Cocoa Producers in Côte d’Ivoire: Cash vs. Digital

Smallholder cocoa producers play a vital role in Côte d’Ivoire’s economy, with 650,000 small cocoa farmers contributing to up to 10% of Côte d’Ivoire’s GDP. However, up until now, financial service providers (FSPs) have somewhat overlooked this essential client segment. One of the major barriers to accessing financial services is the lack of banking infrastructure in villages and camps where cocoa cooperatives and producers operate. Farmers are geographically spread out and it is too costly and complex for traditional FSPs to serve these areas. As a result, cooperatives’ only option to pay producers is cash, creating opacity and increasing risks for both parties. Moreover, producers don’t have access to formal basic financial services, such as deposit accounts, microloans or micro insurance products.

Branchless banking presents an opportunity to reduce those risks and offer financial services to this important segment of the Ivoirian economy. Since 2014, Advans Côte d’Ivoire has embarked on a project, with CGAP’s support, to eliminating the use of cash by linking cocoa producers and cooperatives to a branchless banking solution and enable payments to producers.

From September 2014 to February 2015, Advans Côte d’Ivoire conducted a feasibility study which included interviews of 23 cooperatives and 67 producers. The results confirm our vision: all participating producers and cooperatives have shown interest in benefiting from a branchless banking solution enabling digital payments. Moreover, the adoption level of digital technologies, which is a pre-requisite for a branchless banking project, is promising: 98% of the producers have a cell phone and 64% declared having already used mobile money (either by themselves or with the help of an agent). 97% of the producers also showed a strong interest in accessing formal financial products (deposit accounts and microcredit).

However, the results also show that there are several hurdles to overcome before we can reach our goal to offer digital payments and financial services to producers on a large scale. There are three principal reasons for this:

1. Producers are very accustomed to being paid in cash.  Ivoirians tend to lack trust in the traditional banking system and prefer cash. Our study shows that only 50% of producers trust financial institutions due to bad past experiences. Cooperatives also confirmed that producers often don’t trust new mechanisms. If the system suddenly changes, producers may be reluctant to accept this new solution. In addition, with 56% of cocoa producers being illiterate, they will need time and training to adopt a new technology enabling digital payments.

2. Producers will need a means to access their money. Even if producers are paid electronically, they need to be able to carry out simple cash transactions. Despite good progress in Cote d’Ivoire, the digital payment ecosystem in camps or villages is still underdeveloped. Points of service are not located close to their homes. Only 19% of cocoa producers have access to an ATM or a bank branch within 7 km of their home and just 36% have similar access to mobile money agents. Agents also face regular liquidity problems that further hurt the convenience factor. This could be particularly challenging at the beginning: producers might be tempted to withdraw the total amount paid for their cocoa harvest, due to limited convenience of the service.

3. Producers will only agree to pay fees associated with a cashless solution if they perceive a significant additional benefit. While security is a direct benefit of digitization, producers are not willing to pay many fees for it. However they are interested in and ready to pay for the biggest indirect benefit of the payment service, namely access to deposits and loans.

In light of these findings, we have decided to adapt our approach accordingly and focus on a gradual implementation of a cashless solution to build trust and awareness. We want to ensure that clients are familiar and comfortable with the new mechanism and that the solution developed truly responds to their needs.

Phase one of the project will therefore partially digitize producers’ revenues, limiting related costs and allowing producers to deposit the money into their personal Advans accounts. Once this phase is complete, we will define the best ways to make further headway on the project, working closely with cooperatives and producers to ensure that they will be able to fully benefit from the banking solutions provided.