Case Study: Building Agricultural Value Chain Network to Increase Farmers’ Usage of Mobile Technology

For farmers in northern Uganda, one of the main obstacles in accessing mobile phone services is a lack of Mobile Network Operator (MNO) agents in their area.

The distance from households to agents stretches in some cases to 25 km, making cash-in cash-out services impractical. Furthermore, without access, many farmers are simply unaware of how mobile phone products can improve their farm’s productivity.

Facilitating the extension of mobile services to rural areas by proposing attractive business models for MNOs is central to Mercy Corps’ global Agri-Fin Mobile strategy that aims to bring essential technologies to small farmers.

For Bonny Ayam, a 47-year-old farmer in the Oyam District and father of four, the economic advantage of utilizing mobile financial services was immediately apparent when he signed up for OrangeMoney, a new virtual wallet offered by start-up MNO Orange Uganda.

Bonny is an agent for Farmers Centre (FACE), an agribusiness in northern Uganda that sells inputs like seeds, pesticides and fertilizers and buys outputs such as maize and sorghum. As a FACE agent, Bonny purchases grains from farmers at collection points that he then delivers to warehouses for FACE to sell to larger markets.

In addition to farming himself, for the last two years, Bonny has sold inputs during the pre-planting season and bought grains on behalf of FACE during the harvesting season. Until Mercy Corps facilitated a partnership between FACE and OrangeMoney, Bonny had to travel to the FACE office in the town of Lira, 68 km away, to collect cash for purchases.

With travel time, bank processing, and FACE administration, Bonny’s trips usually took two days and cost FACE 100,000 Ugandan shillings (almost $40). From November — January, during the peak of the harvest season, Bonny traveled sometimes twice per week, but farmers were still frustrated by inevitable delays in getting paid for their crops.

"At times farmers were forced to wait a long time when I didn’t have cash at hand to pay them and had to travel to the FACE office," said Bonny. Sometimes farmers would end up selling their products to other buyers despite having a good relationship with FACE. As a result, for the last two years, I have been purchasing less and less since I couldn’t compete with the growing number of buyers."

This year under the Agri-Fin Mobile program, Mercy Corps facilitated a partnership between FACE and Orange telecom to rollout agricultural value chain payments and increase farmers’ usage of mobile technology.

FACE connected Orange with its large network of farmers; Orange provided technical support and training to register the farmers and educate them with the mobile financial products. Orange also supported setting up agents, including authorizing FACE as a super agent to manage subagents in the rural areas. Their goal is to reduce the average distance for any household to an agent from 25 km to 4 km.

The benefit to the farmer is that they get immediate transaction notification through an SMS on their phone, confirming they have been paid in full.

"As an OrangeMoney agent, I can buy more from farmers who previously were disappointed and said: You sell us seeds and you don’t buy our products, why?" said Bonny. "As long as the network is good and farmers can access the service, I’ll be able to immediately complete a transaction. Once I record the exact kilograms of their product, the FACE office will transfer money to my OrangeMoney account, and I will pay the farmer instantly, either through a mobile payment to his or her OrangeMoney account or as a cash-out service. If ever my cash float gets low, farmers will still be able to cash out with another OrangeMoney agent or just keep their money secure in their mobile wallet."

In the rural areas in Uganda, families often share one mobile phone, making the individual use of phones for mobile transactions in business even more cumbersome. To further promote their services, Orange Telecom is bringing in the kind of low-end phones that farmers say they need, with double lines to give them the option to use the phones with any network. According to Bonny,

"People are really excited about buying these phones and having the option to do business with them. For me, too, this will be a big improvement for my family communication, and I’ll be able to make some extra money since I get a percentage of the Orange profit when I sell airtime and phones or handle transactions," said Bonny.

With the various MNOs vying for business in Uganda, Bonny is amazed that none of them had yet thought of tapping into the financial services market in rural areas.

“It’s frustrating to think that these services have been available in the urban areas for years, yet there’s such an obvious need here where we have to travel even greater distances for business transactions.” Farmers are looking forward to capitalizing on these new services, and they appreciate that finally, an MNO is working with them to reach farmers and agro-dealers.