Last Updated on July 29, 2020 by Nick Baskett
Updated 22 July, 2020
The latest WCF report has highlighted the issue of only 10% of payments being made digitally for farmers in Ghana’s cocoa sector. However, 90% of farmers now own mobile phones, which can be used to enable digital payments, according to the latest research.
Digital financial services represent a powerful opportunity to deliver on our vision of a sustainable and thriving cocoa sector,RICK SCOBEY, President, World Cocoa Foundation
The report makes the case that there are core benefits to digitisation, which includes
- Shortening the operating cycle
- Making it safer for those handling cash
- Reducing interest costs
- Increasing transparency
According to the report solving the issue of enabling far more digital payments to farm communities and educating people at the sharp end of the industry on this is necessary to help raise their standards of living.
Editors note. Something often not taken into account with cashless schemes is that locals will often have to pay suppliers in cash. Some countries (my experience of this is outside of Africa) banking systems are so restrictive that withdrawing cash to pay a supplier is just not possible – invoices are required and transactions are scrutinized.
In these environments, businesses are forced to take cash payments, so they can pay a supplier, who insists on working in cash. Where restrictive banking conditions and government controls like this exist, initiatives like this one will have an uphill battle.
Reading more about the results in Ghana, however, the scheme seems to be having a positive impact.
In the Côte d’Ivoire, many farmers are obliged to work for payments below UN definitions of poverty, which can only be addressed through securing basic levels of pay that are raised wholesale.
This is one of the areas where making payments transparent through a tracked digital platform can assist in enhancing farmers lives.
Over 90% of farmer-level transactions in Ghana take place in cash, representing more than GH¢7 billion, or US$1.26 billion of payments annually.Digitizing Payments in Ghana’s Supply Chain
On the Better than Cash website, there is a reference to a story that gives an example of how this works. Samuel takes his crop to the Licensed Buying Company (LBC) and gets paid immediately to his digital wallet, that he keeps on his phone.
Since not cash is involved, the clerk is less likely to get robbed, while Samuel is able to send money immediately to his kids if they need something at school. He also says that not having cash in his pocket means he tends to save more – something we can probably all relate to.
The LBC has a lot to gain from digitisation. The Better than Cash alliance estimates in this report that costs and risk of cash to the cocoa sector are valued at more than $20 million every year, or more than 20% of turnover for all LBCs.
Cocoa prices have taken a notable hit amid the COVID-19 pandemic within West Africa, which compounds an existing issue. Initiatives like this one that can contribute to improving farmers profitability are welcome.
Further work will be required to enable farmers access to digital markets for other supplies and goods that provide them with an adequate incentive to transition to consider going online.
As noted by the WCF for many rural farming communities in Ghana that form the cocoa sector’s foundation, digital and financial literacy may not be exceptionally high. Still, with a sustained education programme, improvement can be made that does not require high levels of technological investment.
A practical payment system based upon the already high use of mobile phones may have a transformative effect if enough communities can be convinced of the positives of making such a move.
We received an email from a reader who felt it was important to stress that the dangers of abuse and corruption when dealing in cash were real and a digital platform was a superior approach. I have added a summary of their comments here: