Digital Payments: Securing Financial Inclusion for Cocoa Farmers

Author Peter Sheilo Baghr

Project Coordinator
World Cocoa Foundation

Cash has been the common traditional payment for cocoa bean purchases. Unarguably, a lot of risk is associated with cash transactions along the cocoa supply chain. Licensed buying companies and farmers alike have gone through the terror of being robbed at gun point of millions of dollars and, in worse instances, people have lost their lives.

Access to finance by smallholder cocoa farmers to afford quality inputs, planting materials and basic socio-economic needs is a challenge. Moving to digital payments reduces the risks associated with cash payments, such as fraud and theft. Through digital payment services, cocoa buyers have access to digital records of payments made to farmers which helps map the flow of cocoa sales from the individual farmer to the cocoa buyer to the exporter.

Digitized payment notification on a farmer’s phone.

Digital payments enable cocoa farmers’ access to financing mechanisms that can help increase productivity. They can use the digital payment infrastructure to purchase inputs, reduce the time spent in traveling to make payments, better control their finance, and leverage existing means of payment and agents’ networks to help when life events occur, such as illness, school, or bill payments.

Digitizing payments to cocoa farmers, most of whom have previously not had bank accounts, will lead to better access to a broad range of financial services such as savings accounts, credit, and insurance, and will create additional economic opportunities, especially for women.

The World Cocoa Foundation in collaboration with Better Than Cash Alliance has started a process to support the growth of digital payments in the cocoa value chain. The initiative aims to help WCF member companies move from cash to digital transactions by exploring available options.

WCF has organized workshops with member companies on how to digitize payments within their supply chains and has provided clarification on the process and implications of going digital, including how to mitigate challenges. Companies have also introduced various digital financial services products:

Mobile network companies in Ghana, MTN, Vodafone, AirtelTigo and NFORTICS discussed issues around pricing, network coverage, agent availability and technical assistance with WCF member companies. WCF is currently providing technical assistance to companies that have expressed interest in piloting digital payments along their value chain.

The Ghana Cocoa Board is supporting WCF to implement a similar initiative with the Licensed Cocoa Buyers Association of Ghana (LICOBAG) to digitize payments. WCF was able to develop digital payment solutions for Licensed Buying Companies (LBC) in Ghana in collaboration with Mobile Network Operators, Fintechs and aggregators and to provide liquidity support by way of strategically citing agents in communities.

The need for vigorous sensitization on Digital Financial Services

MTN on-boarding farmers to receive digitized payments.

So far, cocoa farmers have been made aware using education on digital payments via phone calls. This is helping address the knowledge gap on the available and accessible digital financial services products for farmers and to encourage them to use their mobile money wallets. After been sensitized on the benefit of mobile wallets, Daniel Nsiah, a cocoa farmer in Kwabenakrom in the Amansie East District in Ghana could not hide his elation and remarked, “Thank you. I did not know that I can access loans from my phone by using mobile money frequently without a collateral.”

Uses of e-money

WCF has been working with Mobile Network Operators such as MTN to build up the ecosystem to support digitized payments within the cocoa supply chain in Ghana. Farmers are gradually paying for services and goods digitally in pharmacies, grocery stores and general merchandise shops, as well as building material and agricultural input shops.

A digitized agricultural input shop.

Jones Akwasi Yeboah is a chemical shop owner and a farmer at Ntinanko in the Amansie East District of the Ashanti Region. He is a recipient of the digital payment module implemented by WCF member companies Nestlé, Cocoanect B.V. and Cocoa Merchants Limited under the Nestlé Cocoa Plan. Jones mentioned that he is happy to receive digital payments from his customers, “Payments for my beans and sales of my medicine digitally is faster and my money is secured. The suppliers of my medicine accept digitized payments as well. I can therefore order for more medicine from my suppliers without traveling to the city, Kumasi which is over 22 miles from here. It saves me time and money.”

There is now more effort to educate farmers on digital payments and to facilitate their access to financial services. It is also important to continue working with other companies in the Ghana cocoa sector, such as the haulage companies, input dealers, and other suppliers to build the ecosystem to support digitized payments and to work with service providers to provide cash flow support and management.

A digitized cocoa value chain will ensure safe, fast, and secure transactions, empower smallholder farmers to use available digital financial tools to access financial services and will bridge the gap of financial inclusion.