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Agriculture Finance for Smallholder Farmers

Increasing working capital lending through innovative technology “Access to Finance for the Coffee Sector”

Background

In second quarter of 2017, a grant agreement between AFR and Technoserve Rwanda was signed to implement a project that will unlock financing within the coffee value chain. This is a scale up of a successful project that Technoserve and AFR had partnered in and implemented the SMS Bookkeeping Platform, a credit monitoring system, since 2014. Phase 2 of this project intends to improve finance flows for actors within the coffee value chain through expanding the information captured within the SMS Bookkeeping system and integrating cashless wet mil farmer digital payment system to improve access to finance for Coffee Washing Stations (CWSs) and the coffee farmers they serve.

The SMS Bookkeeping platform was originally developed to meet a market need: Coffee Washing Stations (CWS) require a significant amount of working capital to operate every season, but they were not able to receive adequate working capital financing from Financial Institutions (FIs) or coffee exporters. Without transparency into the operational and financial progress of washing stations throughout the harvest season, potential working capital lenders were not able to absorb the financial risk of lending. The SMS Bookkeeping System allows working capital lenders to mitigate their risk of lending by providing a real time view into the CWSs performance.

Project overview/Key highlights:

Project name Increasing working capital lending through innovative technology “Access to Finance for the Coffee Sector”
Implementing partners
Project period 2 years (June 2017- May 2019- extended until September 2020

PROJECT TARGET

0
wet mills obtaining credit through the SMS Bookkeeping credit monitoring system
0
Coffee farmers receiving coffee sales transactions history through the Bank transfer “Cashless wet mill pilot”
0
Farmers receiving payments via bank transfers to farmer bank accounts
0
Farmers accessing working capital from financial service providers
0
MT Volume of coffee green sales to the platform
0
wet mills obtaining credit through the SMS Bookkeeping credit monitoring system

Project achievements so far

The importance of scaling up the SMS bookkeeping platform for the coffee value chain has drawn interest from key players in the financial and regulation space, and trading. During the 2017 to 2019 seasons, following working capital lenders used the system: Dorman, Enas, Rwanda Development Bank, Impexcor, Shared Interest, Urewgo Bank, Rwacof, Unguka Bank, Caferwa, and Emmanuel Rusatira.

RWF 10.5 billion of working capital disbursed to 95 CWSs was monitored by the system. In 2019, a new function was added to the system to track green coffee sales, to enable working capital providers to track the sales of coffee where the proceeds repay working capital loans. Over 1,900 metric tons of green coffee with sales of over RWF 4.9 billion was captured on the dashboards from 29 CWSs. Below, please see the summary of the key achievements during the project period:

Performance target Target Result
Wet mills obtaining working capital through the SMS Bookkeeping  credit monitoring system 75 95
Coffee farmers receiving  coffee sales transactions  history through the Bank transfer “Cashless wet mill pilot” 3,000 14,500
Farmers receiving payments via bank transfers to farmer bank accounts 3,000 14,500
Volume of coffee green sales to the platform 1,000 1,940
Value of working capital monitored through the SMS Bookkeeping credit monitoring system with 85% of loans performing 10B 10.5 B
Farmers accessing working capital from financial service providers 67,500 96,009

Key Lessons Learnt

AFR and Technoserve have learned that adoption rates for innovations are always low and increase gradually, as beneficiaries realize benefits. During the initial phase of the project design, it is advisable to consider change management measures, as people are always resistant to new changes especially to technology in the rural settings.