R. OkinemFriday, Ghana

Mobile banking feasibility study among smallholder cocoa farmers in GhanaSession: ICTs/Mobile Apps for Access to Financial Services and Insurance

CSSCPP Agric Financing in Ghana

• 3-year Gates Foundation grant in partnership with KKFU and Chemico Limited

• To increase agric input of 12,000 smallholder cocoa farmers in Ghana, increasing yield and income by 250% and 100% respectively.

• 10,313 smallholder cocoa farmers registered by KKCU and MoFA in 5 regions representing a total of 20,626 acres, with expected output of 144,300 bags (9,240 tonnes) worth $19.7 million.

• 8 Business Development Centers operational in 8 districts, allowing 8,989 cocoa farmers access to $3,918,000 worth of inputs under the input credit scheme, resulting in yield increase of 82% and corresponding income increase of 142%.

• 268 agro dealers certified to access trade credit from input supply companies using CNFA’s credit guarantee facility.

• 5,852 farmers and 431 producer groups trained in improved cocoa production techniques and crop diversification, facilitated by representatives from Chemico and Cocoa Research Institute of Ghana (CRIG).

• 1,446 smallholder farmers received information, training, and corresponding certification about land rights through Medeem Ghana’s Parcelcert program.

• $7 million in input credit to smallholder farmers leveraged through strategically designed matching grants.

Problem Statement

• A total of 474 cocoa farmers under the CSSCPP were interviewed in this study.

• Input supply component of the CSSCPP, smallholder producers were required to pay a 1/3 initial deposit prior to receiving chemical inputs.

• Smallholder Farmers were then given one year to pay the remaining 2/3 of the cost.

• Difficulties in loan recovery of the remaining 2/3 partly, due to improper records keeping and credit officers using the funds to purchase more cocoa at the detriment of the scheme.

Overview of challenges faced by Agro Stakeholders

• Diversity of input dealers/suppliers, primary producers, processors, transporters, storage/inventory warehousing operators and distributors;

• Low loan recovery; • Untimely delivery of agricultural credit; • Limited access to medium to long-term agricultural loans; • Seasonality and variability of rainfall; • Property rights and unsecured land tenure system; • Lack of appropriate collateral for agricultural financing; • High level of defaults among agricultural loans beneficiaries in

comparison to other sectors; • High transaction cost of disbursement of agriculture loans to

smallholders.

Objective of the Study• Understand the need for and willingness of

smallholder farmers to utilize m-banking.

• Establish a relationship between MNOs and smallholder farmers.

• Verify that the telecommunication infrastructure is reliable for mobile money Transactions.

• Confirm that KKCU and other participating financial stakeholders are able to implement mobile banking in their operations.

• Report that mobile banking is feasible with smallholder cocoa farmers in Ghana.

• Recommend next steps for the implementation of mobile banking in rural communities.

Factors Influencing m-banking adoption

• Higher level of education had a higher adoption rate as compared to respondents who had no formal education.

• Numerically, 63.9% could read numbers and 48.1% could write numbers.

• Farmers who own a bank account or use any financial services are more likely to adopt m- banking. 54.3% respondents have a bank account.

• The farther the farmer is to a bank or financial service provider, the more likely that farmer will use m-banking services.

• Social capital through membership in farmer organization also affects the likelihood of using m-banking services.

Farmers Education vrs m-Banking Usage

Mobile Network Usage by Farmers

Proposed Tripartite Agreement in the Agro Value Chain

• A viable mobile solution requires a banking platform that interfaces with any of the MNO Mobile Money platforms.

• All financial transactions will be via the mobile banking platform and a credit officer will receive and pay money via the mobile banking platform.

• The platform should automatically deduct the loan repayment amount anytime the farmer sells his/her produce to a credit officer.

• The minimum amount that should be deducted with respect to the number of cocoa bags that a farmer sells at a particular time needs to be agreed upon with the various stakeholders.

Proposed Mobile Banking Solutions for Agric Financing• Financial Operator (e.g. universal/commercial bank, rural bank)

provides financial services to farmers, through farmers groups/out growers;

• Farmer groups/out growers make deposits and repayment of loans to Financial Operator through a mobile banking platform;

• Technical Operator (TO) provides technical (modern inputs, technical/extension advice and marketing services (guarantee to purchase produce that meet predetermined standards at agreed prices) to farmers through contract farming agreements;

• Farmer Based Organizations/Out growers sell produce to TO and/or through TO to

• other end buyers; • Financial Operator provides loans to TO via the mobile banking

platform for its own • operations, or through TO to farmer groups/out growers; • TO repays own loans and /or loans of farmers collected at

source when paying • farmers for produce bought via the mobile banking platform.

Financial Services

Proposed Services on the Platform

• Mobile Banking

• Mobile Payment

• Mobile Insurance

• Mobile Money Savings

• Mobile Money Transfer

• Risk Management

• Financial Analytics

• Transactional State Analysis

• Collateral Management

• Visualization

• Inventory Management

• Maps

• SME website

• Weather Information

• Knowledge Sharing

Non Financial Services

Critical Success Factors

• MNOs such as Airtel or MTN need to have mobile money merchants in proximity to the communities in the study districts so that respondents can have access to physical cash anytime possible.

• A further education to the communities on the benefits of using m-banking beyond Agric Financing program should be encouraged

• Since most of the farmers use MTN, the program should make provision for the farmers to appreciate porting their mobile numbers to the MNO the program decides to use for the m-banking.

Conclusion

• 90.32% of the farmers were positive about using m-banking for output sales whiles 89.5% were positive about using m-banking for input supply provision.