Zimbabwe case study: Lessons from a buyer’s experience of mobile money

Last August, small-scale farmers in rural Zimbabwe were preparing to harvest their crop of chilies just like they do every year. But this harvest would be like no other.What made this season different was that two months before, almost 450 farmers in the region had registered as “EcoCash” customers. By linking their phones to the local mobile money platform managed by EcoNet, these farmers now had the option of being paid for their crops through their phone. And because a local chili buyer had also signed on to EcoCash, it worked. The farmers were paid immediately and in full for their chilies–not usually the case when cash is involved.It didn’t happen organically. Last June, in Zimbabwe’s Domboshawa region, Mercy Corps piloted its Agri-Fin …

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Last August, small-scale farmers in rural Zimbabwe were preparing to harvest their crop of chilies just like they do every year. But this harvest would be like no other.

What made this season different was that two months before, almost 450 farmers in the region had registered as "EcoCash" customers. By linking their phones to the local mobile money platform managed by EcoNet, these farmers now had the option of being paid for their crops through their phone. And because a local chili buyer had also signed on to EcoCash, it worked. The farmers were paid immediately and in full for their chilies–not usually the case when cash is involved.

It didn't happen organically. Last June, in Zimbabwe’s Domboshawa region, Mercy Corps piloted its Agri-Fin Mobile program, which built the partnership between EcoNet, specialized produce buyer KAITE, and small-scale farmers. Though everyone benefits, Mercy Corps' focus is to reduce hunger by increasing small-scale farmers’ productivity, and stabilizing their income. In trying out the idea, KAITE had a lot of lessons to share.

KAITE trains thousands of small-scale farmers around Zimbabwe in cultivating and processing organic herbs and spices to be sold at international fair trade markets, including chilies. Prior to the mobile phone option, coordinating cash payments was a huge challenge for KAITE. With only rough estimates of the quality and amount of produce farmers would bring to collection points, KAITE had to rely on approximations of the cash required. When purchasing in remote locations, this often resulted in cash shortages. Farmers would have to wait until KAITE could travel back to their village with more cash.

With EcoCash, KAITE purchased all of the produce available at one time. This allowed farmers to receive the exact payments for their produce via a secure, private mobile account on collection day. And, cashless payments meant both KAITE and the farmers weren't vulnerable to robberies.

Mercy Corps' Zimbabwe pilot, in which 448 farmers were trained and registered on EcoCash, proved that farmers were interested in the idea and able to receive payments through their mobile phones. In fact, they actually preferred it over cash.

For the farmers, the mobile payments options has also improved personal financial transactions. Farmers can now receive and send money to family members and friends, and make payments for groceries and school fees through the mobile phone.

For KAITE, the upfront investment in training and registering farmers paid off in increased overall efficiency. Now, even without Mercy Corps support, KAITE is planning to expand mobile payments to all regions of Zimbabwe where they operate.

“To reach Binga, in the northwest of Zimbabwe, costs us $528 just for the transportation, not to mention time and labor,” said Dominic Collenberg, CEO of KAITE, explaining the move to mainstream mobile payments in their operations.

“It's 1,600 km round trip – 10 hours minimum one-way. The whole trip takes several days. There’s no bank there, so we have been bringing cash. Just last month, we had planned on paying around 470 farmers $25,000 for rosella and safflower, but they had an excess of product worth around $2,000. So we registered the farmers still in need of payment and sent them the money through EcoCash.”

Obstacles remain, however. Some rural areas are still without network coverage. Still other areas lack nearby EcoCash agents to let farmers turn their mobile money into cash when needed. Sometimes local agents have limited cash themselves and aren't unable to provide the adequate amount farmers wish to withdraw.

Yet the benefits of mobile payments to farmers and buyers alike seem to outweigh current inconveniences. Users are finding ways around obstacles, and are optimistic that further improvements are coming, including the expansion of network coverage. For example, KAITE has reached multiple farmers through one farmer who was better able to travel to a nearby agent, withdraw funds, and distribute to the other farmers.

“At the moment, it’s still in the infancy stage, but I see huge potential – if EcoNet installs boosters to improve network reach, as it has planned – then after we register all farmers for making payments, our next priority is pushing information and then improving coordination for production, collection and messaging to negotiate selling prices,” said Mr. Collenberg.

Registering farmers to make mobile payments is an important first step in laying the groundwork to bring numerous services to rural farmers and agro-buyers. As remote areas like this gain more access to mobile networks, new opportunities are soaring for rural farmers to reap the benefits of financial services and timely agriculture information through their mobile phones.

“Although we haven’t started pushing information yet, we are preparing for it," Collenberg added. "We regularly hold farmer trainings and have developed brief ‘grower guides’ for each product we buy. It describes the complete cropping timetable, as well as recommendations for the type of soil to plant in, the rotation with other plants, laying out the seedbed, fertilizing, weed control, irrigation, pest and disease control, harvesting and drying. All of that information is too long for a text message, but we can use texts to send simple prompts to remind farmers of all these things at the time they need to act.”

“Moving to mobile payments is something we never would have done without Mercy Corps’ actively bringing us together with EcoNet,” said Collenberg. “It's a lot of work–very time consuming, and we would never have initiated it on our own. But we will make the time to register all our farmers in the future, because we realize it’s worth it.”

This article was adapted from Mercy Corps.

Learn more about Mercy Corps' Agri-Fin Mobile program, which bundles financial services and agriculture information on a mobile platform.

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Zimbabwe case study: Lessons from a buyer’s experience of mobile money

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Free trials and payment plans: Innovative ways to market clean energy products in rural Uganda

Guest post by Alba Topulli.Families in rural northern Uganda who cook over open fires and use kerosene as their primary light source face numerous health and safety issues – they should be rushing to buy fuel efficient cookstoves and solar units. Why aren’t they?Evelyn is a shop owner in Kitgum, a municipality of about 60,000 people in northern Uganda. Judging from her shop, full of general merchandise, food and cold beverages, it’s not readily apparent that she also sells solar units. Yet, one solar unit did catch my eye – sitting in a far corner. The box looked as though it had been opened and closed many times as potential buyers expressed interest, but none strong enough to take the unit home.I met with Evelyn during my …

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Guest post by Alba Topulli.

Families in rural northern Uganda who cook over open fires and use kerosene as their primary light source face numerous health and safety issues – they should be rushing to buy fuel efficient cookstoves and solar units. Why aren't they?

Evelyn is a shop owner in Kitgum, a municipality of about 60,000 people in northern Uganda. Judging from her shop, full of general merchandise, food and cold beverages, it’s not readily apparent that she also sells solar units. Yet, one solar unit did catch my eye – sitting in a far corner. The box looked as though it had been opened and closed many times as potential buyers expressed interest, but none strong enough to take the unit home.

I met with Evelyn during my first week in Kitgum this summer, having just arrived for my internship with Mercy Corps. I came onboard to research financing plans that could be adopted by energy company partners to increase their network of resellers and by retailers to increase their sales broadly and to the most vulnerable households. Earlier in the week, I traveled from Uganda’s capital, Kampala, to Kitgum, a seven-hour drive.

Making my way, I couldn’t help but notice the visible impacts of the long-standing conflict between the Ugandan government and Lord’s Resistance Army. Our car bumped and lurched over the unmaintained road as we passed one neglected piece of physical infrastructure after another. But it was my first-hand, day-to-day interactions with shop owners in Kitgum that revealed the less visible impacts of conflict: the traumatic memories, the new opportunities to achieve a sustainable livelihood, and the struggle to keep markets functioning.

As I sat down with Evelyn, a bright-eyed and poised young woman, she candidly recalled the poor sales record of her solar units over the last few months since she became a retailer of solar products. Evelyn sold solar units that consisted of solar lanterns and an integrated lantern and mobile-phone charging unit. On average, she sold just one unit per month. The price tag of about 130,000 Ugandan shillings (USD $50) was certainly cause for concern for many consumers, considering the average monthly income for rural households in northern Uganda is just 117,000 shillings (USD $46), while an urban household in the same region makes about 361,000 shillings (USD $142).

These prices are in part a result of high transportation costs from the poor road infrastructure and fragmented markets characterized by inefficient and unshared distribution channels. All these factors increase the cost of doing business in the region. Aside from pricing, Evelyn mentioned other factors that seemed greater barriers to sales – consumers not fully aware of the benefits of solar units over time, including cost-savings, and trust in the product and its ability to function properly over time. A Mercy Corps solar market assessment conducted in May, 2012 found that the average household would need eight months to pay off the value of the most advanced solar unit.

As the Mercy Corps team and I listened to Evelyn and other retailers’ concerns, we determined that we needed to come up with tailored innovative financing plans that shopkeepers could use to increase sales of clean energy products.

To ease buyers' burden of purchasing clean energy products, our team developed five financing plans that retailers like Evelyn could offer. Here they are–and the results we saw:

• The “pay-by-installment” offer. The retailer would allow the consumer to pay for the solar unit in two installments over one week increments. This resulted in a 100 percent increase in sales volume over a four-week period. There were no defaults and 100 percent payment recovery.

• The “one-week free trial plus pay-by-installment” offer. The retailer would offer the product to a consumer to try out for a week for free. If the consumer found it useful and saw that they would save money, the retailer would then allow the consumer to pay in two installments over one week increments. Beyond that, consumers could return the product if unsatisfied, an unprecedented option in northern Uganda. Sales increased threefold over a four-week period, with no defaults and an 100 percent payment recovery.

• The “price discount” offer. The retailer would offer a consumer a discount of 800 shillings (USD $0.30) with the purchase of a small-sized stove; a discount of 1,900 shillings (USD $0.75) with the purchase of a medium-sized stove; and a discount of 1,000 shillings (USD $0.40) with the purchase of large-sized stove. One stove retailer adopted this offer, and it was valid for two weeks. During this time, the retailer's weekly cookstove sales increased by 167 percent.

• The “free related product” offer. This offer involved a radio advertisement which announced a giveaway: free charcoal with the purchase of a fuel-efficient charcoal cookstove. The free charcoal amount was predetermined based on the stove size purchased. This offer increased customer visits and inquiries regarding cookstoves by 388 percent and stove sales by 75 percent during the two-week promotional period.

• The “pay-by-installment plus discount” offer. The retailer would offer a customer the option of paying for a solar unit in three installments over one-week increments. But the customer could receive a discount of 5,000 shillings (USD $2) if they paid off the unit in just two installments.

The Mercy Corps team initially hoped to make the "pay-by-installment" offer a four-part payment to increase affordability to the consumer, especially for the more expensive solar units. However, retailers were reluctant to adopt the idea because of the cost of retrieving payments and other factors, like losing the liquidity needed to purchase more products to sell. Instead, we modified the offers to two installments or, at the most, three.

The offer that combined the free trial with the option of paying in installments had the most potential for increasing sales. It tackled consumer trust with the free trial period, and acknowledged consumer cash constraints by offering the option to pay in installments. Most of the retailers were interested, but they decided against participating because of the inherent risks associated with the offer. Only Evelyn saw the opportunity.

At first, Evelyn handed out all of her products during the free trial. This was a great result but it meant she ran out of stock without the cash to reinvest in new products. The trick, she learned, was to determine demand and ensure there was enough liquidity to meet it. Yet, this didn’t weaken Evelyn’s eagerness to continue promoting these products. Once she collected all outstanding payments, Evelyn immediately reinvested her profits in acquiring more solar units.

Although our research came to an end, Evelyn enthusiastically kept up the sales program. “With or without this research, we will continue with these offers,” she said. “Because they have worked for us.”

Evelyn’s enthusiasm however, was not shared by many other retailers in Kitgum. This was also the case for one of the retailers who originally agreed to participate in the research. The solar retailer who adopted the “pay-by-installment plus discount” offer stopped mid-way through his sales trial. When asked why, he said that because of drought conditions creating poor harvests and school fees that households had just finished paying, most families were allocating their resources toward basic necessities and food rather than clean energy products, despite their long-term benefits. Yet, when we asked participating retailers why they offered the financing plans in spite of these constraints, most agreed with Evelyn: they couldn't wait for the most opportune time to strengthen their business.

With forward-looking retailers like Evelyn offering financing plans to customers, clean energy products can be more affordable to the families who need them, improving their lives.

Alba Topulli is a master's student at The George Washington Univertsity in international development with a concentration in economic development. She served as an applied research analyst with Mercy Corps in the summer of 2013.

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For more info: Free trials and payment plans: Innovative ways to market clean energy products in rural Uganda

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