As part of our activities at Mobile – 360 Africa this year, Tigo Rwanda and Access to Finance Rwanda (AFR) co-hosted the mAgri team, our guests and the GSMA’s Chief Regulatory Officer John Giusti, on a field trip to visit a tea value chain digitisation deployment in Mulindi, approximately two hours north of the capital Kigali. The deployment is the result of a multi-stakeholder partnership between:
- Three SACCOs (Savings and Credit Cooperative) – Umurenge/ sector Savings and Credit Cooperative (SACCOs) were part of a Government initiative to increase financial inclusion for Rwandans – the number of banked people has increased by a factor of 5 since 2011.
- Tigo Rwanda – provided the mobile money (MM) platform and sourced 11,000 phones which were sold to farmers at RWF 9,000 (USD 11.50).
- Access to Finance Rwanda (AFR) – AFR provided funding to procure core banking software, servers, internet connectivity and acquire short USSD code, capacity building for the tea SACCOs staff and board members and technical assistance to integrate Tigo’s MM platform with the SACCOs’ banking platform.
- The Wood Foundation Africa (TWFA) – The Wood Foundation Africa (TWFA) approached AFR for support and facilitated the implementation of the project together with the factory.
- The Mulindi tea factory, a subsidiary of TWFA – paying pluckers through their SACCO accounts.
How the system works
The SACCO in Mulindi started in 2005 with about 1,600 members and quintupled its membership within 3 years. Back then, up to 20 days could pass between a farmer taking produce to the factory and getting paid. The cooperative switched from using complicated paper ledger cards to manage their members’ accounts to an automated system in 2015 and nowadays, farmers can get paid within just 3 days; this makes a huge difference to them and to the SACCO, which became operationally profitable in 2016.
When the factory pays the farmers into their SACCO accounts, they receive a free SMS notification informing them that the money has cleared in their SACCO account. The integrated system enables farmers to remotely pull money from their SACCO account into their Tigo Cash wallets. The integrated system enables farmers to remotely pull money from their SACCO account into their Tigo Cash wallets which can be used to make Person-to-Person (P2P) transfers for motorbike taxis for example, and pay for other services including Cash Power (pay as you go electricity), airtime and school fees. The money pulled into their Tigo Cash accounts can be used by farmers to make Person-to-Person (P2P) transfers for motorbike taxis for example, and pay for other services including Cash Power (pay as you go electricity), airtime and school fees. Currently, about 91% of the SACCO members are using the integrated system to pull their wages into their Tigo Cash wallets. Adoption figures have been lower at the other two SACCOs involved in this initiative – the Mulindi SACCO management has been hugely credited for its willingness to pioneer new things, contributing to its success. Scepticism by older people has been identified as one of the barriers to adoption: they generally prefer to be paid in cash due to issues of trust and a lack of understanding about digital money. An underdeveloped MM ecosystem also means people tend to cash out immediately as the lack of merchants accepting digital payments makes it difficult to spend their money digitally.
In the middle of open tea fields with spectacular far-reaching views, we spoke to members of the SACCO after they had finished plucking for the day to understand how they perceive the system. Overall, the project has been well received and the farmers were pleased with the improvements in their lives. They are benefitting from quicker payments for their crops, added security by not physically going to collect cash which, in the past, put them at risk of being robbed, and they are no longer faced with the the loss of income and potentially wasted trips on the day they go to collect payments. The factory also wanted to reduce the absenteeism caused by the farmers going to collect wages and as such, have benefitted from more leaf being plucked. . In addition, there has been a reduction in the opportunity for fraud at the SACCO level.
However, it has not been without challenges: most farmers do not understand the exact fees they are liable for by using the system: these include Tigo cash out fees, P2P transfer fees and commission for the SACCO to cover operational and system maintenance costs. More needs to be done to communicate this with them. It is also unclear whether they understand how to use the service themselves or if they are relying on Tigo agents to make the transactions on their behalf. When asked what could be done to improve the service, the farmers said that they would like to gain access to insurance services, a breakdown of deductions sent via SMS and access to farming equipment they could pay for in instalments.
At the end of the day, we gathered at a café on our way back into the city to reflect on the experience during a debrief session and share our key learnings.
- Due to Rwandan Government regulation, MNOs cannot operate in the same way as banks – payments must be directed first through banks before the money can be converted into its digital equivalent. Beyond P2P services, farmers need access to credit, savings and insurance and MNOs do not hold lending licences and may not want the risks associated with lending to farmers anyway.
- The merchant payment conundrum is yet to be resolved – there is a need to modify our concept of merchant payments as no value proposition has been developed for merchant payments in Rwanda yet. Until then, it may be necessary to apply special rates for low-value P2P transactions to incentivise people to adopt MM as a viable enterprise solution. For example, Telenor’s microfinance bank in Pakistan first priority was to scale uptake of their services and slash prices from MM wallet for P2P transactions to get people to use the platform. However, this can only be achieved by simultaneously developing services that can be paid for using MM.
- It was evident again that training should not be considered a one-hit wonder – there is a need to push repeated use and continuous training to ensure people fully understand MM and appreciate its value to drive adoption. This will also prevent misunderstandings and rumours which could negatively impact the service’s credibility.
Overall, the experience put into perspective the impact our work has on the lives of farmers. Digitising payments in the agricultural last mile is hugely important if we are to work towards the financial inclusion of smallholder farmers. What became most apparent is the need to develop a fully functioning rural MM ecosystem in order for farmers (and other stakeholders) to appreciate the value proposition and build their trust in the system.
If you would like to find out more, please reach out to the mAgri team by dropping us a comment below and explore our online resources.