Digitizing Agriculture Value Chains: Building Value for Farmers

3 February, 2016

Source: CGAP

While the benefits of digitizing agricultural produce payments seem persuasive, a CGAP case study analysis of Uganda finds that innovations are largely met by resistance from farmers. 

The benefits for buyers of digitizing agricultural produce payments are both clear and persuasive. Exporters, cooperatives, and the many middlemen involved, benefit significantly from reduced costs and increased security by avoiding cash. For the more progressive, there are also benefits of payment transparency and data collection. However, as CGAP has noted before, DFS innovations in the agricultural context – driven by benefits for buyers – are not sufficiently based on financial needs and behaviors of smallholders. Slow uptake is largely due to resistance from the farmers who are the intended recipients of digital payments.

Why are farmers resistant to digitization?

From the CGAP research, which consisted of interviewing farmers, their cooperatives, associations, and buyers in Uganda for a CGAP-commissioned project, it appears that the problem is that farmers do not see the benefits of payment by DFS. On the contrary, they see it as an alternative, less convenient cash delivery mechanism.

For farmers to embrace DFS, they need to see meaningful benefits in the form of:

  • Security;
  • Affordable services;
  • Faster Payment; and
  • Convenience.

To read the elaborate explanation and learn more about the analysis, click here.

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