Uganda

Uganda

Uganda Annual Monitor 2016

Uganda

Wed, 09/20/2017 - 12:53 -- anna.ferracuti

Uganda started the journey from a cash-dominated economy to a digital-based economy in 2009. The country is emerging as a strong performer in digital financial services (DFS). Two major mobile network operators (MNOs) dominate the market alongside active third-party providers. In 2016, most active customers used one or more ‘second-generation services,’ such as digital savings or lending products. While rural Ugandans are still half as likely to use a mobile phone, the growth rate parallels that of urban users—about 3% per year.

What Know-Your-Customer Regulations Apply in Uganda

Uganda

What Know-Your-Customer Regulations Apply in Uganda

By Richard Ndahiro, DFS Expert in Uganda
September 14 , 2017

Study on Know-Your-Customer Requirements for DFS in Uganda

Kampala, UGANDA - 

In the past couple of years Uganda witnessed a steady increase in financial inclusion, mainly driven by an increased uptake in mobile money. Financial inclusion insights Uganda (2016) shows that close to 4 in every 10 Ugandan adults (39%) now have access to financial services. 35% have a mobile money account, 11% have a full-service bank account, while 6% have an account in a non-bank financial institution. 

Financial inclusion, and exclusion on the flipside, is primarily a matter of access. Particularly for digital financial services (DFS), access is dependent on the ability of users such as consumers, traders, merchants, agents and aggregators, to be fully registered and compliant with the Know-Your-Customer (KYC) requirements by regulators. 

Talk to anyone working in DFS in Uganda and they will bring up the topic of KYC. These discussions mainly reveal:

  • A need for more clarity around the KYC requirements for the various DFS types of users 
  • Discrepancies in interpretation of requirements in the KYC regime
  • Challenges around registration and onboarding of, for example, agents, merchants and refugees due to strict KYC requirements. This results in excluding people from using DFS as well as lengthy onboarding processes, with a lot of paperwork for those registering.  

To fully understand all these issues UNCDF–MM4P researched all specific KYC requirements for DFS players in Uganda. The exercise sought to: 

  • Clarify the KYC requirements for opening and operating DFS accounts, including accounts for individuals, informal merchants and traders, formal businesses, and non-citizens such as refugees;
  • Understand how financial service providers are interpreting and implementing KYC requirements;
  • Assess the impact of the interpretation and implementation of KYC requirements on DFS adoption; and
  • Offer recommendations for addressing KYC challenges to foster DFS growth and uptake.

The results of this research are full of findings and insights for regulators, banks, mobile network operators and other financial service providers that operate DFS in Uganda. Please have a look at the summary or the entire study report.

In accordance with these findings, UNCDF-MM4P is engaging with the various stakeholders in a bid to address some of the issues highlighted from the report. 

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

Study on Know-Your-Customer Requirements for DFS in Uganda

Uganda

Wed, 09/13/2017 - 16:26 -- anna.ferracuti

The UNCDF MM4P program contracted BFA to conduct a Study on Know-Your-Customer (KYC) Requirements for Digital Financial Services in Uganda. The key objectives of the study were to: Clarify the KYC requirements for opening and operating different digital financial services (DFS) accounts; understand how financial service providers are interpreting and implementing KYC requirements for the aforementioned accounts today; assess the impact of the interpretation and implementation of KYC requirements on DFS adoption; and offer recommendations for addressing KYC challenges to foster DFS growth an

Creating a digital ecosystem for dairy farmers in Uganda

Uganda

Creating a digital ecosystem for dairy farmers in Uganda

By Naomi de Groot, MM4P Knowledge Management Consultant in Uganda
August 30 , 2017

Godfrey and his wife.

Nabitanga, UGANDA - 

Meet Godfrey. Godfrey and his wife are dairy farmers in a small town in central Uganda. Together they own six cows and about thirty goats. His wife mainly looks after the goats, which are sold for meat and Godfrey looks after their cows.

These six cows give a little less than ten litres of milk a day. Every morning, Godfrey takes the milk to the Nabitanga Dairy Cooperative (see location). Here, milk from about 120 smallholder farmers is collected every day, which is then sold to a larger milk company that processes, packs and distributes the milk. Since a few months, these milk farmers can receive the money for their milk digitally on their mobile phones. Godfrey was one of the first farmers who signed up for this.

In ongoing efforts to introduce bulk digital payments in agricultural value chains across the country, UNCDF is also collaborating with players in the dairy industry. Such as dairy cooperatives for example, who collect milk from smallholder farmers, which is then sold to larger dairy companies.

“I used to get paid in cash. Every two weeks someone from the cooperative would call me and tell me that my money was ready for pick up. I would then get a boda-boda (local motorcycle taxi) to take me to Nabitanga, which is about three miles away. A round trip that costs me UGX 10,000 (around USD 2,75). Just to collect my payment of around UGX 100,000”,Godfrey explains.

Now that he gets paid digitally on his mobile money account, Godfrey explains that it offers him a lot of advantages:

  • the privacy that receiving his payment on his mobile phone gives him. No one else in line can hear or see how much he is paid;
  • the fact that he doesn’t have to spend money for transport just to collect his payment;
  • he no longer has to worry about his safety when travelling with a large sum of money;
  • and the cooperative also doesn’t have to worry about their security measures when it is payday, which is normally a big burden as there is no local police station.

Godfrey also explains how he spends his income. This information is crucial to develop improvements to the digital payments eco-system, such as digital school fee payments and merchant transactions.

“Generally, I spend money on groceries, school fees for our four children, the agro vet, clothes and for medicine when someone is ill. And I also try to save some money on my mobile money account. I like saving money on my phone because I can easily access it in case of an emergency.”

UNCDF is currently exploring opportunities to create a more compelling eco-system for digital payments in Nabitanga. This includes introduction of mobile money merchant payments at the agro input store, the local boda-boda repair shop and the pharmacy amongst others. This way people can keep their money on their phone account and there is less need for withdrawals, and thus reduces the cost that comes with cash-outs. Godfrey, however, says that he doesn’t mind the cash-out fees as these outweigh the benefits for him.

“Receiving my pay on my phone works perfectly for me. There are no big challenges. I can easily send some money to family or pay school fees to the head-master directly. Mobile money is mobile, it keeps moving with you, it travels with you”.

The UNCDF pilot of testing digital bulk payments in the dairy value chain will run for the next months. During this project UNCDF also supports the dairy cooperative in digitizing their administration and accounting system. More about this activity will be shared in the months to come.

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

How to make mobile money more appealing than cash?

Uganda

How to make mobile money more appealing than cash?

By Pall Kvaran, Research Associate PHB Development
August 17 , 2017

Maize farmer in front of his shop. 

Kampala, UGANDA - 

Recent findings of UNCDF projects show that mobile money is an easy alternative to cash to facilitate bulk payments in the coffee value chain. However, coffee farmers who are being paid digitally for their produce, still see a lot of value in the usage of cash. To pay for their daily groceries such as rice, cooking oil and charcoal for instance.

“Something needs to change if agriculture value chains such as coffee are to be digitized”, argues Delia Dean, Value Chain & Digital Finance Specialist at UNCDF. “When we digitize such value chains, we need to consider every payment in a farmer’s day, all of which need to be considered for digitization. Our experience and observation tells us that, besides savings, many farmers have limited to almost no use case for mobile money. This means that if we are to create a positive value proposition and stimulate uptake of digital payments, we have to create additional use cases and these new options need to be integrated within their day-to-day spent patterns.”

Against this background, UNCDF and CGAP, with technical support from PHB Development are designing new business models for mobile money services in Uganda. Ciprian Panturu, Digital Finance Expert at UNCDF suggests that the Mobile Network Operators (MNOs) should start focusing on volumes rather than high-value services. “The current mobile money business model in Uganda is essentially driven by a single use case; person-to-person remittance services. People mostly use them to send money to family and friends living in rural areas. The recipients then find an agent and cash-out most or all of what they have received and pay a fee for doing that. This is where the MNOs get a big share of their revenues.”, says Ciprian. The main problem with this model is that there is a restricted demand and, more importantly, it ends up with a return to cash.

In the current model a strong and liquid agent network is required. But setting up and running an agent ecosystem for customers to collect these remittances is expensive. Agent commissions and other related costs are the main cost drivers and reduce profit margins for MNOs. At the same time, these cash-out fees represent an important barrier to regular use by customers. The digital journey systematically starts from and ends up in cash, which is what makes the model less efficient.

Nathan Were from CGAP says that MNOs are faced with large untapped opportunities; “People make several cash transactions every single day and there is always a cost associated with using cash. Such as the risk of losing money, theft and the inconvenience of carrying cash. If MNOs change their models so that the cost of using mobile money is well below the cost of cash, people will make the switch,” suggests Nathan and points out that this will lead to a reduced need for running extensive agent networks.

“This is where there are big opportunities for MNO’s and we have only scratched the surface of what can be done”, believes Nathan. “MNOs could transition to a closed-loop digital payments eco-system within five years. Although it requires taking some risks, but relatively limited upfront investment is needed and there is a lot of space for growth. MNOs now have a vast user base, currently mainly using mobile money for remittances. Meanwhile, the average user is using cash for more than 10 basic transactions to pay for goods and services every single day. If we can digitize this type of transactions with a competitive enough fee structure that is low enough to ‘beat’ the cost of cash, people will start using mobile money to conduct their regular payment transactions. MNOs can tap into this market and we expect to see an exponential increase of their transaction volumes.”

More on Value Proposition Mapping and the results have been shared in two previous blogs: “Going Digital or Stick to Cash?” and “Making mobile money more attractive to farmers.” 

For more information, please contact
Naomi de Groot
KM Consultant, Uganda
Páll Kvaran
Research Associate, PHB Development
Additional Information
Naomi de Groot
KM Consultant, Uganda

Uganda Testing Digital in Tea

Uganda

Uganda Testing Digital in Tea

Watch Latest Video
August 10 , 2017

The video team on our way back to Kampala after three busy days.

Kiko tea plantation, UGANDA - 

When you are told that “Money falls from the sky to pay tea farmers”, you go through a moment of disbelief and astonishment. When you witness it, you feel the adrenaline rush through your veins as security officers rapidly make sure the airdrop is a success.

A few months ago, I was in Uganda for the production of a new MM4P video with the country team. The plan was to film and interview tea workers who chose to test digital payments. Every two weeks these workers receive their payment directly on their phone instead of spending a half day queuing for their payment at the factory.

Fort Portal the town nearby -half day’s walk -  is not small and has bank with an ATM, but the security measures and the amount of cash needed to pay the workers are just not available at the local bank. Reason why McLeod prefers to send the money by airplane to the tea estates west of Kampala.

Dropping cash comes with issues one might not think of at first. Weather is an enemy of such methods. When an airplane can’t fly, due to rain for instance, the pay day has to be postponed. The human factor can also create issues, when for example the wrong bag is dropped on the wrong estate or just one bag is released instead of two. When such issues take place the tea estate manager, Vikram Singh Ranawat takes his car and flies – literally flies with his car full speed on the road- to ensure he will be able to pay on time the workers lined up in front of factory gates.

Digitizing these payments can potentially come with challenges too. In the pilot phase, that covered payments to 100 workers on the McLeod Russell tea estates, specific challenges were uncovered and solved. The good management during this phase is critical to prevent hick ups from hampering a smooth roll-out to all workers volunteering to test receiving their pay on their mobile phones instead of cash.

The tea workers have to familiarize themselves with this new service and the options it offers. When we met 15 of them before the filming, they still have many questions about the payments they or their coworkers have received. Wycliffe Ngwabe, UNCDF MM4P Digital Finance Expert, spent 30 minutes improvising a Q&A session to answer all these questions and telling workers. The questions in fact mainly revolved around phone usage and how they could get their own phone through payment in installments, and about the fees, and the possibilities about saving money on their mobile money account. Despite that the team hadn’t planned any of this in our script, the cameraman had the bright idea to record the Q&A session with the consent of the farmers. This video with the questions farmers had for Wycliff, will soon be released.

While you wait for that extra video, I invite you to view the story of the tea estate manager Vikram and the tea workers telling us about their experiences during the MM4P pilot to digitizing payments (video is on the right-hand-side column).

Come back to view the next video!

For more on the digital payment pilot at McLeod please read this previous article.

by Karima Wardak, KM Senior Associate UNCDF-MM4P

For more information, please contact
Karima Wardak
KM Senior Associate UNCDF-MM4P
Additional Information
Karima Wardak
KM Senior Associate UNCDF-MM4P
Video

Time for Action

Uganda

Time for Action

Piloting digital cash based interventions with refugees in Uganda
July 17 , 2017

Image #1 (above): Queue at Airtel's help desk in the Bidi Bidi refugee camp, Uganda.

Image #2: Financial inclusion dashboard, Uganda.

Kampala, UGANDA - 

Never have there been so many displaced people as now. People fleeing their homes in search of safety. Many displaced hope to find this safe haven in Uganda. The country currently hosts 1.2 million refugees, 72% of whom - mainly women and children - are from South-Sudan.

Last month, the UN Secretary General António Guterres visited Uganda to co-host the Solidarity Summit on Refugees. This summit was called to translate the New York Declaration Commitments into action. And action is needed because, since last year, over 900,000 refugees, primarily from South-Sudan, have fled to Uganda.

Together with the UN Secretary General around 200 high-level international guests attended the summit and visited the settlements in Northern Uganda. Amongst them was also the Belgian Deputy Prime Minister and Minister for Development Cooperation, Alexander De Croo. With a small team and journalists from Belgium, De Croo visited both South-Sudan and Uganda as the Belgian Government supports several projects providing humanitarian assistance to the refugees in Uganda.

During the last day of his visit, De Croo also had the chance to meet with several Ugandan stakeholders that use digital solutions to spur the development of Uganda. Not only is De Croo Minister for Development Cooperation, but also for the Digital Agenda, therefore he is a strong supporter of the use of digital solutions to advance the UN’s Sustainable Development Goals.

During this meeting, the UN Capital Development Fund’s programme Mobile Money for the Poor (UNCDF MM4P) presented an online financial inclusion dashboard that has been developed with support from the Government of Belgium, using the data records from the two biggest mobile network operators (MNOs) in Uganda: MTN and Airtel. This dashboard has been developed by Dalberg Data Insights and it gives real-time insight on the penetration and usage of mobile money in the country. It provides a very detailed overview per district and even per MNO cell tower on how many people have a mobile phone, whether they are using mobile money and what their activity rate is. This application directly shows the impact of UNCDF’s projects on financial inclusion, with special focus on Ugandans living in rural areas.

UNCDF is also supporting the digitization of cash-based interventions (CBIs) for refugees in Bidi Bidi. Instead of cash, which is being driven by a van into the settlements, refugees as well as members of the host communities can now receive this supplement digitally on their mobile money account. In order to successfully implement digital CBIs, UNCDF MM4P works with its partners DanChurchAid and MercyCorps to build a digital ecosystem to enable the digitization of these transfers. Concretely, this means that UNCDF engages with the MNOs to ensure that there is sufficient mobile network coverage, and that it assists in the roll out of a network of mobile money agents that maintain sufficient cash levels to sustain withdrawals by refugees whenever they receive mobile money.

These disbursements may be small but are very important to the recipients. Once refugees receive them digitally, this opens the door for other use cases for digital financial services, such as access to mobile savings and loans, but also to affordable Pay-Go Solar Power Systems. “Cash transfers to refugees are increasingly being adopted by humanitarian and development organisations as they are a catalyst for local economies to grow, especially enabling host communities to benefit from the growing local economy that comes with the influx of refugees. Mobile money fits in perfectly as it not only ensures safe and secure cash transfers to beneficiaries, but also because of the additional services like the ability to save using a mobile phone”, says Ronald Rwakigumba, Uganda Country Coordinator, Agri-Fin Mobile, at MercyCorps.

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

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

Making mobile money more attractive to farmers

Uganda

Making mobile money more attractive to farmers

Value Proposition Mapping for digital payments in Uganda’s coffee value chain
July 12 , 2017

Closed mobile money agent rural Uganda.

Kampala, UGANDA - 

In 2015, UNCDF MM4P partnered with Kyagalanyi Coffee Ltd (KCL), a leading coffee exporter in Uganda, to digitize the payments to its 7,000 farmers around Mount Elgon. As part of this effort UNCDF MM4P, in collaboration with CGAP, contracted PHB Development to analyse the attractiveness of digital payments versus cash for stakeholders in the coffee value chain. For that purpose, PHB introduced a new approach that compares the cost of cash with the cost of digital payments for every transaction smallholder farmers and coffee traders engage in. PHB gives a name to this new approach Value Proposition Mapping (VPM), which is based on a methodology derived from accounting: Activity Based Costing.

Farmers and traders were interviewed to map their market behaviour, all their sales and purchases and where these took place. Next, for each transaction the associated costs were calculated.

Ciprian Panturu, Digital Financial Services Expert at UNCDF MM4P, explains: “If we look at payments from KCL to farmers at coffee collection points for example, the cost of cash for an average farmer is around UGX 27,000 per transaction. This includes the costs of transportation, time and the perceived risk of carrying cash back to the farm. If farmers are paid with mobile money, the cost would be reduced to around UGX 3,500 per transaction. Farmers would only have to pay for cash-out at a mobile money agent, something that is done frequently.” While this looks like a great value proposition at first sight, the situation is more complex.

“Farmers will still need to travel to the collection points even if they are paid with mobile money, simply because they need to supervise the weighing and grading of their coffee. And ensure they get the best price for their product. So, if farmers still have to travel, even when being paid digitally, the actual cost of cash is much lower, around UGX 3,500. Cash is also more versatile and the cost associated to the risk of carrying it, although acknowledged, remains theoretical.” says Ciprian.

“The analysis shows that farmers have a hard time spending the money on their mobile wallet. In some cases, they can pay school fees using mobile money or they use it to send remittances to family members, but those are limited use cases. It simply doesn’t make sense for them to pay for farm inputs or food with mobile money,” according to Ciprian. UNCDF and its partners in this project are using such insights to find ways to enhance the mobile money ecosystem. It is one thing to pay people digitally, it is another for these farmers to make their everyday payments digitally.

Nathan Were from CGAP thinks that the data collected during the VPM exercise is very valuable. “This information can be used as leverage to talk to MNOs [mobile network operators] about their current business models. Most MNOs are making profit from remittances cash-outs.” However, according to Nathan, “Mobile money can become an attractive alternative to cash, provided that merchant registration is made easier and accessible, and pricing is adjusted. When for example farmers are able to pay for their daily shopping with mobile money, digital payments can be perceived more positively, with tangible benefits for all users. Bringing a sense of security and access to financial services for people in rural Uganda, this is our ultimate goal”. 

The data collected is currently being used to design new business models with the leading MNOs in Uganda to unlock the potential for day-to-day use of digital payments beyond just remittances. 

By Páll Kvaran, Research Associate at PHB Development and Bram Peters, Technical Specialist at UNCDF MM4P in Uganda

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

Unlocking DFS innovation in Uganda: The role of Open APIs

Uganda

Unlocking DFS innovation in Uganda: The role of Open APIs

By Richard Ndahiro and Bram Peters, UNCDF MM4P in Uganda
June 26 , 2017
Kampala, UGANDA - 

Mobile financial services in Uganda have come a long way and continue to hold huge potential for enabling access to financial and none-financial services for a large share of the population. Mobile money has grown from being a just money remittance service to become a platform that enables the delivery of many more innovative products and services.

Mwende Vincent, a coffee farmer in Kapchorwa was introduced to PAYG solar as part of UNCDF’s work in digitising agro-value chains. Vincent was able to have light in his home because he could pay for it in small instalments over time, making it affordable to acquire the home solar system. Delivering such a service is made possible by integrating the services of a solar company and a telecom company (mobile money). The integration is technically enabled by an application programming interface (API).

Many other services we enjoy today are enabled by APIs. A farmer accessing weather information by SMS, a market vendor receiving a micro loan or saving on mobile, being able to order for a cab (Uber) or a ‘boda-boda’ (Safeboda) in Kampala, are all enabled by APIs.

An API is what allows software programmes to talk to one another to enable the delivery of a given service. APIs connect third-parties (developers, fintechs etc.) to established payments platforms (of for example telecoms and banks), enabling the delivery of innovative services that address needs of many customers.

Recently, the UNCDF MM4P programme in Uganda was involved in technology innovation contests for young developers (DataHack4FI and MTN App Challenge)  in Kampala. The innovative solutions presented were very encouraging about the potential for digital innovation to provide solutions to some of the pressing community challenges in agriculture, health, financial services, transport, and education. When asked teams that stood out what was holding them from taking their solutions to market, they mentioned access to the necessary APIs from payment service providers (PSPs).

By lowering the barriers to access key APIs, PSPs open up the innovation space for external developer talent to propose new solutions to the market. The benefits of this are immense for stakeholders: more solutions, more usage, more revenue.

Whereas the concept of Open APIs has been around for a while, in East Africa and Uganda in particular, it remains quite a new concept and business model for industry players.

Tomorrow 27th June 2017, MM4P Uganda is convening digital financial services (DFS) industry players in the country to discuss how to leverage Open APIs to unlock DFS innovation for the benefit of everyone. Attending will be top executives and decision makers from telecoms, banks, fintechs, regulators, donors and NGOs in the DFS space. The event will feature international and local key note speakers and panellists, experts in DFS and Open APIs.

Together, industry players will explore the concept of Open APIs and the benefits it holds for the DFS sector in Uganda. We will hear from the fintech community about their experience and challenges when dealing with DFS providers and the opportunities they see in open APIs. We will also hear from key DFS providers on the challenges they foresee in the progression towards openness in DFS. Industry players will also discuss what it takes to get started, from the business considerations, to the operational and technology considerations.

With more awareness and a shared understanding among industry players about the subject, MM4P will continue to engage with the sector to see traction on the path towards open APIs in Uganda. 

To join the event, register through this link.

For more information, please contact
Naomi de Groot
KM Consultant, Uganda
Bram Peters
Technical Specialist, Digital Finance
Additional Information
Naomi de Groot
KM Consultant, Uganda

Going digital, or stick to cash?

Uganda

Going digital, or stick to cash?

An innovative approach to define the value proposition of digital payments in the coffee value chain
June 19 , 2017

Jane Sebbi, a farmer in Uganda.

Mbale, UGANDA - 

“Sometimes I am forced to travel with tens of millions of shillings in my pocket and I fear for my life. Someday, something will happen”, says James Odega, a coffee trader in Eastern Uganda. James is one of hundreds of coffee traders who buy coffee from many of smallholder farmers around the Mount Elgon area and sell it to Kyagalanyi Coffee Limited (KCL) in Mbale, Uganda. After being paid for the coffee he has bought from farmers, James has to travel back to his village. This trip takes him around two hours using public transport or a ‘boda-boda’ (a motorbike taxi), often with over UGX 3 million (over USD 1,000) in his pocket.

In addition to buying from traders in Mbale, KCL operates six coffee collection stations in remote areas, where undried coffee is purchased directly from farmers in surrounding villages. Like James, KCL staff members are faced with a risk when they make one to three hour trips to Mbale multiple times every week to pick up over UGX 35 million (over USD 10,000) to pay farmers. Finally, the farmers themselves have to keep the cash safe, as this will get them through to the next season.

Instead of being paid in cash, KCL with assistance from UNCDF’s MM4P programme now offers farmers and traders the option of receiving mobile money instead. In an effort to alleviate the risks he is faced with James would like to use mobile money to pay his farmers. “I would even pay for their withdrawal fees" he says, " But I don’t think the farmers would accept.” When asked why, James says he has discussed it with many coffee farmers and most of them simply say no. “I don’t think they understand. They don’t know how it works.”

However, according to Bram Peters, Country Technical Specialist in digital finance for UNCDF Uganda, the reasons many farmers are not accepting mobile money may run deeper than simply a lack of understanding. “We have run a series of sensitization efforts and most farmers already use mobile money to send and receive remittances. The people we work with in our projects know very well what is best for them. Most of them have limited financial resources, so smallholder farmers are already used to making cost-sensitive decisions on what makes more sense for them; being paid in cash or via mobile money.”

In collaboration with CGAP, UNCDF engaged with PHB Development to take a closer look at whether being paid digitally makes economic sense for each of the stakeholders in the coffee value chain. Or in other words, is there a value proposition for each player to move from cash to digital payments?

PHB Development introduced an innovative approach to gain a deep understanding of the value propositions different players in the coffee value chain are faced with. “PHB has developed a method called Value Proposition Mapping (VPM), which borrows from traditional activity-based costing. This is a popular methodology used in management accounting, to give insight into costs associated with operational activities related to paying and receiving funds", says Ciprian Panturu, PHB Development Associate who recently joined the UNCDF MM4P programme in Uganda.

PHB Development researchers first interviewed farmers and traders that have links with KCL and mapped their market behaviour on a month-on-month basis over the course of a year. They looked at virtually all their sales and purchases, where the transactions took place and the associated transport and time costs. They then incorporated the value of risk the interviewees place on travelling with cash.

“The data gathered is used to calculate a per-activity and per-transaction average cost of cash, which allows for a comparison to what the cost of using mobile money instead would be. This is a very efficient way of comparing the cost of cash and the cost of digital payments for all players along the coffee value chain - a method which can easily be used in other agricultural value chain in Uganda in the future,” says Ciprian.

Data and information of the VPM are currently being analyzed and the first results are expected in the coming weeks, just in time for the next coffee harvest season. A momentum where the introduction of digital payments can be of real value. Depending on the results, UNCDF and CGAP are looking to use this method in other agricultural value chains in Uganda, such as tea, dairy and maize.

By Páll Kvaran, Research Consultant at PHB Development

For more information, please contact
Naomi de Groot
KM Consultant, UNCDF MM4P in Uganda
Páll Kvaran
Research Consultant, PHB Development
Additional Information
Naomi de Groot
KM Consultant, UNCDF MM4P in Uganda

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