around 140 million adults.12 As figure 2.2 shows, less than estimation of potential opportunity for digitization of agri- 15 percent reported receiving an agricultural payment cultural payments among this segment of the population. through an account. The majority of the agricultural-pay- Individuals who report receiving payments for sale of agri- ment recipients in all four regions report receiving their pay- cultural products are a good proxy for farmers who sell at ments in cash only, but this proportion is highest in SSA. least some portion of their produce in the market and, FIGURE 2.1: Individuals Receiving Payments for FIGURE 2.2: Agricultural-Payment Channels Sale of Agricultural Products in the Past Year (%) (% among Agricultural-Payment Recipients) 30 15 19 21 26 16 15 11 85 81 74 79 SSA EAP ECA SAR SSA EAP ECA SAR In cash Into an account All regional aggregates exclude high income countries. SSA - Sub All regional aggregates exclude high income countries. SSA - Sub Saharan Africa, EAP - East Asia and Pacific, ECA - Europe and Central Saharan Africa, EAP - East Asia and Pacific, ECA - Europe and Central Asia, SAR - South Asia Region Asia, SAR - South Asia Region 11. As previously mentioned, over half of the total population 10. 2017 Findex defines persons who received agriculture (54.6 percent) in SSA is estimated to be employed in the payments as “respondents who report personally receiving agriculture sector. This includes all farmers, including money from any source for the sale of agricultural products, subsistence farmers who are not selling any production to crops, produce, or livestock in the past 12 months.” the market, and those who are working for farmers but do Although, as defined, the category could also include not themselves farm. respondents who trade in agricultural products, the 12. The proportion of respondents who report receiving agricul- proportion of such respondents is estimated to be marginal. ture payments is much lower in the Latin America and the The digital channels identified were accounts at a bank, a Caribbean Region and the Middle East and North Africa non-bank financial institution, mobile money account, and Region — 5 and 6 percent, respectively — and hence not card. included in this analysis. Digitization of Agribusiness Payments in Africa   5 Agricultural-payment recipients also report very low 56 percent of adults receiving agricultural payments usage of formal financial institutions for saving and bor- reported having borrowed money in the past 12 months, rowing, although they save and borrow more than the compared to 40 percent of adult who do not receive such rest of the population. As figure 2.3 shows, individuals payments. These differentials are not surprising since receiving agricultural payments report having saved and income from agriculture is often lumpy and highly vulner- borrowed more in the past year than other adults. On able to shocks, but as figure 2.4 shows, only a small pro- average, 66 percent of individuals in SSA receiving portion rely on formal financial institutions to save or agricultural payments reported having saved money in borrow: only 17 percent saved and 10 percent borrowed the past 12 months, compared to 50 percent of adults in from formal financial institution. the region who do not receive such payments. Similarly, FIGURE 2.3: Saving and Borrowing (%) FIGURE 2.4: Use of Formal Financial Institutions among Agricultural-Payment Recipients (%) 66 56 50 40 83 90 17 10 Saved money - Saved money - Borrowed money - Borrowed money - Saving Borrowing farmers others farmers others In a formal financial institution Others Source: Global Findex (2017). While the proportion of the population receiving agricul- payments, over 30 percent reported receiving such tural payments and those receiving payments in cash payments into an account in Ghana, Kenya, Uganda, and only is higher in SSA than in other regions, there are Zambia. In contrast, virtually all recipients in Ethiopia and significant differences between countries (figure 2.5). Madagascar, two of the countries with the largest share of Over 50 percent of adults in Ethiopia, Madagascar, and adults who report receiving agricultural payments, indi- Uganda reported receiving agricultural payments, while cated receiving such payments in cash. These differences less than 10 percent in South Africa and Botswana are likely to be driven by the differences in the national reported doing so.13 Among recipients of agricultural and rural ecosystems for DFS. 13. The percentage of respondents reporting receiving agricultural payments in Botswana and South Africa is 8 percent and 3 percent, respectively. Given the low share, Findex does not disaggregate this data by payments received into an account or in cash. 6   Digitization of Agribusiness Payments in Africa FIGURE 2.5: Agricultural Payments Channels, by countries in SSA (%) Benin Burkina Faso Cameroon Chad Congo, Dem. Rep. Congo, Rep. Cote d’lvoire Ethiopia Gabon Ghana Guinea Kenya Madagascar Malawi Mali Mauritania Namibia Niger Nigeria Rwanda Senegal Sierra Leone Tanzania Togo Uganda Zambia Zimbabwe 0% 20% 40% 60% Into an account In cash only Source: Global Findex (2017). Digitization of Agribusiness Payments in Africa   7 Access to mobile money accounts seems to be a key While still high, the proportion of individuals in SSA driver of the levels of digitization of agricultural receiving agricultural payments through cash only has payments. Among the countries with the largest share of decreased regionwide and in most countries. Among adults receiving agricultural payments into an account, those receiving agricultural payments, the regional most receive the payment into a mobile money account. average for those who received payments only in cash In Kenya and Ghana, 37 percent of agricultural-payment decreased to 81 percent in 2017 compared to 85 percent recipients receive payments into a mobile money account. in 2014. The scale of change has varied across countries; In Uganda and Zambia, 28 percent and 27 percent, some countries show a much larger magnitude of change respectively, receive such payments into a mobile money compared to others. For example, among agricultural- account.14 These countries are also among those with the payment recipients in Ghana and Uganda, those receiving highest uptake of mobile money: the share of adults with their payment in cash decreased from 90 to 49 percent a mobile money account is 73 percent in Kenya, 51 per- and from 85 to 65 percent, respectively.15 cent in Uganda, 39 percent in Ghana, and 28 percent in Zambia. FIGURE 2.6: Decrease in Agricultural Payments through Cash Only across SSA Countries between 2014 and 2017 70% 60% 50% 40% 30% 20% 10% 0% ni n so oon had ep. oire pia bon ana nea nya scar lawi ali ia ia er ria a al e ia o a ia e Be Fa er C , R d’lv thio Ga Gh Gui Ke ga Ma M itan mib Nig ige and neg eon zan Tog and mb abw na m m e a r u N a N R w e L an Ug Za imb i a e E d a S rra T rk C D ot a M e Z Bu o, C M Si o ng C 2014 2017 Source: Global Findex (2017). 14. The share receiving payments into an account at a financial 15. Additional country-level work is necessary to explain or institution is 15 percent, 18 percent, 7 percent, and confirm the magnitude of these changes and the increase in 22 percent, respectively. Respondents can report receiving those reporting receiving payments in cash only in Ethiopia agricultural payments in multiple ways, and receiving (by a large margin) and in Nigeria. payments into an account at a financial institution and receiving payments through a mobile phone are not mutually exclusive categories. 8   Digitization of Agribusiness Payments in Africa 3. FINDINGS AND INSIGHTS FROM THE The AAPS aimed to collect information from agribusi- AFRICA AGRIBUSINESS PAYMENTS nesses on their agri-commodity procurement in SSA, SURVEY existing levels and channels of digital payments, and current and planned efforts to digitize payments. The To complement the demand-side findings from Findex survey was administered to 45 firms, and 29 agribusiness with supply-side data and insights, the AAPS was admin- responded to the survey. These included 16 firms that istered to select global, regional, and national agribusi- operate globally or regionally and have operations in nesses active in SSA. The survey focused on agribusiness several African countries and 13 firms that operate at a payments since such payments are estimated to be more national level (figure 3.1). The respondents included firms widespread than other formal payment flows to farmers in that are primarily supply-chain companies and those that SSA.16 While agribusiness payments are a relatively small are primarily processors.17 The survey was a first of its kind proportion of all agricultural payments received by farm- and, as a result, should be seen as a pilot that can be ers, they are the most feasible entry point for digitizing expanded upon in potential future rounds. This section payment flows. Agribusiness payments through formal discusses the key findings and insights from the survey. value chains are a first point of digitization because they can provide the transactional volumes to support a sus- Agribusinesses procure a wide range of commodities in tainable network of CICO agents, have predictable pay- SSA, and several million farmers are involved in their ment streams, and involve fewer players (GSMA 2020a). commodity supply chains. Figure 3.2 shows the range of FIGURE 3.1: Firms Behind the Data 16. A few countries in SSA have government programs for 17. Supply-chain companies typically procure produce either procuring agricultural commodities to maintain food-security directly or indirectly from farmers or intermediaries. The reserves, but they are generally small in terms of the number produce is then sold to processors and other firms. of farmers from whom the procurement is made. Some Processors are those firms that are engaged in processing countries have agricultural input-subsidy programs, but most the produce and preparing it for the consumer market. Some of these subsidies are in-kind subsidies, where farmers processors also procure from directly from farmers. receive inputs rather than cash. Even in the case of input- subsidy programs where digitization has been attempted, farmers receive e-vouchers that can be used to redeem inputs from input dealers, and the payment for the inputs are made by the government to the input dealers. Digitization of Agribusiness Payments in Africa   9 commodities procured by the surveyed firms: six firms reported that a majority of the farmers in their supply reported procuring cocoa, five reported procuring coffee, chains are paid digitally, and three firms reported that all and four firms each reported procuring maize and fruits farmers in their supply chains are paid digitally. In response and vegetables; the rest of the commodities are procured to the question on key constraints to digitization, by three or fewer firms. They procure commodities pro- one-third of firms reported the lack of digital channels, duced by an estimated 19.4 million farmers; this is approx- particularly limited network coverage, as a top reason for imately 14 percent of the estimated 140 million individuals not having digitized payments or for having done so only reporting receiving payments for sale of agricultural prod- partially. ucts as per Global Findex 2017. The combined value of commodities procured is approximately $7 billion. The Three firms reported having fully or nearly fully digitized bulk of the value of commodities procured is reported by their payments to farmers. These include the Kenya Tea a few firms; the median reported value of procurement Development Agency (KTDA) and VegPro, which oper- over the past fiscal year is $30 million. The firms use ate only in Kenya, and TruTrade, which operates in Kenya multiple models of procurement, but a surprisingly large and Uganda. Among the respondents, KTDA reports the proportion (62 percent) report procuring at least some largest number of farmers that are being paid digitally, portion of their procurement directly from farmers. Just while VegPro and TruTrade pay all farmers in their supply over half (52 percent) report procuring through buying chain digitally. Box 1 presents the case of KTDA, and box agents, and 41 percent report procuring through 2 presents the VegPro and TruTrade cases. KTDA’s digiti- producer organizations. Most firms procure commodities zation success seems to be driven by multiple factors: from farmers through a combination of procurement the well-organized sector, the wide savings and credit channels. cooperative organization (SACCO) network in Kenya and its indirect access to the national payments system A majority of the firms make at least some farmer pay- (through the Cooperative Bank of Kenya), and KTDA’s ments digitally, but the proportion of digital payments partnership with Citi Bank. VegPro and TruTrade, rela- remains low for most firms (figure 3.3). While nearly four- tively new organizations that have much smaller numbers fifth of the firms (79 percent) reported making at least of farmers in their supply chains, report having opted to some digital payments to farmers, nearly half (45 percent) go for full digitization since benefits outweighed costs pay only a small share (less than 10 percent) of their right from the beginning. farmers digitally. However, over 20 percent of the firms FIGURE 3.2: Commodities Procured Livestock Sesame & dairy Other Barley Cocoa Maize Cotton Cashew Shea butter Beans Cassava Tea Pigeon Gum pea arabic Sweet Sunflower potato Fruits & Coffee vegetables Soybean Wheat Rice Sorghum Fodder Source: AAPS 2019. 10   Digitization of Agribusiness Payments in Africa FIGURE 3.3: Digital Farmer Payments by Agribusinesses (%) Estimated share of firms making digital payments Estimated share of farmers 45 21 79 14 17 3 No digital payments at all Less than 10% Between 10-30% Between 30-50% More than 50% Source: AAPS 2019. While bank branches, surprisingly, remain the main point of the firms, however, suggest that most firms do not have of withdrawal, several firms also report the use of agents clear visibility on the withdrawal channel used by farmers and e-wallets by farmers. As figure 3.4 shows, nearly half since one payment channel can allow multiple withdrawal of the firms report that farmers use bank branches to with- channels. For example, payment into a bank account draw their payments, and just over one-third of firms could be withdrawn through a bank branch or a bank report that farmers use agents. About a quarter report agent, or it could be used for making an electronic that farmers use non-bank financial institutions (NBFIs), payment using an e-wallet, or, in cases where mobile and and 17 percent report that farmers use e-wallets to with- bank accounts are linked, payments can be withdrawn draw payments made to them. Discussions with a subset from a mobile money agent. FIGURE 3.4: Digital Payment Withdrawal Channels (%) 48 34 24 17 Bank branch NBF branch Agent E-wallet Source: AAPS 2019. Digitization of Agribusiness Payments in Africa   11 BOX 1 KTDA: A Producer Organization-Driven Model of Digitization The Kenya Tea Development Agency (KTDA) is a holding company owned by 54 tea factory companies, which are in turn owned by 600,000 tea producers in Kenya. Over 90 percent of them are small-scale farmers operat- ing farms less than one acre. Nonetheless, Kenya is a major player in the global tea value chain, providing 13 percent of global tea exports. KTDA Management Services, a subsidiary of KTDA, manages all payments to the farmers. Farmers are paid an initial payment every month and a final payment annually, after closing of accounts. Over the past five years, total producer payments have ranged between $609 million and $459 million. Almost all farmers are paid electronically; approximately 40 percent of the payments are made through individual bank accounts, and 60 percent of payments go through accounts in SACCOs. A small proportion of farmers who are unbanked (approximately 2.4 percent) are paid in cash by the local SACCOs, as per payment information provided by the factory company affiliated with those farmers. KTDA started digitizing its payments following its privatization in 2000. The process accelerated rapidly in 2007, when KTDA engaged the services of Citi Bank to manage its producer payments. The extent of digitization has increased rapidly over the past five years. During this period, KTDA reduced the number of producers being paid in cash from 100,000 to about 12,000. KTDA expects to digitize its producer payments fully by the end of 2020. The figure below shows the process flow used by Citi Bank’s Mass Pay platform to process KTDA’s payments. Payments made by electronic funds transfer (EFT) are processed within one day, while payments made by real- time gross settlement (RTGS) are processed on the same day. This means that all farmers paid through bank accounts receive their payments within one or two working days at the latest. It takes an additional day for producers paid through SACCO accounts to receive their payments since the payment platform does not pay farmer accounts directly; rather, it makes a payment into the SACCO account, and the SACCO makes the transfer to each farmer’s account (based on payroll information sent by KTDA). Citi Pay Bank account: Payment is made Uploads payroll list directly to farmer’s account via 40% < 1 million KSH: EFT which takes Citi Pay Transfers required 2 days and costs 7 KSH SACCO account: Payment is made amount into Citi Bank account > 1 million KSH: RTGS through to the SACCO via Citi Pay, following which SACCO transfers required 60% which final payment to farmer is funds to individual farmer accounts completed on the same day and costs 15 KSH KTDA Farmer While KTDA does not have definitive information on the relative proportions of withdrawal channels used by the producers, it reports that all channels are likely being used since nearly all banks and SACCOs are linked to e-money accounts — provided by either banks or mobile money providers — and funds in most SACCO accounts can be withdrawn from any automated-teller machine in the country. KTDA is also piloting direct payments to farmer’s mobile money accounts but identifies the daily limit on payments into an e-money account as a limitation. Source: Alfred Njagi, Operations Director, KTDA, and Simeon Rugutt, Financial Controller, KTDA, personal communication. 12   Digitization of Agribusiness Payments in Africa BOX 2 VegPro and TruTrade: The Full Converts TruTrade is a market intermediary that operates in Kenya and Uganda and works with around 3,700 small- holder farmers and 25 buyers. It aims to formalize value-chain transactions and improve efficiency through a bespoke online and mobile-enabled trading and payment platform providing Market Connect Service to farmers and Source Connect Service to buyers. The platform enables efficient supply-chain management, price discovery, the tracking of produce from collection to delivery, and digital payments from buyers to farmers. TruTrade pays 100 percent of its farmers digitally. TruTrade uses an agent-based model whereby agents recruited by TruTrade are its primary mode of interaction with farmers. Farmers bring their produce to collection points managed by a growing network of agents. The produce is checked for quality and, if of acceptable quality, weighed using calibrated scales. Then a purchase offer is made by the agents. If the offer is accepted, the agent triggers a payment directly from TruTrade to the farmer’s mobile money account or bank account. Agents also register the supplier- farmers on the TruTrade app. As a market intermediary, TruTrade then manages the aggregation from differ- ent agents, transaction logistics, and delivery to the final buyer. After buyer payment is received and all figures are finalized, TruTrade takes a commission fee for service provided. Over 90 percent of payments to farmers are made using mobile money; the rest go through bank accounts. For farmers that are unbanked but willing to sell through TruTrade, the company provides support opening a bank or mobile money account. To reduce the cost of mobile money payments for farmers, TruTrade covers the transaction and withdrawal fees that would otherwise be incurred by the farmer. The farmer typically receives the payment due with an additional top-up for the withdrawal fee that would be charged when the farmer withdraws payment. TruTrade pays the transaction fees directly to the mobile network operator or aggregator. The company estimates these costs are around 1.6 percent of its total payments to farmers in Kenya due to the relatively low fees and absence of taxes. In contrast, they are around 2.2 percent in Uganda due to the tax on mobile money payments (initially 2 percent but since reduced to 0.5 percent). Nonetheless, TruTrade estimates that its willingness to pay withdrawal and transaction fees has been instrumental in per- suading its supplier-farmers to accept being paid digitally. Most importantly, TruTrade reports that the addi- tional costs are offset by the reduced costs and risks associated with cash payment. VegPro is one of the largest producers and exporters of fresh produce from Kenya. It operates using an out- grower model whereby it contracts farmers with irrigation facilities to produce vegetables for it. It currently works with around 5,000 farmers organized in six out-grower schemes. The company provides inputs on credit and agronomic advice to the farmers through their agricultural extension staff. VegPro also enters into annual contracts with their out-growers that commit it to procuring produce from the contracted farmers at pre-agreed prices. VegPro started digitizing payments to farmers in 2016 and has since transitioned to paying all its farmers digitally. It pays primarily through banks and SACCOs and currently works with multiple banks and SACCOs. All farmers need to have a bank or SACCO account in order to begin a contract with VegPro, and it supports farmers with the account-opening process. VegPro handles its payments by periodically instructing its primary bank to make transfers to the various financial institutions in which the out-growers have accounts along with a list of account details for the farm- ers who have accounts at that institution. Payments are made on either a weekly or fortnightly basis, and the average amount paid to farmers ranges from $100 to $200 per week during the season and cumulatively ranges between $4,000 and $5,000 per year per out-grower. VegPro has also been successful in leveraging its relationships with financial institutions to reduce the minimum deposit requirements and withdrawal fee amounts for farmers who have a contract with them. Moreover, it has also been able to facilitate access to credit from these financial institutions for around one-fourth of their clients at preferred interest rates for purchasing equipment or other inputs. Source: Jenny Rouquette, CEO, TruTrade, and Atul Patel, Senior Outgrowers Manager, VegPro, personal communication. Digitization of Agribusiness Payments in Africa   13 Not surprisingly, firms report high levels of digitization in Almost all firms report corporate initiatives to increase or countries with higher levels of overall financial inclusion. implement digital payments. Over 90 percent of firms Figure 3.5 shows countries with the largest proportion of report having a corporate initiative to increase digital firms reporting digitization of payments to farmers.18 payments to farmers, and over half of these firms report a South Africa, Kenya, Uganda, and Ghana are also among high level of priority for these initiatives. Among these, countries in SSA with the highest levels of financial the cumulative investment by 24 firms is $48 million, with inclusion. As per the 2017 Global Findex, 69 percent of a median investment of $180,000.19 The large proportion individuals in South Africa have an account; in Kenya, this of firms reporting having digitization initiatives and the proportion is 82 percent, while in Uganda, it is 59 percent. substantial volume of financial resources planned to be The 2017 Global Findex similarly reveals that Kenya and invested to support these initiatives suggest that most Uganda also have the highest proportion of agricultural- firms recognize the benefit of digital payments and are payment recipients who report receiving their payment willing to make the necessary financial investments to into an account: 46 percent and 32 percent, respectively. move from cash to digital payments. FIGURE 3.5: Agribusiness Firms Reporting At Least Some Digitization of Payments to Farmers (%) Uganda 100 South Africa 100 Kenya 100 Ghana 50 Cote d’lvoire 40 Mali 33 0 10 20 30 40 50 60 70 80 90 100 Source: AAPS 2019. 18. Only countries where at least three firms responded to the 19. In addition, one respondent firm, which estimated 100,000 survey were included for this analysis. farmers in its supply chain, reported a planned investment of $100 million over the next three years. This is not included in the cumulative planned investment reported, since the scale of investment reported is an outlier compared to the amounts reported by the other firms. 14   Digitization of Agribusiness Payments in Africa 4. OPPORTUNITY, CHALLENGES, AND The digitization potential among the firms responding RECOMMENDATIONS to the survey is estimated at over $6 billion and poten- tially benefitting approximately 17.8 million farmers. This estimate is based on a total estimate of procure- The Opportunity ment value of over $7 billion by the responding firms, an average current digitization level of 10 percent, and an GSMA estimates the global value of cash-based busi- estimate of 19.4 million farmers involved in the supply ness-to-person agricultural payments in 2021 to be $392 chains of the responding firms. Given that the survey is billion and expects this to grow to $491 billion by 2025 not exhaustive, at both the firm level and the country (GSMA 2020a). These represent estimates of the value of level, the total number of farmers in agribusiness supply transactions that can potentially be digitized. GSMA chains and total volume of agribusiness procurements arrives at this figure by using the estimated proportion of currently not being paid digitally can reasonably be agricultural procurements that use formal procurement estimated to be much higher. This presents a large channels and the estimated proportion of these procure- digitization opportunity, both in volume of payments and ments that are being made in cash. Formal procurement the number of benefitting farmers. is defined as purchase from farmers by agribusinesses, government, non-government organizations, coopera- Challenges tives, and other farmer organizations. The bulk of formal procurement is estimated to be from farmers by agribusi- There are several challenges to accelerating digitization of nesses, either directly or indirectly (through agents or agribusiness payments to farmers, however. These include farmer organizations). While the bulk of the global value both foundational challenges, such as limited connectiv- of cash-based agribusiness payments is estimated to be in ity, poor digital literacy, and a weak regulatory environ- Asia, the share of SSA is significant; in 2016, GSMA ment for digital payments, and proximate challenges, estimated this to reach $64 billion by 2020 (GSMA 2016). such as limited availability of CICO points and opportuni- In Côte d’Ivoire, the value of agricultural payments that ties to use e-money. Limited availability of CICO points could be digitized was estimated to be $3.8 billion in and limited acceptance of digital payments by merchants 2017; in Ghana, this was estimated to be $2.2 billion for result in farmers having to incur additional costs to travel the same year (GSMA 2017, 2018b). The AAPS confirms to the nearest CICO point to access or spend e-money that the digitization opportunity is indeed large even when needed or to respond to an emergency. Further- when the focus is narrowed to payments to farmers by more, transaction and withdrawal costs combined with agribusinesses. travel costs can be costly relative to the value of the pay- ments received, further reiterating a preference for cash. FIGURE 4.1: Key Challenges with Digitizing Agribusiness Payments to Farmers KEY CHALLENGES • Poor network coverage in rural areas • Low levels of financial inclusion at the country level • Low digital literacy • Regulatory limits on transaction value and account size • High transaction and withdrawal costs • Limited access points to formal financial institutions (bank branches, automated-teller machines, SACCO networks, etc.) • Limited availability of agents • Insufficient cash liquidity among agents • Limited acceptance of digital payments by merchants Digitization of Agribusiness Payments in Africa   15 As box 3 shows in the case of Olam in Indonesia, these receive payments at the same time. Addressing this challenges constrain efforts of agribusinesses to digitize challenge requires large buyers to work proactively with their farmer payments even when there is a corporate account issuers to ensure that their access points have commitment from agribusinesses to do so. Notwithstand- enough liquidity when payments go out and the demand ing Olam’s willingness to offset withdrawal fees, few farm- for cash-out increases. ers were willing to accept digital payments due to limited access to agents and limited opportunities to use Recommendations e-money. The Consultative Group to Assist the Poor has documented ecosystem challenges that constrained This section discusses key actions that governments and efforts to digitize agribusiness payments to smallholder the private sector can take to support the agricultural- coffee farmers in Uganda (M’Bale, Pillai, and Were 2018). payments digitization agenda further. It does not discuss The limited availability of CICO agents is further con- all actions needed to address the challenges in detail strained by liquidity challenges faced by rural agents, and since some of these are discussed in detail elsewhere, but this is often a bigger constraint for larger buyers since they references are made to these documents. are dealing with much larger numbers of farmers who all BOX 3 Olam: Ecosystem Challenges to digitizing agribusiness farmer payments Olam is a leading global food and agribusiness supplying food, ingredients feed, and fiber to over 25,000 customers worldwide. The company’s value chains span over 60 countries, with procurement across Asia, the Americas, and Africa. The company estimates that nearly 5 million farmers globally are in its supply chains, of which an estimated 2.3 million are in SSA; most are smallholder farmers. Digitization of its supply chain is a high priority objective for Olam, which aims to maximize digitization along its supply chain to enable the company to deliver a comprehensive suite of sustainability and traceability solutions to its customers. Olam operates multiple digital platforms to achieve this objective, including Olam Direct, which enables the company to connect directly with farmers to deliver better margins along with digitized sales information and digital payments to producers. The platform allows Olam to pay farmers through banks and can seamlessly integrate with mobile money providers. The Olam Direct platform was tested and first rolled out in Indonesia in 2017 and has since been expanded to 11 countries, including Ghana. Olam procures produce from over 66,000 farmers through this platform, including 3,200 in Africa. Nonetheless, Olam has not been successful in transitioning a significant share of producers in this platform to digital payments. Olam reports this to be the case despite its efforts to market this platform feature in Indonesia and offering to top up fees for farmers, if they were to receive payments digitally. Olam assesses that farmers in Indonesia preferred not to receive digital payments because most producers needed cash to meet their daily household needs, and there is limited availability of mobile money or banking agents in rural areas. Furthermore, farmers also faced relatively high costs, both direct and indirect, to withdraw cash. In the short run, Olam plans to continue its payment-digitization efforts for farmers in Indonesia. While still limited, penetration of digital payments in Indonesia’s rural communities is expected to be relatively quicker in comparison to other regions, due to better access to mobile money or banks and merchant acceptance of e-money. Lessons from Indonesia will then be used to find suitable digital-payment solutions for operations in Africa and Latin America. Source: Olam 2019 and Siddharth Sapute, Programme Director, Digital Olam, personal communication. 16   Digitization of Agribusiness Payments in Africa 4.1 Governments should strengthen their digital-economy strengthening e-governance systems for all public ser- foundations and the enabling environments for agritech, vices and resources being administered through ministries fintech and e-commerce: There is increasing recognition of agriculture (Kim et al. 2020). Strengthened digital- of the importance of strengthening the foundations nec- economy foundations and ecosystems for agritech, essary for the growth of Africa’s digital economy. This is fintech, and e-commerce are critical to help advance the demonstrated by the African Union’s 2020–30 Digital digitization of agribusiness payments since improvements Transformation Strategy and the World Bank’s Digital in all these areas can help make it more feasible for agri- Economy for Africa (DE4A) Initiative. The African Union’s businesses to digitize their payments to farmers and strategy identifies digital infrastructure, digital skills, digi- increase farmers’ ability to use digital payments. tal innovation and entrepreneurship, and an enabling pol- icy and regulatory environment as foundations, and digital In parallel to efforts to strengthen digital-economy foun- agriculture and digital trade and financial services as dations and key ecosystems, governments should also among the critical sectors to drive the digital transforma- assess if policies are inadvertently undermining digitiza- tion of the economy (African Union 2020). The World tion efforts. A good case in point is Uganda. As discussed Bank’s DE4A initiative has already supported digital- in the previous section, Uganda has a higher overall level economy diagnostics in over 20 countries and has opera- of financial inclusion than most countries in Africa, and all tions in over 15 countries that support the DE4A initiative; firms that are active in Uganda and participated in the sur- additional diagnostics are underway in around 15 coun- vey reported using digital means to pay at least some of tries, and 29 investment operations are in the pipeline.20 A the producers in their supply chains. Yet the decision by recent World Bank publication identifies four actions that the government to tax mobile money services also made governments in SSA can take to help scale up disruptive digital payments less attractive to farmers and thereby agricultural technologies. These include investing in poli- harder for agribusiness firms in Uganda to move fully to cies and platforms for data collection and access from digital payments. Box 4 describes the case of Kyagalanyi public and private sources, developing an e-agriculture Coffee, the largest coffee exporter in Uganda. While some strategy and an agri-technology start-up policy, and firms such as TruTrade have persisted with digital BOX 4 Kyagalanyi Coffee, Uganda: Importance of Alignment of Government Policy to Facilitate Digital Payments Kyagalanyi is the largest coffee exporter in Uganda and buys conventional coffee across the country. The coffee value chain in Uganda is fully liberalized, and coffee is traded through an intrinsic network of agents, middle- men, and traders. Kyagalanyi procures coffee using multiple procurement channels: (a) through purchases from dry mills in Kampala, the capital, that are typically supplied by large traders; (b) through buying agents in vari- ous parts of the country — all purchases of robusta beans and some purchases of arabica are made this way, while most arabica purchases are made from certified promoter farmers who also buy from other farmers; and (c) through washing stations and small buying centers where the company purchases from farmers directly. The firm estimates that it procures from approximately 21,000 farmers, from whom they buy directly or through promoter farmers. Given the relatively high level of uptake of mobile money in Uganda, Kyagalanyi invested in setting up a mobile money platform to allow mobile money payments to farmers who deliver coffee directly to the washing stations. Just when the company switched to mobile money payments, however, the government introduced a new tax on mobile money. As a result, a large majority of farmers refused to receive their payments through mobile money and insisted on cash. Source: Inputs from Anneke Fermont, Regional Sustainability Manager, Kyagalanyi Coffee Ltd., and M’Bale, Pillai, and Were 2018. 20. https://www.worldbank.org/en/programs/all-africa-digi- tal-transformation. Digitization of Agribusiness Payments in Africa   17 payments notwithstanding the higher costs, partly driven goods industries, to build an industry consensus on the by the taxes, it is likely that such taxes have dissuaded need to move toward digitization of agribusiness pay- several others from moving to digital payments. ments to farmers. The United Nations Capital Develop- ment Fund’s Better Than Cash Alliance documents several 4.2 Governments should take targeted actions to successful cases of “last mile” payments digitization in strengthen the rural DFS ecosystem: While strengthening private-sector supply chains and has built an alliance of the national digital-economy foundations and key ecosys- companies working toward advancing digital payments tems is critical, targeted actions are also needed to (BTCA 2018). Its experience shows that, while this is a strengthen the rural DFS ecosystem, since rural areas face challenging endeavor, it is indeed possible to make signif- specific challenges related to their geography. These icant gains over a relatively short period. In 2018, building actions fall into two broad categories: one relating to on its previous efforts and achievements in this area, Gap increasing the density of CICO points in rural areas, and Inc. announced a goal for all its Tier 1 suppliers (approxi- another that relates to increasing the opportunity for rural mately 800 factories in about 30 countries) to fully transi- residents to use e-money. While the first set of actions tion from a cash-based system to digital payments by would make it easier and less costly for farmers and others 2020. In 2018, 80 percent of its factories were already residing in rural areas to convert e-money to cash and vice making digital payments.21 versa, the second would reduce the need to make these conversions. The Consultative Group to Assist the Poor’s 4.4 Agribusinesses should strengthen partnerships with technical guide for strengthening the agent network rec- PSPs and better leverage the opportunity presented by ommends several steps that policy makers and regulators the fintech revolution: Several agribusinesses already can take to achieve this objective (Hernandez 2019). partner with PSPs to deliver digital payments to farmers Among others, recommendations for policy makers effectively and efficiently. The KTDA case (box 1) is an include (a) allowing social payments and fiscal payments early example of a partnership between a multinational to be made through CICO agent networks that are shared bank and a farmers organization to advance digital pay- with other financial and non-financial providers; (b) when ments to farmers. Cargill has partnered with MTN in fiscally feasible, using direct and time-bound subsidies to Ghana to ensure that MTN’s mobile money agents have reduce agent start-up costs in previously unserved rural enough liquidity during the period when it makes the bulk areas; and (c) simplifying requirements to become a DFS of its payments to farmers (GSMA 2018a). Partnerships agent. Recommendations made for regulators include (a) can be a win-win opportunity for PSPs and agribusinesses. taking a risk-based approach to regulating CICO agent GSMA’s Agritech toolkit for digitization of agricultural networks; (b) developing a strategy for agent interopera- value chains presents the business case for mobile money bility to enable customers to perform DFS transactions providers and agribusinesses to invest in “last mile” digi- between multiple providers using the most accessible tization (GSMA 2020b). Mastercard sets out a broader CICO agent; and (c) avoiding dictating fees or price caps case for partnerships between financial service providers for CICO transactions to ensure that market prices reflect and firms in the real sector (Mastercard 2019).22 provider costs. For PSPs, digitization of agribusiness payments presents a 4.3 Agribusinesses need to build an industry consensus large revenue opportunity. GSMA estimates the revenue on the value of digital payments to farmers as a key opportunity in SSA for mobile money providers to be driver of achieving their sustainability goals. There is $214 million in 2021 (GSMA 2020a). For agribusinesses, already a consensus within the food and agribusiness partnerships can help negotiate better pricing structures industry on the need to advance sustainability in the for bulk payments. The ability of agribusinesses to pay full industry. This is demonstrated by the sustainability com- or part of the transaction fees makes such partnerships mitments made by agribusinesses, the increasing number particularly attractive for PSPs. The cost of transaction fees of firms that have “chief sustainability officers,” and par- ticipation in initiatives such as the Consumer Goods Forum and the Business for Social Responsibility. How- ever, there is limited understanding of the strong linkage 21. https://www.betterthancash.org/news/media-releases/ between the sustainability goals and the value of digital gap-inc-sets-new-goal-for-apparel-suppliers-to-pay-gar- ment-workers-digitally-by-2020 payments to farmers. While the rural context presents 22. The paper highlights opportunities for partnerships between larger challenges to digitization, sustainability initiatives in financial services providers and contract manufacturers, mass the agribusiness sector can learn from initiatives in other transit providers, fast-moving consumer good companies, sectors, such as the garment and fast-moving consumer energy providers, and agribusinesses. 18   Digitization of Agribusiness Payments in Africa is often a disincentive for farmers to accept digital pay- regulation, larger agribusinesses can become corporate ments, and the willingness of companies such as TruTrade agents, while smaller agribusinesses, such as agricultural and Inbev to pay the transaction costs can be instrumental input dealers, can become retail agents. This can poten- in persuading farmers to accept digital payments. The tially be attractive to agribusinesses, since it can offer a TruTrade case (box 2) shows that the cost of such fees as a new revenue stream while also creating the opportunity to share of the total payment to the farmer can be relatively offer a broader set of additional services to the farmers in low for agribusinesses. VegPro’s experience (box 2) sug- their supply chains. Agribusinesses with large national gests that even relatively small firms can negotiate lower footprints could significantly advance the digitization of fees for bulk payments. These partnerships can also help farmer payments. Examples of such agribusinesses test innovations that can demonstrate to PSPs the busi- include the large licensed buying companies in Ghana ness case for innovating on pricing models. For example, that are authorized to procure cocoa, the warehouses research by the Consultative Group to Assist the Poor in affiliated with the Ethiopian Commodity Exchange in partnership with Olam shows that there is a business case Ethiopia, and large agricultural input dealers in many for mobile network operators and other PSPs offering countries. lower pricing structures for high-frequency face-to-face transactions (Hernandez, Riquet, and Sberro 2018). Agribusinesses that do not see a business case or find it challenging to partner with PSPs directly should explore Agribusinesses should also consider becoming agents for partnerships with fintechs to foster increased digitization banks or mobile money providers. When allowed by of agribusiness payments. Box 5 describes the partner- BOX 5 AB InBev: Blockchain-based Agribusiness Payments to Farmers A partnership between AB InBev, the world’s largest brewer, and BanQu, a blockchain-based platform, has helped AB InBev advance its agenda to digitize farmer payments as part of its 2025 sustainability goal, which is to ensure that 100 percent of farmers are properly skilled, connected, and financially empowered. AB InBev purchases from over 15,000 smallholder farmers globally, most of whom are in SSA. In June 2018, around 2,000 cassava farmers in Zambia began selling their harvests to Zambian Breweries, an AB InBev subsidiary, through the platform. In 2019, the platform was rolled out by Nile Breweries Limited, another InBev subsidiary, to purchase barley in Uganda and aid in the distribution of seeds and other crop inputs for approximately 1,700 barley farmers. BanQu’s platform creates a decentralized digital ledger of each transaction for the produce bought on the platform. Instead of cash, each farmer receives a digital payment through one of the major mobile money providers in the country. The platform also tracks the vol- ume of goods delivered, the quality of those goods, and the price paid. Both the agribusiness and farmers benefit from increased traceability and transparency in their supply chain. In the medium term, AB InBev expects the inclusion of inputs in the platform to better enable the provision of credit and other financial services to farmers. Nile Breweries Limited is piloting a new direct-to-farmer weather-based crop insurance through start-up partner OKO in conjunction with BanQu. In 2020, Nile Brew- eries plans to extend the use of the platform to its broader barley program as well as its sorghum program. Additionally, in both Zambia and Uganda, beyond tracking the purchase of crops, BanQu also will deploy smart contracts to help the breweries and farmers plan for the season. AB InBev also plans to extend the use of the platform to its sorghum program in Tanzania in 2020. Beyond Africa, AB InBev has implemented the BanQu platform to support its barley program in India and plans to deploy the platform in a smallholder cassava program in Brazil in 2020, while continuing to explore the use case for the platform in other Latin American supply chains. Source: https://www.fastcompany.com/90328012/this-digital-ledger-helps-small-farmers-get-a-fair-deal and inputs from Katie Hoard, Global Director, Agricultural Innovation and Sustainability, AB Inbev. Digitization of Agribusiness Payments in Africa   19 ship between AB InBev, the world’s largest brewer, and The World Bank is supporting two projects in SSA with BanQu, a fintech based in the United States with opera- components related to digitization of agriculture pay- tions in Zambia and Uganda. The partnership with BanQu ments. The $50 million Benin Rural Transformation Project helps reduce AB InBev’s cost of directly making many includes a component that supports the digitization of relatively small payments and provides the company with agribusiness payments to smallholders through the cre- the opportunity to provide value-added services. It should ation of a single digital platform linking agribusinesses, be noted that the exponential growth of mobile money in smallholders, and mobile network operators. In a second Zambia in recent years is likely to have been critical in phase, the platform is also expected to enable traceability making the InBev initiative feasible (World Bank 2020). In of smallholder transactions. The $100 million Niger Smart addition to cost efficiencies, such partnerships with Villages for Rural Growth and Digital Inclusion Project sup- fintechs can facilitate the delivery of other livelihood- ports (i) the digital registration and onboarding of small- enhancing financial services beyond payments, such as holders in multifunctional digital centers; (ii) the upgrading digital credit and savings, as well as insurance. The of agriculture suppliers’ information technology systems Consultative Group to Assist the Poor documents several and the creation of a digital platform that will allow farm- Fintech innovations that have the potential to scale up ers associations to order and purchase inputs and make financial inclusion of the unbanked (Murthy et al. 2019). direct payments to their members using a mobile phone; and (iii) use data associated with digital agricultural pay- 4.5 Development finance partners should support ments and other alternative data to generate credit targeted initiatives on agricultural-payments scores. The project is expected to benefit around two mil- digitization. Given the benefits of agricultural-payments lion farmers. The International Finance Corporation is also digitization to multiple stakeholders — farmers, agribusi- scaling up its work in this area by building on its work with nesses, and rural economies in general — development Cargill in Côte d’Ivoire from 2013 to 2018 (IFC and partners need to scale up support to further this agenda. Mastercard Foundation 2018). 20   Digitization of Agribusiness Payments in Africa 5. CONCLUSION hood-enhancing purposes that help smooth consumption and build assets through credit, saving, and insurance. Farmers, agribusinesses, and the rural economy stand to When combined with solutions that enable acceptance of gain from increased digitization of agribusiness payments. digital payments by agricultural input dealers and other Digitization can advance financial inclusion of farmers and rural businesses, digitization of agribusiness payments thereby help them smooth consumption, make productiv- can help significantly increase the uptake of agricultur- ity-enhancing investments, and better manage their vul- al-payments digitization initiatives and strengthen the nerability to shocks through improved access to savings, digital economy. credit, and insurance products. For agribusiness firms, digital payments can help improve not only efficiency but The analysis and recommendations presented in this also transparency by bringing better visibility to how and report suggest that while levels of digitization in agricul- when farmers are paid, thereby enabling them to comply tural payments in SSA are rising (albeit from a very low better with their commitments to sustainability. Lastly, reg- base), much more needs to be done to accelerate the ular digital payments from agribusinesses can benefit the pace of digitization. These include actions by govern- rural economy more broadly by strengthening the rural ments to strengthen the foundational drivers of a digital DFS ecosystem by improving the business viability of DFS economy and the ecosystem for rural DFS, and more spe- agents, encouraging merchant payment acceptance, and cific actions targeted at agricultural payments; by agri- enabling more e-money usage for local payments. businesses to strengthen partnerships with PSPs and fintechs; and by development partners to support tar- Financial inclusion of farmers is critical if they are to partic- geted initiatives on agricultural-payments digitization. ipate fully and successfully in a digital economy of the Figure 5.1 shows a schematic representation of the digiti- future. Digitization of payments by agribusinesses to farm- zation opportunity presented by the agribusiness pay- ers can act as the ramp to broader financial inclusion by ments that are currently made in cash, the direct and enabling access to transaction accounts as well as adding indirect benefits that can flow from digitization of these value by facilitating better usage of these accounts. Such payments, and the challenges that needs to be addressed transaction accounts can be used for a range of liveli- to realize the opportunity. FIGURE 5.1: Digitization of Agribusiness Payments to Farmers: A Schematic Representation Digitial platforms, Rural DFS ecosystem Agricultural inputs payments Digital financial Agribusiness services - savings, procurement credit and insurance payments Farmer Other merchant payments Digitial infrastructure Digital skills Source: Authors Digitization of Agribusiness Payments in Africa   21 Additional country-level analysis, such as those under- The COVID-19 pandemic has only reinforced the urgency taken by the Better Than Cash Alliance and World Cocoa of this agenda. Digitizing payments has become even Foundation in Ghana (BTCA and World Cocoa Founda- more pertinent in avoiding disruptions to the supply chain tion 2020a, 2020b), by the International Finance Corpora- and maintaining economic activity. The ongoing crisis pro- tion and Mastercard Foundation in Côte d’Ivoire (IFC and vides additional impetus to accelerate the pace of digiti- Mastercard Foundation, undated), and by GSMA in both zation of agribusiness payments to allow firms and farmers of these countries (GSMA 2017, 2018a), would be needed to stay resilient, maintain the supply of food and other to better understand the demand- and supply-side con- agricultural commodities, and combat the negative straints across specific country contexts and commodity shocks to income caused by the pandemic. value chains, farmers’ preferences, and obstacles for tar- get population segments, such as women farmers, based on which actions can be tailored to the relevant context. 22   Digitization of Agribusiness Payments in Africa APPENDIX A: REFERENCES African Union. 2020. The Digital Transformation Strategy for Africa (2020–30). Addis Ababa, Ethiopia. https://au.int/en/ documents/20200518/digital-transformation-strategy-africa-2020-2030. AGRA (Alliance for a Green Revolution in Africa). 2017. Africa Agriculture Status Report 2017: The Business of Small- holder Agriculture in Sub-Saharan Africa. Nairobi, Kenya: AGRA. https://agra.org/wp-content/uploads/2017/09/Final- AASR-2017-Aug-28.pdf. ———. 2019. Africa Agriculture Status Report 2019. https://agra.org/wp-content/uploads/2019/09/AASR2019-The- Hidden-Middleweb.pdf. Anderson, J., and D. Sobol. 2018. Executive Summary: CGAP National Survey of Smallholder Households. Washington, DC: Consultative Group to Assist the Poor (CGAP). https://www.cgap.org/sites/default/files/publications/Execu- tive-Summary-CGAP-National-Surveys-of-Smallholder-Households-Nov-2018_2.pdf. Brune, L., X. Giné, J. Goldberg, and D. Yang. 2016. “Facilitating Savings for Agriculture: Field Experimental Evidence from Malawi.” Economic Development and Culture Change 64, no. 2 (January 2016): 187–220. BTCA (Better Than Cash Alliance). 2017. The Role of Digital Payments in Sustainable Agriculture and Food Security. https://www.betterthancash.org/tools-research/reports/the-role-of-digital-payments-in-sustainable-agricul- ture-and-food-security. ———. 2018. The Future of Supply Chains: Why Companies Are Digitizing Payments. https://www.betterthancash.org/ tools-research/reports/the-future-of-supply-chains-why-companies-are-digitizing-payments. BTCA and World Cocoa Foundation. 2020a. Digitizing Payments in Ghana’s Cocoa Supply Chain: Four Building Blocks for Responsible and Scalable Digitization. https://www.betterthancash.org/tools-research/reports/digitizing-pay- ments-in-ghanas-cocoa-supply-chain. ———. 2020b. The Hidden Cost of Cash to Ghana’s Cocoa Sector. https://www.betterthancash.org/tools-research/ reports/the-hidden-costs-of-cash-to-ghanas-cocoa-sector. Cargill. 2017. “For First Time, 10,000 Ghana Cocoa Farmers Able to Receive Premium Payments by Mobile Phone,” September 11, 2017. https://www.cargill.com/2017/10000-ghana-cocoa-farmers-able-to-receive-mobile-phone-payment. Christen, R. P., and J. Anderson. 2013. “Segmentation of Smallholder Households: Meeting the Range of Financial Needs in Agricultural Families.” Focus Note 85. Washington, DC: CGAP. CPMI (Committee on Payments and Market Infrastructures) and World Bank Group. 2016. Payment Aspects of Financial Inclusion (PAFI). Washington, DC: Bank of International Settlements and World Bank Group. https://www.worldbank. org/en/topic/financialinclusion/brief/pafi-task-force-and-report. de Janvry, A., and E. Sadoulet. 2009. Agricultural Growth and Poverty Reduction. Washington, DC: World Bank. https:// openknowledge.worldbank.org/handle/10986/4432. Demirgüç-Kunt, A., L. Klapper, D. Singer, S. Ansar, and J. Hess. 2018. The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. Washington, DC: World Bank Group. Duflo, E., M. Kremer, and J. Robinson. 2011. “Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya.” American Economic Review 101, no. 6: 2350–90. Digitization of Agribusiness Payments in Africa   23 GSMA. 2016. Market Size and Opportunity in Digitizing Payments in Agricultural Value Chains. https://www.gsma.com/ mobilefordevelopment/resources/market-size-and-opportunity-in-digitising-payments-in-agricultural-value-chains/. ———. 2017. Opportunities in Agriculture Value Chain Digitization: Learning from Cote d’Ivoire. https://www.gsma. com/mobilefordevelopment/resources/opportunities-agricultural-value-chain-digitisation-learnings-cote-divoire/. ———. 2018a. Prerequisites to Digitizing the Agricultural Last Mile: Addressing the Connectivity, Liquidity and Due Diligence Challenges. https://www.gsma.com/mobilefordevelopment/wp-content/uploads/2018/07/mAgri-Tool- kit-2018-Prerequsities-to-digitising-the-agricultural-last-mile.pdf. ———. 2018b. Opportunities in Agriculture Value Chain Digitization: Learning from Ghana. https://www.gsma.com/ mobilefordevelopment/resources/opportunities-in-agricultural-value-chain-digitisation-learnings-from-ghana/. ———. 2020a. Digitising Payments in Agricultural Value Chains: The Revenue Opportunity to 2025. https://www.gsma. com/mobilefordevelopment/resources/digitising-payments-in-agricultural-value-chains-the-revenue-opportuni- ty-to-2025/. ———. 2020b. The GSMA AgriTech Toolkit for the Digitisation of Agricultural Value Chains. https://www.gsma.com/ mobilefordevelopment/resources/the-gsma-agritech-toolkit-for-the- digitisation-of-agricultural-value-chains/. Hernandez, E. 2019. Agent Networks at the Last Mile. Washington, DC: CGAP. https://www.cgap.org/research/publica- tion/agent-networks-last-mile. Hernandez E., C. Riquet, and R. Sberro. 2018. “Building Rural Digital Ecosystems, One Small Payment at a Time.” CGAP blog, August 28, 2018. https://www.cgap.org/blog/building-rural-digital-ecosystems-one-small-payment-time. IFC (International Finance Corporation) and Mastercard Foundation. 2018. Digital Financial Services for Agriculture Handbook. https://www.ifc.org/wps/wcm/connect/region__ext_content/ifc_external_corporate_site/sub-saharan+af- rica/resources/dfs-agriculture. ———. Undated. Opportunities for Digital Financial Services in the Cocoa Value Chain in Côte d’Ivoire: Insights from New Data. https://openknowledge.worldbank.org/handle/10986/30203. ISF Advisors and the Mastercard Foundation Rural and Agricultural Finance Learning Lab. 2019. Pathways to Prosperity: Rural and Agricultural Finance State of the Sector Report. Washington, DC. https://pathways.raflearning.org/report/ was-the-year-2016-an-inflection-point/. Kim, J., P. Shah, J. C. Gaskell, A. Prasann, and A. Luthra. 2020. Scaling Up Disruptive Agricultural Technologies in Africa: International Development in Focus. Washington, DC: World Bank. https://doi.org/10.1596/978-1-4648-1522-5. Klapper, L., D. Singer, S. Ansar, and J. Hess. 2019. Financial Risk Management in Agriculture: Analyzing Data from a New Module of the Global Findex Database. Policy Research Working Paper 9078. Washington, DC: World Bank Group. http://documents1.worldbank.org/curated/en/544071576074656430/pdf/Financial-Risk-Management-in-Agricul- ture-Analyzing-Data-from-a-New-Module-of-the-Global-Findex-Database.pdf. Mastercard. 2019. The Role for Last Mile Partners in Expanding Payments at the Base of the Pyramid. https://www.mas- tercardcenter.org/insights/digital-economy-last-mile. 24   Digitization of Agribusiness Payments in Africa Mattern, M. W., and R. M. Ramirez. 2016. “Digitizing Value Chain Finance for Smallholder Farmers.” Focus Note 106. Washington, DC: CGAP. M’Bale, A., R. Pillai, and N. Were. 2018. Digitizing Agricultural Payments: Lessons from Uganda’s Coffee Value Chain. CGAP Working Paper, June 2018. Washington, DC: CGAP. Murthy G., M. Fernandez-Vidal, X. Faz, and R. Barreto. 2019. Fintech and Financial Inclusion: Looking past the Hype and Exploring Their Potential. Washington, DC: CGAP. https://www.cgap.org/research/publication/fintechs-and-finan- cial-inclusion. Nair, A., T. Ono, and S. Mapfumo. 2018. Rwanda Agriculture Finance Diagnostic. Washington, DC: World Bank Group. Olam. 2019. “Digital Olam in the Making.” Olam Insights 1 (May 2019). https://www.olamgroup.com/content/dam/ olamgroup/investor-relations/ir-library/olam-insights/olam-insights-pdfs/Olam_Insight2019_Issue1.pdf. World Bank. 2020. Accelerating Digital Transformation in Zambia: Digital Economy Diagnostic Report. World Bank, Washington, DC. https://openknowledge.worldbank.org/handle/10986/33806. World Bank Group. 2014. The Opportunities of Digitizing Payments: How Digitization of Payments, Transfers, and Remit- tances Contributes to the G20 Goals of Broad-based Economic Growth. Financial Inclusion, and Women’s Economic Empowerment. Washington, DC. Digitization of Agribusiness Payments in Africa   25 APPENDIX B: AGRIBUSINESSES THAT PARTICIPATED IN THE AAPS Name of Agribusinesses 1 AB InBev 2 AFEX Commodities Exchange Limited 3 Barry Callebaut 4 BOVIMA (Bonne Viande de Madagascar) 5 Bunge 6 Cargill 7 Country Bird Holdings 8 Ecom 9 Export Trading Group (ETG) 10 FrieslandCampina 11 Interprofession of the maize sector of Mali 12 JFS (Joao Ferreira dos Santos) 13 Kenya Tea Development Agency Holdings Ltd. (KTDA) 14 Kyagalanyi Coffee Ltd / Volcafe Uganda 15 Louis Dreyfus Company 16 Mali Shi 17 Mars Wrigley Confectionary 18 McCormick and Company 19 Meru Central Coffee Cooperative Union Ltd 20 Mukwano Industries (U) Ltd 21 Neumann Kaffee Gruppe (NKG) 22 Olam International 23 Olivado EPZ Limited 24 Produits du Sud 25 Sucden 26 Telcar Cocoa Ltd. 27 TruTrade Ltd 28 Unilever 29 VegPro Kenya Ltd 26   Digitization of Agribusiness Payments in Africa APPENDIX C: AFRICA AGRIBUSINESS PAYMENTS SURVEY QUESTIONNAIRE 1. Agribusiness Information Name of the company: 2. Respondent Information Name: Title: Affiliation: Phone Number: Email: 3. Procurement in Africa. Please provide the following information for the crops you procure in Africa. Total approximate value Estimated Number of Estimated Share of of procurements last farmers in the supply Estimated Share of number of value of payments to fiscal year (in US$ million chain* (in 000s) farmers paid digitally (%) ** farmers paid digitally equivalent) (enter data) (enter data) (%) ** • None • None • <10% • <10% • 10%-30% • 10%-30% • 30%-50% • 30%-50% • >50% • >50% *Including farmers in direct procurement programs and farmers from whom procurement is done by suppliers. **including payments in direct procurement programs as well as procurements through intermediaries. 4. Countries with highest levels of Digitization of Procurement Payments. Please provide the following information for the top 3 country-crop combinations with highest share of procurement payments made through digital channels.24 Payment If other Final Primary withdrawal Disbursement specify If other specify Commodity Country payer to channel by the instrument to (enter (enter specification) the farmer farmer the farmer specification) • Electronic voucher • Branch of a bank • Credit • Branch of a NBFI transfer to a • Directly • Agent of a bank bank by the • Agent of a NBFI account company • Agent of a • Credit • Buying nonbank transfer to agent payment service a NBFI (interme- provider account diary) • E-wallet of a bank • Credit • Farmer • E-wallet of a transfer to organi- nonbank e-money/ zation payment service mobile provider money • Other account • Other 24. This question was modified for national respondents given that they only procure from one country Digitization of Agribusiness Payments in Africa   27 5. Rank the Major Reasons for not having fully digitized payments to farmers. If other specify Ranking Reason (enter speci fication) • Farmers prefer cash • No digital channels to reach majority of farmers; limited network coverage • Low ownership of mobile phones • Limited financial literacy • Investment needed from company too high • Other 1 2 3 6. Corporate Strategy on Payments Digitization If there is a corporate target Is there a corporate toward digitizing payments What investments is the company planning initiative to increase or to the farmers, what % of Corporate to make in the next three years to support implement digital farmers in your supply chain Priority its digitization efforts? (in US$ million payments to farmers in are targeted to receive equivalent) (enter data) Africa? digital payments by end 2020?* (enter data) • Low • Medium • High *Including farmers in direct procurement programs and farmers from whom procurement is done by suppliers. 7. Payments Digitization - Country Initiatives. Please provide the 3 country-crop combinations that are of highest priority to the company. What % of farmers in the supply chain are expected to Commodity Country receive payments digitally by end 2020?* *Including farmers in direct procurement programs and farmers from whom procurement is done by suppliers. 30   Digitization of Agribusiness Payments in Africa