This is a guest post on Mobile Money Asia by Brian Dusza,
Shelley Spencer and Grace Retnowati.
The new market research advances work by USAID in 2011 that
outlined a business case for a mobile-based banking system in this value
chain. You can read a copy of the 2011
report here. Cocoa farming is an important segment of
Indonesia’s agriculture sector; Indonesia is the world’s third largest producer
of cocoa beans. Despite the size of this
industry, the farmers producing the cocoa typically are poor and face
significant financial challenges.
Smallholder famers that produce most of the cocoa on Sulawesi earn
annual incomes averaging $2,000 a year from the sale of their crops.
The recent market survey study moves the program one step
closer to introduction of a mobile money product for these farmers by
identifying the financial patterns of the farmers that can influence mobile
money product design. The most
significant findings are highlighted below:
Cocoa Farmers are
Willing to Use and Pay for Mobile Financial Services
![]() |
Cocoa Farmers Willing to Use Mobile Money
|
- Two thirds of the cocoa farmers (67%)
surveyed expressed a willingness to adopt a mobile money solution for
their financial transactions.
- Seventy-five percent (75%) of the farmers
believe mobile money would help save them time and offer a convenient way
to conduct their financial transactions.
- Eighty-six percent (86%) of farmers willing to use mobile money are willing to use agents for cash-in/ and cash-out transactions.
![]() |
Perceived Benefits of Mobile Money
|
Cash and Cocoa
The study found that cocoa farmers, similar to other small
holder farmers in rural districts, transact mainly in cash. Farmers use cash for transactions including
the sale of their cocoa harvest and to pay their bills:
- Ninety-eight
percent (98%) of the farmers receive payment for their cocoa sales in the
form of cash.
- Ninety-seven percent (97%) of cocoa famers
pay their bills with cash.
Savings a Rarity for
Cocoa Farmers
![]() |
Farmers who Save |
The study found that most farmers do
not save and seek to supplement their income from cocoa production by planting
other crops:
- Less than half of the farmers (46 %)
reported that they currently “keep” or save cash (using either formal or
informal channels).
- Of those famers who save, more than half
of the farmers (54%) save in banks or BPRs (rural credit unions). Other
farmers (46%) save in semi-formal and informal channels. Ninety-nine percent (99%) of farmers who
save in banks also save in semi-formal and informal channels.
Cocoa farmers Lack
Credit and Don’t Borrow Money
![]() |
Sources of Loans for Farmers |
The report chronicles the different sources for
credit and borrowing for cocoa farmers including formal channels, like
banks. It also delves into the use of
informal lenders including: (i) cocoa collectors and traders who purchase the
farmers’ crops and typically reduce the price paid for the crop as the “cost”
of the loan, (ii) farmers’ groups (Gapotkan) Gadai , (iii) the practice of
leasing out land for a loan, and (iv) borrowing from pawnshops (Pegadaians).
- Only
thirty-six percent (36%) of farmers report that they borrow money and then
generally borrow from a bank only when the loan is subsidized by a program
of the Government of Indonesia.
- Women
farmers are more likely to borrow from PNPM, a government community
development program.
- Farmers who borrow from banks continue to borrow because they now are familiar with banking process and have an established credit history.
Remittances will Not
Drive Mobile Money Adoption for Cocoa Farmers in Indonesia
Unlike
other countries where remittances has driven mobile money adoption, cocoa
farmers in Indonesia do not generally send or receive money from 3rd
parties making this an unlikely entry point for mobile money adoption:
- Two-thirds
(66%) of the farmers reported that they never received money from their
family members/friends.
- Less than one third of the farmers (27%) sent money to their family members or friends (living within or outside the country).
Recommendations for
Mobile Money Product Development
As
suggested by USAID in 2011, the cocoa farmers of Indonesia present a valuable
control group for the introduction of mobile payment and agent banking
products. This new market research
reveals receptivity by farmers to the adoption of mobile money products but
thoughtful product design and development of a trusted agent network will be
essential. The market research study
includes several insights for product design and roll out. Providers entering this market can use this
research to inform their product and entry strategy and use those lessons as
agent banking becomes permissible in Indonesia and mobile payments systems
continue to spread into the rural and poor communities of Indonesia. Getting it right the first time will be
important for as one farmer said: “If
such a [mobile money] service is available, we will surely try it. We may decide to not use it later on but we
will at least try.” The time has come to
try and providers should answer that call.
Bank
Indonesia recently released guidelines for pilots by banks and telecommunications
companies using mobile technology and third parties to provide limited banking
services to important sectors like the cocoa industry.
Brian Dusza is the
Deputy Director for the Office of Economic Growth at the USAID Mission in
Indonesia, Shelley Spencer is the Program Director of the Payment Innovations
Group at NetHope, Grace Retnowati is the Country Director for MicroSave in
Indonesia.
Something it seems can be used as the pilot case of UPLK/Agent Banking in Bali.
ReplyDeleteSpeaking the willingness of the farmer using mobile money, the ecosystem should be available like a shop selling their needs for farming or in such other way how they can use the money once they put it in mobile.
its things like these that really have been looking for the right supply chain consultants to help my business get a better grasp on things and deliver what we need to
ReplyDeleteInteresting. I heard that there are some owners of cocoa farm are successful because of good harvest and as of now, cocoa has good price for this year. Cocoa is a very useful plant for us.
ReplyDeletefinancial planning columbia sc