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Sub-Saharan Africa has shown significant growth in financial inclusion over the past decade driven by mobile money account adoption and digitalization of person-to-person (P2P) payments. Yet over 140 million adults on the continent continue to receive payments for the sale of agricultural products and livestock in cash. Digitalizing these payments could provide an onramp for farmers to access other financial products, such as finance for seed and fertilizer inputs, or insurance products.

This note is part of a series on financial inclusion in Sub-Saharan Africa and focuses on the digitalization of agricultural payments. We look deeply at four economies: Democratic Republic of Congo, Ghana, Kenya, and Madagascar. Visit the Global Findex Africa page to access and download the entire series.

Agriculture remains an important source of income for a quarter of adults in Sub-Saharan Africa

According to the Global Findex, the share of adults¹ in low-and-middle-income economies (LMIC¡¯s) who received payments for the sale of agricultural goods or livestock, either as wholesalers or retailers, (referred to for simplicity as agricultural payments) halved between 2014 and 2021, falling from 25 percent to just 12 percent. This decline was much smaller in Sub-Saharan Africa, where nearly one in three adults in the region still receives agricultural payments, making them an important source of household income¡ªparticularly in economies where a large portion of adults receive them.² 

Nearly three-quarters of those agricultural payment recipients¡ªor more than 140 million adults, 66 million of them women¡ªare paid only in cash. Cash payments leave recipients vulnerable to loss or theft, require physical proximity to collect and spend, and are untraceable. In contrast, less than half of adults earning private sector wages, and just under 20 percent of those receiving government wage and transfer payments in Sub-Saharan Africa are paid only in cash.

This disparity suggests a significant, untapped opportunity to expand financial inclusion for Africa¡¯s agricultural producers by digitalizing their payments. Achieving payment digitalization would require incentives as well as initiatives that address the different barriers faced by all members of the agricultural value chain, including farmers, but also suppliers, traders, and wholesalers (Figure 1 shows select countries with high rates of adults receiving an agricultural payments).³

Digital payments expand opportunities for agricultural payment recipients

Paying farmers directly into an account with a bank or a digital financial service provider (such as a mobile money operator) has the greater financial inclusion, enabling farmers and agricultural buyers to invest and save more at lower costs.⁴ We refer to direct payments made into or out of an account as a digital payment.

One report on the Ghanaian cocoa market estimated a potential from theft alone for purchasing companies paying in cash. In contrast, paying farmers digitally reduces the risk of theft and the logistics costs associated with payment delivery. Digital payments also improve traceability, such that purchasing companies have records of and transparency into where their commodities come from. This builds confidence that their agricultural products are ethically sourced and grown to high quality standards. It can also allow for easier traceability in the event of a food-borne outbreak.

Payment recipients also benefit from receiving their payments digitally. It saves them the time and expense of traveling to collect their payment, lowers the risk of theft, and enables easier and more flexible use of the money. It also increases user transparency by allowing agricultural producers to and , which lenders can use to underwrite credit for new inputs, such as seeds and fertilizer, or equipment.

Digital payments have specific agriculture-related benefits as well. Most agricultural producers harvest their crops just once or twice a year, creating a large influx of income that they must stretch to cover expenses until the next harvest. While 61 percent of the agricultural payment recipients in Sub-Saharan Africa saved in the year prior to the Global Findex 2021 survey, just over a quarter of them did so formally. Having an account, ideally one with design features that create incentives to save, can help agricultural payment recipients more efficiently smooth their consumption throughout the year.

Research furthermore shows that having an account and receiving digital payments is associated with recipients learning to , , and developing greater resilience to income shocks¡ªcritical given how vulnerable agricultural producers are to weather events and climate change.

Most farmers in Africa still receive cash payments, but there are many opportunities to digitize

The benefits of receiving digital payments are clear. Accordingly, there has been much progress towards digitalization of other types of payments, including private sector wages and government payments. There has not been the same progress toward digitalizing agricultural payments. That is likely due to multiple barriers, which vary by the specific context for an economy.

One barrier has to do with the buyer and the broader agricultural supply chain. Many farmers in Sub-Saharan Africa sell through relatively informal, local markets. Only an estimated 20 percent participate in formal value chains involving governments or private buyers.⁵ These represent the most immediate opportunities for payment digitalization, given that the broader trade ecosystem is digitalized.

Whether buyers can digitalize payments varies based on the degree of payment digitalization already underway in their economy, and the share of adults who are banked or digitally connected. In Sub-Saharan Africa there have been only modest changes toward digitalization over the past decade, according to Global Findex data from 2014, 2017, and 2021/2022. There is a great deal of nuance by economy, however.

Consider the contrast, for example, between the Democratic Republic of Congo, where 81 percent of agricultural income earners are paid only in cash, and Kenya, where 34 percent are. The predominance of cash in the Democratic Republic of Congo may be related to the fact that the economy has a relatively high 39 percent share of adults receiving agricultural payments, and relatively low 27 percent of adults with accounts. The rate of agricultural payment digitalization remains unchanged since 2014.

In contrast, Kenya was an early adopter of mobile money payments and has a relatively high account ownership rate at about 80 percent of adults, well above the 49 percent average for the region and enabled by a diverse financial system, including both banks and mobile money providers. Kenya also has wholesale buyers who have invested in payments digitalization in their supply chains. Some newer organizations have even opted to pay all of their famers digitally, citing that the benefits outweigh the costs even from the start.⁶ Since 2014, agricultural payment recipients have transitioned from most receiving cash to most receiving digital payments¡ªaround 63 percent as of 2021.

The takeaway is that the specific context of agricultural dominance, financial inclusion, and digital connectivity warrant a distinct approach to payment digitalization that addresses the demands and barriers in each market.

Account ownership and mobile phone access are foundational for payment digitalization

Account ownership is a prerequisite for receiving digital payments, and widespread account ownership in an economy correlates with higher-than-average agricultural payment digitalization.  While some economies with high levels of agricultural payments, like Ghana, Kenya, and Uganda have account ownership rates above the regional average, most adults receiving agricultural payments in cash do not have an account (Figure 2).

 Efforts to increase agricultural payment digitalization must be coupled with those to increase account ownership. For example, 62 percent of adults receiving agriculture payments only in cash live in rural areas, where brick-and-mortar institutions may not operate at all, or only with a few branches spread at far distances. Customers may face safety risks traveling with cash to make deposits and withdrawals. It may also take time away from income-generating activities.

Given the robust market for mobile money in many economies of Sub-Saharan Africa, agricultural communities increasingly have the option of using digital financial accounts if brick-and-mortar branches are not available. Among adults receiving agricultural payments in cash, almost 60 percent on average have a mobile phone. That share is even higher in Ghana and Kenya, though barriers exist in the Democratic Republic of Congo and Madagascar, where less than 50 percent of those receiving cash payments for agricultural products have their own mobile phone (Figure 3).

Access to an account and to a phone are clearly not the only barriers to agricultural payment digitalization, given that a significant share of recipients receives their payments in cash despite having a bank or mobile money account. In Sub-Saharan Africa, about half of the adults receiving agricultural payments, and 40 percent of those receiving agricultural payments only in cash, have an account. Among cash-only agricultural recipients in Ghana and Kenya, account ownership rates still surpass 50 percent, compared with Democratic Republic of Congo and Madagascar, where only about 25 percent own an account. For these banked individuals, the digital payment barrier may be that the payer does not offer the option of digital payments, not that the recipient is unable or unwilling to receive them.

Advocacy and ecosystem building may help increase payment digitalization

Focused advocacy and technical assistance may be necessary to help both recipients and buyers/payers adopt digital payments. The UN¡¯s Better Than Cash Alliance (BTCA) studied several payment digitization projects in Ghana and found that in the context of active efforts to build relationships with farmers, explain the benefits of digital payments, and digitalize the value chain such that farmers can also directly buy agricultural inputs digitally. Additionally, individuals selling agricultural products directly to consumers can benefit from improved person-to-person (P2P) payment infrastructure.

To drive positive outcomes from increased financial inclusion, programs should aim to couple digital payments initiatives with efforts to and . An effort to found that farmers generally cashed out immediately, resulting in local mobile money agents running out of cash. Coupling digital payments with improvements to the broader digital payment ecosystem, including facilitating digital merchant payments, can mitigate liquidity runs. 

Endnotes

^{1. Individuals aged 15 and older are classified as adults.}

^{2. The 12 economies in Sub-Saharan Africa where over 30 percent of adults receive agricultural payments are: Chad, Democratic Republic of Congo, Ethiopia, Ghana, Kenya, Madagascar, Mali, Nigeria, Sierra Leone, South Sudan, Togo, and Uganda.}

^{3. This note includes data from African economies surveyed in 2021 (which are included in regional, developing economy, and global averages reported in the Global Findex 2021 report and related deliverables). It also includes data from 11 economies surveyed in 2022 due to COVID-19 related delays. The 2022 economies include Botswana, Chad, Comoros, the Democratic Republic of Congo, Eswatini, Ethiopia, The Gambia, Lesotho, Madagascar, Mauritania, and Niger. In total, this regional note includes data from 36 Sub-Saharan African economies.}

^{4. In this regional note, the term ¡°bank¡± refers to any financial institution that offers similar services to traditional banks, including credit unions, cooperatives, and microfinance institutions (MFIs) where applicable. These financial institutions have historically operated through primarily physical channels but may now offer banking apps that allow customers to access traditional banking products through the internet or using a mobile phone. This is in contrast to mobile money operators and other fintechs who offer accounts that are supported by a network of mobile money agents independent of the traditional banking network. Typically, 100% of the cash in mobile money is held in a fully prudentially regulated institution such as a bank.}

^{For a fact base to understand the potential impact of digital agriculture payments, see: Nair, Ajai; Varghese, Minita. (2020) Digitization of Agribusiness Payments in Africa: Building a Ramp for Farmers¡¯ Financial Inclusion and Participation in a Digital Economy. World Bank Group, Washington, D.C.}

^{5. Christen, Robert Peck, and Jamie Anderson. 2013. ¡°Segmentation of Smallholder Households: Meeting the Range of Financial Needs in Agricultural Families.¡± Focus Note 85. Washington, D.C.: CGAP, April.}

^{6. Nair,Ajai; Varghese,Minita Mary. Digitization of Agribusiness Payments in Africa : Building a Ramp for Farmers¡¯ Financial Inclusion and Participation in a Digital Economy (English). Washington, D.C. : World Bank Group.}