In 2017, MM4P Uganda, working with the private sector partners, spearheaded the transition from cash to digital payments in the agricultural sector. The focus was put on some of the most important cash crops and staple foods in the country: tea, coffee, seed oil, maize and dairy. And these projects directly impact the lives of small-holder farmers, as they opt to be paid digitally, rather than in cash.

On this digitization journey, MM4P engaged with all players along the value chain; farmers, cooperatives, traders and other private sector players, to fully investigate the opportunities and value of digitizing payments. On this journey, we have learned some things the hard way. We have learned not to overlook, underestimate or ignore certain key aspects.

Competition

MM4P was quick to learn that to guarantee success and speed up the market growth, there is need to infuse a healthy dose of competition in our projects.

Instead of just one mobile network operator implementing bulk payments for tea workers for instance, three different models were tested. One mobile network operator processed the payments on one tea estate, another one the next and an aggregator made payments to the last estate. This set up did get things moving. But when a business case is clear and players see the potential for profit, natural market competition takes over. Something that we see happening in our Dairy projects for instance. Best results of scaling up and growth potential were seen in areas where market competition could just take its natural course.

Traders

In most of the value chains our projects targeted sellers, often in organized form such as cooperatives, and large off-takers. MM4P discovered that traders, middle-man, are an invaluable part along this chain, often connecting sellers to buyers and driving the payment process. Talking to traders and mapping their behavior provided valuable lessons on how to also digitize payments to and by traders.

Store of Value

Once farmers receive their pay digitally, they can use this money for several purposes. To pay school fees, remittances and simply store money safely. MM4P learned that people are not always looking for a savings product which will earn interest or any benefits; just a safe place to save a little money for emergencies and other needs. That is where the value of a mobile wallet lies for many. Something to keep in mind when developing digital financial products beyond payments; e.g pay-as-you-go models for services such as solar, as well as lay-away products.

AgroTech versus FinTech

For the implementation of high volume payments, MM4P worked a lot with FinTechs in Uganda. An important take away has been that FinTechs that specialize in agriculture, so called AgroTechs, are more successful in the digitization journey, given their deep knowledge of the sector. Collaborating with organizations such as MobiPay, Akorion and MNO payment aggregators have boasted and highly benefited the MM4P projects.

Conditions for digitization

Last but not least, MM4P has learned that there is a set of basic requirements that need to be in place in order for people, especially in rural areas, to make the switch and stick to digital.

The necessary conditions identified include:

• Network coverage;
• People need to own a phone with a SIM card;
• People need to understand how to use these services (literacy);
• People should be able to find an agent in a nearby area;
• This agent then needs to have enough float (liquidity in network);
• Services need to be affordable (digital versus cash);
• And people need to be able to spend their mobile money digitally (use cases beyond payments).

Just one of the above missing, makes it hard to create a digital environment where people have a mobile wallet, know how to use it and use it on a daily basis.