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Why going digital works for farmers in Nepal

DFSgoRural

Why going digital works for farmers in Nepal

Understanding the digital financial interventions in dairy and tea value chains
October 30 , 2017

A dairy farmer in Nepal.

Kathmandu, NEPAL - 

If you ever get a chance to interact with a farmer in Nepal, do not forget to ask this question, “How do you pay your workers and how do you receive the money from your distributors?” The most common answer will be “In cash”.

In a country where agriculture contributes two-thirds of the GDP and employs more than half of the population, digital finance and mobile money are still considered very foreign and sophisticated concepts. A recent study on agriculture’s digital linkage shows that digital finance can play a crucial role in solving financial problems that farmers face on a day-to-day basis. There is a real need for digital financial solutions such as receiving online payments for farmers, as well as viable business potential for digital financial services providers.

As a case in point, let us look at two such agricultural produces - dairy and tea. In many tea plantation areas in Nepal such as Illam, the tea farmers are often dairy farmers as well. And in fact, both the tea and dairy value chains look very much alike. With similar supply and payment models. Let us show you why.

Supply Chain

Dairy: Every morning from 6:00 am to 8:30 am dairy farmers walk to the nearest cooling centers (which include cooperatives) with their milk. Then dairy trucks collect the milk from these chilling units between 10:00 am to 1:00 pm. Dairy processing companies receive the milk within two to three hours. From here milk is further processed and then finally transported to small shops and supermarkets.

Tea: All day tea workers pick and store the leaves from the plantation at the nearest collection center. Cooperatives hire loaders to pick up the produce from collection centers and sends them to tea factories. After doing a final quality check, the tea factories package and transport the product to small shops, export companies and supermarkets all over Nepal. Finally, payments are released to the cooperatives from tea factories.

Payment Flows

Dairy: Dairy companies pay cooperatives every two weeks on their bank accounts. The cooperative officials withdraw money from the bank and bring the cash on motorbikes to the cooperatives. From here, farmers are paid in cash. But the farmers seldom deposit their earnings in a bank account simply because the bank branches are located at a distant location.

Tea: Tea factories pay their workers every two to three months, as they receive payments for each consignment exported or sold locally. Tea factories transfer the payment to the cooperative bank account. The cooperative sends the payment to collection centers in cash due to lack of options such as bank transfers available to its payees.

Considering the similarities in the value chains of dairy and tea, introducing digital modes of payments can help eliminate problems such as risky cash movements, taking loans from local villagers, friends who charge high-interest rates etc., UNCDF-MM4P has come up with an optimum way to leverage digital finance in the agriculture value chain of Nepal:

  1. Digitize limited products in value chain

Payments from the dairy companies are carried on motorbikes to the cooperatives. Officials from the cooperatives then pay the farmers in cash. If a digital financial service providers comes into the picture, they can enroll the dairy cooperative as an agent and offer bulk payment solutions to the farmers who are the members of the cooperatives. The digital finance provider can also offer mobile wallet services to farmers where they can receive the payments in an interest-bearing account.

  1. Customize products

Both tea and dairy factories can partner with cooperatives to promote digital finance. Like the dairy cooperatives, tea cooperatives will also be enrolled as super agents and offer bulk payments to other cooperatives. Digital finance service providers can partner with financial cooperatives or banks to use transactional histories to develop credit scoring tools. These can help offer small credit to farmers for immediate needs and insurance to safeguard livelihoods.

  1. Integrate access to information and digital marketplace

Once the digital payments are in place, it will open a gateway for other financial services and smart solutions for farmers. Partnering with other organizations developing IT solutions for ag-businesses will help design and disseminate services such as mobile applications for farmers. These innovative tools will address new agricultural practices, market prices and financial literacy. Similarly, digital finance providers can also partner with virtual marketplace providers that can offer access to seeds, fertilizers, equipment etc.

There are several pain points for farmers in both dairy and tea value chains when it comes to receiving payments and accessing financial services. A simple digital finance intervention can help eliminate the financial problems they have faced since starting work. With 95% mobile phone penetration[1] rates in Nepal, cooperatives and farmers are already safe-guarded with their parachutes. Now it is only a matter of making the jump.

[1] FINSCOPE Survey highlights Nepal 2015

By Aliska Bajracharya

For more information, please contact
Aliska Bajracharya
Knowledge Management and Communication Consultant, Nepal
Additional Information
Aliska Bajracharya
Knowledge Management and Communication Consultant, Nepal

Money falling from the sky

DFSgoRural

Money falling from the sky

Going from cash to digital salary payments on tea estates in Uganda
May 16 , 2017

Since April, McLeod Russel tea workers can volunteer to receive their salary through mobile money instead of by cash.

Kampala, UGANDA - 

A small UNCDF team is driving on dirt roads for hours to get to Mwenge Tea Estate, one of the largest such estates in the country. Every now and then the team passes a small trading centre with a few signposts for mobile money agents. The nearest tea estate is a 30-minute drive away, a distance that most tea workers need to cover twice a month on foot to send some of their earnings back home, to family living in another part of the country or even abroad.

About 8,000 people work on six McLeod Russel tea estates, including Mwenge, located around Fort Portal in Western Uganda. Two times per month, pluckers, weeders and sorters receive their salary payment in cash. To pay these employees, who don’t have access to a bank account, McLeod Russel charters a small aircraft to distribute the cash needed. Bags of money are dropped out of the plane onto each of the six McLeod Russel estates.

The money bags are then collected and taken to administrative offices on each of the estates, where a team counts the money, puts it into small brown envelopes and finally pays the employees—a process that is lengthy and stressful. On paydays, regular security forces are supported by extra police officers to secure the whole process.

As soon as workers start queuing for their salary payment, a small market emerges outside of the estate gates. Local women sell vegetables and fruits, while boda-boda motor taxis are ready to take people to the nearest trading centres. Most workers have to find their way to a mobile money agent to send some of their earnings back home, to pay a family member’s school fees for example.

It is on these tea estates that UNCDF, together with McLeod Russel, is piloting the digitization of salary payments. Since April, tea workers can volunteer to receive their salary through mobile money instead of by cash. Slowly but surely more and more people are signing up. For some workers it is the first time they are using mobile money, and some have difficulty understanding how the transaction works. What is more, the use of mobile money services is not completely free of charge, so workers also need to understand and agree with the transaction costs.

But once these challenges are overcome, receiving their payment on their mobile phone can save the workers a lot of time, money and stress: time queuing to receive their pay, time and money travelling to the nearest village to send money back home, and worry about their safety, as travelling with two weeks’ pay can be very risky. As for McLeod Russel, paying employees digitally greatly reduces the stress and cost associated with handling vast amounts of cash and keeps workers focused on actually plucking, weeding and sorting tea on paydays, rather than on waiting to receive their salary in cash. It is a huge benefit for all parties.

Over coming months, this UNCDF pilot on digitizing bulk payments within the tea value chain will roll out to three of the six McLeod Russel estates. Results, success stories and lessons learned will be shared here. As the team travels back to Fort Portal this week, they will talk to some of the many migrant workers on the estates, who send a large part of their pay to neighbouring countries like the Democratic Republic of the Congo and Rwanda. 

By Bram Peters and Naomi de Groot, UNCDF MM4P in Uganda.

For more information, please contact
Naomi de Groot
KM Consultant
Additional Information
Naomi de Groot
KM Consultant
Video

DFS Media Library

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DFS Go Rural Field Visit

Mobile Money for the Poor and MicroLead, two flagship global thematic initiatives at UN Capital Development Fund, are hosting a joint learning event in Uganda in February 2015. Partners will be exposed to expertise in agent network management, savings group linkages, smallholder farmer initiatives and mobile network operator perspectives, as well as have the opportunity to share and learn from each other. The funders—the Swedish International Development Cooperation Agency (Sida), the Australian Department of Foreign Affairs and Trade (DFAT), the Bill & Melinda Gates Foundation, The MasterCard Foundation and the Livelihoods and Food Security Trust Fund (LIFT) Myanmar—are committed to sharing knowledge and learning for and with partners of the programmes.

The main objectives of the workshop are to expose participants to cutting edge initiatives in branchless banking, which will allow financial service providers to reach deeper into rural areas, to create/solidify the foundations of a community of practice amongst the programmes’ stakeholders, and to share and learn.

The themes/topics selected for this workshop reflect the ultimate goal of delivering services and products, particularly deposit services, adapted to low-income people in rural areas.

By the close of the workshop, partners and practitioners will have reflected on the local challenges faced when developing agent networks in rural areas and how to overcome those challenges based on the experience of their peers or exchanges with their peers. They will be equipped to set up clear and efficient partnerships and to amend and/or create new policies enabling the development of the digital financial ecosystem in their respective countries.

Follow the event on www.dfsgorural.com

*********

About MM4P

Mobile Money for the Poor (MM4P) is a global programme supported by UN Capital Development Fund (UNCDF) and the Bill & Melinda Gates Foundation, managed from UNCDF Brussels. The programme provides support to branchless and mobile financial services in a select group of least developed countries (LDCs) to demonstrate how the correct mix of financial, technical and policy support can build a robust branchless and mobile financial services ecosystem that reaches low-income people in LDCs.

About MicroLead

MicroLead is a UNCDF global programme initiated in 2008 to meet the challenges of providing deposit services to low-income rural people who are currently un- or under-banked in order to enhance their capacities to weather shocks, smooth income streams, and save the future. With the generous support of the Bill & Melinda Gates Foundation, The MasterCard Foundation and the LIFT Fund in Myanmar, MicroLead is working with a variety of FSPs and TSPs to reach rural markets with demand-driven, responsibly priced products offered via alternative delivery channels in combination with financial education so that customers not only have access but actually use quality services.

About UNCDF

UNCDF is the UN’s capital investment agency for the world’s 48 least developed countries. It creates new opportunities for poor people and their small businesses by increasing access to microfinance and investment capital. UNCDF programmes help to empower women, and are designed to catalyse larger capital flows from the private sector, national governments and development partners, for maximum impact toward the Millennium Development Goals.

Additional Information

Tillman Bruett
Advisor and MM4P Programme Manager
MM4P@uncdf.org

Pamela Eser
MicroLead Programme Manager
pamela.eser@uncdf.org

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Digital financial services go rural

DFSgoRural

Digital financial services go rural

Kampala, UGANDA at Speke Resort Munyonyo -23–27 February 2015
February 23 , 2015
Kampala - 

Mobile Money for the Poor and MicroLead, two flagship global thematic initiatives at UN Capital Development Fund, are hosting a joint learning event in Uganda in February 2015. Partners will be exposed to expertise in agent network management, savings group linkages, smallholder farmer initiatives and mobile network operator perspectives, as well as have the opportunity to share and learn from each other. The funders—the Swedish International Development Cooperation Agency (Sida), the Australian Department of Foreign Affairs and Trade (DFAT), the Bill & Melinda Gates Foundation, The MasterCard Foundation and the Livelihoods and Food Security Trust Fund (LIFT) Myanmar—are committed to sharing knowledge and learning for and with partners of the programmes.

The main objectives of the workshop are to expose participants to cutting edge initiatives in branchless banking, which will allow financial service providers to reach deeper into rural areas, to create/solidify the foundations of a community of practice amongst the programmes’ stakeholders, and to share and learn.

The themes/topics selected for this workshop reflect the ultimate goal of delivering services and products, particularly deposit services, adapted to low-income people in rural areas.

By the close of the workshop, partners and practitioners will have reflected on the local challenges faced when developing agent networks in rural areas and how to overcome those challenges based on the experience of their peers or exchanges with their peers. They will be equipped to set up clear and efficient partnerships and to amend and/or create new policies enabling the development of the digital financial ecosystem in their respective countries.

Follow the event on www.dfsgorural.com

About MM4P
Mobile Money for the Poor (MM4P) is a global programme supported by UN Capital Development Fund (UNCDF) and the Bill & Melinda Gates Foundation, managed from UNCDF Brussels. The programme provides support to branchless and mobile financial services in a select group of least developed countries (LDCs) to demonstrate how the correct mix of financial, technical and policy support can build a robust branchless and mobile financial services ecosystem that reaches low-income people in LDCs.

About MicroLead
MicroLead is a UNCDF global programme initiated in 2008 to meet the challenges of providing deposit services to low-income rural people who are currently un- or under-banked in order to enhance their capacities to weather shocks, smooth income streams, and save the future. With the generous support of the Bill & Melinda Gates Foundation, The MasterCard Foundation and the LIFT Fund in Myanmar, MicroLead is working with a variety of FSPs and TSPs to reach rural markets with demand-driven, responsibly priced products offered via alternative delivery channels in combination with financial education so that customers not only have access but actually use quality services.

About UNCDF
UNCDF is the UN’s capital investment agency for the world’s 48 least developed countries. It creates new opportunities for poor people and their small businesses by increasing access to microfinance and investment capital. UNCDF programmes help to empower women, and are designed to catalyse larger capital flows from the private sector, national governments and development partners, for maximum impact toward the Millennium Development Goals.

For more information, please contact
Tillman Bruett
Project Manager - Mobile Money for the Poor
+ 32 2 274 10 21
Pamela Eser
Project Manager - MicroLead
+1 212 906 6565
Additional Information
Tillman Bruett
Project Manager - Mobile Money for the Poor
+ 32 2 274 10 21

DFS go RURAL - What will you bring back with you to your institution?

DFSgoRural

Mon, 12/07/2015 - 00:00 -- mm4p
Embed Video: 

Description: 

In this video, UNCDF MM4P partners share one of the key takeaways they will bring back to their institution. The main objectives of the DFS Go Rural workshop (Kampala - Uganda, February 2015) were to expose participants to cutting edge initiatives in branchless banking, which would allow financial service providers to reach deeper into rural areas, to create and/or solidify the foundations of a community of practice amongst the programme’s stakeholders, and to share and learn.

By the close of the workshop, partners and practitioners have reflected on the local challenges faced when developing agent networks in rural areas and how to overcome those challenges based on the experience of their peers or exchanges with their peers.

DFS go RURAL - Why did you go for a field visit?

DFSgoRural

Mon, 12/07/2015 - 00:00 -- mm4p
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Description: 

In this video, the team of UNCDF recalls how the field visit helped MM4P partners learn about the benefits of a Human-Centered Product Development approach. The main objectives of the DFS Go Rural workshop (Kampala - Uganda, February 2015) were to expose participants to cutting edge initiatives in branchless banking, which would allow financial service providers to reach deeper into rural areas, to create and/or solidify the foundations of a community of practice amongst the programme’s stakeholders, and to share and learn.

By the close of the workshop, partners and practitioners have reflected on the local challenges faced when developing agent networks in rural areas and how to overcome those challenges based on the experience of their peers or exchanges with their peers.

DFS go RURAL - Why and how to go rural with DFS?

DFSgoRural

Mon, 12/07/2015 - 00:00 -- mm4p
Embed Video: 

Description: 

In this video, UNCDF MM4P partners provide evidence on why and how it is compelling to go rural with digital financial services. The main objectives of the DFS Go Rural workshop (Kampala - Uganda, February 2015) were to expose participants to cutting edge initiatives in branchless banking, which would allow financial service providers to reach deeper into rural areas, to create and/or solidify the foundations of a community of practice amongst the programme’s stakeholders, and to share and learn.

By the close of the workshop, partners and practitioners have reflected on the local challenges faced when developing agent networks in rural areas and how to overcome those challenges based on the experience of their peers or exchanges with their peers.

DFS go RURAL - What are we doing here?

DFSgoRural

Mon, 12/07/2015 - 00:00 -- mm4p
Embed Video: 

Description: 

In this video, the team and partners of UNCDF MM4P introduce the thinking behind the event. The main objectives of the DFS Go Rural workshop (Kampala - Uganda, February 2015) were to expose participants to cutting edge initiatives in branchless banking, which would allow financial service providers to reach deeper into rural areas, to create and/or solidify the foundations of a community of practice amongst the programme’s stakeholders, and to share and learn.

By the close of the workshop, partners and practitioners have reflected on the local challenges faced when developing agent networks in rural areas and how to overcome those challenges based on the experience of their peers or exchanges with their peers.

Going rural with digital financial services

DFSgoRural

Going rural with digital financial services

by Karima Wardak, Knowledge Management Associate, UNCDF
April 08 , 2015
Kampala, UGANDA - 

When a family member first told Mary that she could use her mobile phone to store her money, she felt that she had finally found a safe place to keep the earnings from her vegetable sales.  Mary soon experienced, however, that the journey to register and manage an account to be less simple.

At a four-day event in Uganda, UNCDF brought together 150 digital financial service providers from 20 countries in Asia and Africa to improve their understanding of the challenges faced by low-income entrepreneurs like Mary and find  solutions for them.

An event for learning and sharing experiences

Understanding the “user journey” was at the core of the learning event organized for grantees and partners from two UNCDF programmes, MicroLead and Mobile Money for the Poor.  Through meeting and talking with agents and clients directly, the participants, who were mostly providers of digital financial services (DFS), were able to identify ways to improve their services in rural areas by taking a more customer-centric approach. They also got an improved sense of how their ’cashless’ services can better meet the needs of farmers and small entrepreneurs in rural areas.  Participants also discussed savings group linkages, rural agent management, smallholder farmer initiatives and service design for poor rural households.

The participants came from countries ranging from the Lao People’s Democratic Republic, Myanmar and Nepal to neighbouring Ethiopia, Malawi and Senegal. They represented the entire DFS ecosystem: financial service providers (Equity Bank, FidelityBank, Laxmi, NBS Bank and Opportunity International, to name a few), mobile network operators (Airtel, MTN, Ncell, Tigo, etc.), central bank and ministry of finance representatives, as well as other non-banking providers and funders.

The field visit or “user journey” was an eye opener for digital financial service providers. It changed the way the participants approach the development of new DFS products, partnerships, and delivery channels.

Lessons learned and quick solutions from the user journey include:

Problem 1: Costly and time-consuming registration and know-your-customer (KYC) procedures: Not only does Mary need a passport photo but she also needs a copy of a valid ID, which is no small challenge in rural areas where photocopy machines are scarce, copies costly and finding a photographer can be next to impossible. When she does have the opportunity to get a picture taken by a professional photographer, chances are good that it will take several weeks if not a couple of months before the photographer returns with the precious prints. In such a situation, participants heard that clients like Mary are willing to sacrifice a family picture—even a wedding photo!

Potential solution 1: Some participants visited agents that offer to take the picture themselves through a device provided by the DFS provider. This solution seemed to be an obvious option to many participants to consider for their own countries and as a good investment in their attempt to improve the experience of DFS users.

Problem 2: Lack of literacy: Once Mary has collected all required documentation, she returns to her preferred agent with her phone and some cash for her first deposit. The agent then proceeds with registration, which in the best case scenario takes a couple of minutes but can take up to three weeks if the network fails to connect properly and activate the account. Since Mary cannot read or write, the agent completes the documentation paper work and holds Mary’s phone to show her how to manage the SMS messages. Mary painfully signs and accepts whatever fee the agent requests from her as she cannot read the poster that displays the official tariffs.

Potential solutions 2: Participants explored the potential that smartphones can offer and how short videos can be delivered on simple phones. This approach effectively replaces the written word, and is a practise used successfully by Freedom from Hunger in West Africa.

Problem 3: Long distances and lack of liquidity: Mary’s journey does not become easier after she is registered. To deposit cash, she plans a 15-kilometre trip to the nearest agent on the same day she sells her vegetables at the market. The journey comes at a cost, as waiting in a long line for her preferred agent takes time away from her business.On occasions when she needs cash, Mary knows that her preferred agent might not have the cash and be able to provide her with what she needs.

Potential solutions 3: What are the best options to keep agents afloat? Could providers recruit and train super agents capable of answering the urgent need for cash? Or would it help to map an agent network to ensure that clients can find an agent within five kilometres of their residence? Besides these ideas, another solution that emerged was turning every client into an “agent” as distance would then no longer be an issue. Each client could turn to one of their community members and manage transactions to either cash out or cash in money.

These are just three examples of challenges faced by low-income people in rural areas and possible solutions to improve the registration and usage of DFS. The realities faced by agents and clients revealed pain points that the DFS providers had never considered before.  Participants took the lessons learned from the training, especially the client and agent visits, home with them to adapt them into tailor-made solutions for their digital financial services clients.  One participant, Webster Chidze Mbekeani from TNM Malawi, said he would try his best to help people like Mary “by understanding her needs better rather than trying to just prescribe a solution”. Francis Matseketsa from Airtel Malawi went a step further, declaring: “I will roll out an engagement plan that ensures that the client is equipped with adequate information on the product and she knows where to go or how to contact us when she needs help. I want Mary to be delighted with our service.”

This post was originally published on Better Than Cash Alliance blog

To learn more, visit the Live Event page at www.dfsgorural.com.

For more information, please contact
Karima Wardak
Knowledge Management Associate
Additional Information
Karima Wardak
Knowledge Management Associate
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