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Digitization of Agribusiness Payments in Africa

Building a Ramp for Farmers’ Financial Inclusion and Participation in a Digital Economy

This report presents the rationale for digitization of agribusiness payments in Sub-Saharan Africa (SSA), assesses the current status of digitization, and identifies key actions that governments, agribusinesses, and development partners can take to help accelerate digitization.

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Agriculture employs over half the population in SSA, yet most farmers in the region do not have access to formal financial services. The 2017 Global Findex survey finds that among individuals in SSA who report receiving payments for sale of agricultural goods, fewer than one in six reports receiving the payment through an account, and among those who report saving and borrowing, only one in four saves at a formal financial institution, and only one in five borrows from a formal financial institution.

Farmers, agribusinesses, and the rural economy stand to gain from increased digitization of agribusiness payments. Digitization can advance financial inclusion of farmers and thereby help them smooth consumption, make productivity-enhancing investments, and better manage their vulnerability to shocks through improved access to savings, credit, and insurance products. For agribusiness firms, digital payments can help improve not only efficiency but also transparency by bringing better visibility to how and when farmers are paid, thereby enabling them to comply better with their commitments to sustainability. Lastly, regular digital payments from agribusinesses can benefit the rural economy more broadly by strengthening the rural digital financial services (DFS) ecosystem through improving the business viability of DFS agents, encouraging merchants to accept digital payments, and enabling more e-money usage for local payments.

Our analysis of Global Findex 2017 data shows that while average levels of digitization in SSA is lower than in other regions of the world, variation is wide between countries. Over 30 percent of recipients of agricultural payments v reported receiving such payments into an account in Ghana, Kenya, Uganda, and Zambia. In contrast, in Ethiopia and Madagascar, two countries with the largest share of individuals who report receiving agricultural payments, virtually all recipients indicated receiving such payments in cash.

Our analysis suggests that access to mobile money accounts is a key driver of digitization of agricultural payments. In Kenya and Ghana, 37 percent of agricultural-payment recipients receive payments into a mobile money account; in Uganda and Zambia, this share is 28 percent and 27 percent, respectively. These countries are among those with the highest uptake of mobile money: the share of adults with a mobile money account is 73 percent in Kenya, 51 percent in Uganda, 39 percent in Ghana, and 28 percent in Zambia.