In early 2022, Earthworm Foundation and New Venture Fund launched an ambitious partnership to address financial inclusion in Ghana’s cocoa sector.
The aim of this partnership is to support brands’ NDPE (No Deforestation, Peat and Exploitation) commitments through a digital payment system for farmers. Cocoa bean purchases in Ghana have historically been paid for in cash. This has created challenges such as theft, armed robbery and, in the worst cases, loss of life to some farmers and Licensed Buying Companies.
Besides these issues, existing payment systems have neglected most farmers, especially in rural areas. Coordinated action is needed to ensure financial inclusion and address NDPE issues in the cocoa supply chain.
Earthworm Foundation’s approach was to identify key stakeholders, pilot a digital payment system and share lessons learnt. To gather data, Earthworm field teams in Ghana engaged stakeholders on how to successfully implement a digital payment system. These stakeholders included banks, telecommunications companies, Better Than Cash (BTC) Alliance, Civil Society Organisations (CSOs), World Cocoa Foundation (WCF) and Licensed Buying Companies.
Cash transactions have created challenges such as theft, armed robbery and even the loss of life to farmers and Licensed Buying Companies.
In March 2022, Earthworm also conducted a survey to gather primary data on farmer perception of an effective digital payment system. The survey covered about 1,000 cocoa farmers in the Western and Western North regions of Ghana, while a pilot survey was conducted in the Ashanti and Eastern regions of Ghana.
Results from the survey showed that only about 15% of farmers interviewed subscribe to digital payment through formal banking institutions, such as Rural and commercial banks. The majority of these farmers (75%) do not subscribe to digital payment services through the formal banking system. Also, most farmers subscribe through mobile money services. As a matter of fact, 91% of farmers interviewed like mobile money because it is fast and convenient. Currently, only 2% of the total farmers interviewed use digital payments for payment of cocoa beans and receiving premiums.
91% of farmers interviewed like mobile money because it is fast and convenient.
Equally, much of the income from additional livelihood activities is not received digitally. Of the few farmers that have received digital payments in this category, about 44% reported being satisfied with the service. From the study, most of the farmers interviewed were familiar with mobile money transactions. Also, 72% of farmers had mobile money accounts.
Data gathered has been analysed to identify key factors for implementing a successful digital payment system. The next step of the project will involve a partnership with local Licensed Buying Companies to pilot a digital payment system in Ghana’s cocoa sector and share findings.
Digital payment has been identified as a good entry point to increasing the financial inclusion and resilience of farmers.
According to the World Bank, financial inclusion is the ability of individuals to have access to and use responsible and sustainable financial products and services to meet their needs.
The technology and systems that enable digital payment also offer opportunities for reducing poverty, maximising user benefits and addressing NDPE issues faced by workers, farmers and companies; in line with the UN (United Nations) Principles for responsible digital payments. “It will allow fast and secure payment and permit savings on momo wallet,” said a farmer from Aboi Nkwanta, in response to the introduction of the Cocoa Management System by the Ghana Cocoa Board (COCOBOD). The Cocoa Management System is a database of cocoa farmers and purchases across Ghana, allowing for traceability back to the farm.