MOBILE APPLICATIONS AND POLICY IMPACT ON AGRICULTURE - UGANDA

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1 MOBILE APPLICATIONS AND POLICY IMPACT ON AGRICULTURE - UGANDA AUGUST 2018 Semakula Emmanuel/Mercy Corps AgriFin Mobile Mercy Corps is a leading global organization powered by the belief that a better world is possible. In disaster, in hardship, in more than 40 countries around the world, we partner to put bold solutions into action helping people triumph over adversity and build stronger communities from within. Now, and for the future. Since 2012, Mercy Corps AgriFin Mobile Program has been working in Indonesia, Uganda, and Zimbabwe with partners to build sustainable models, where farm and crop management tools and financial services are bundled in affordable, unified platforms on digital channels to promote mass commercial uptake.

2 The program targeted partners with existing financial, mobile network operator (MNO), and agricultural technical service mobile platforms or applications (or demonstrated interest in developing and investing in them). The partnerships were developed based on business models whereby the bundling process provided an increased value proposition for each partner, such as increased fee income, greater outreach, or reduced risks. AgriFin Mobile is funded by the Swiss Agency for Development and Cooperation (SDC). SDC s goals are to reduce poverty, foster economic self-reliance and state autonomy, contribute to the improvement of production conditions, find solutions to environmental problems, and provide better access to education and basic healthcare services. Acronyms ICT: Information and Communications Technology MNO: Mobile Network Operator SMS: Short Message Service UGX: Ugandan Shillings VSLA: Village Saving and Loan Association SHF: Smallholder farmer(s) OTT: Over the top (tax) Uganda Country Context Agricultural activities contribute 23% of Uganda s GDP, employing over two-thirds (68.4%) of the workforce (16-64 years) with subsistence agriculture employing the bigger bulk of Uganda s working population. 3.7% of the agriculture working population (16-64 years) is employed in market oriented or commercial agriculture (2014 Uganda National Population and Housing Census). Emphasis has been placed on transitioning farmers from subsistence more towards market oriented agriculture. To achieve this, improved access to quality agricultural extension services and financial services has been sighted as an enabler. Yet in the majority of African countries, Agricultural Advisory Service institutions reach less than an estimated 10% of farmers with some kind of training or advisory services. This is far below the recommended ratio of 1:500 (AFS-FARA et al. 2009). In Uganda, there are about 1,250 agricultural extension workers for a total population of 34.6 million people, at least 68.4% of whom live directly off various forms of farming. The Ministry of Agriculture aims to raise the number of extension workers to at least 4,000 over the next 3 years. If the recruitment goes according to plan, it will reduce the ratio of extension workers to farmers in Uganda from the present 1:5000 to 1:1000. In 2017, the third biannual African Forum for Agricultural Advisory Services (AFS) conference (held in Durban, South Africa) emphasized the opportunities to use information and communications technology (ICT) to address extension gaps. The Durban AFS declaration mentions that ICT can support countries in promoting wider coverage, improved efficiency, and increased effectiveness in service delivery. Uganda s National Agriculture Extension Strategy proposes the following related to ICT s role in agriculture: Advancement in technology, especially ICT has created a huge opportunity in extension service delivery. Globally and in Uganda, the application of ICT in agricultural extension also known as e-extension is expanding rapidly. This will be exploited to the greatest extent during the implementation of this strategy. MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 2

3 Research Objectives Mercy Corps AgriFin Mobile Program commissioned this research with the following objectives: To assess the effectiveness of using mobile applications such as USSD menus and SMS in agriculture and for financial inclusion. To establish the impact of macro, socio-economic factors, and policy changes on the adoption and scaling of mobile solutions in agriculture and financial inclusion. Many times, even well-designed mobile solutions using a human-centered approach do not reach scale. The study examined if other macroeconomic, social, and policy factors influence the adoption of these solutions, showing the relative significance of such factors in the general context of adoption. To learn more about interventions that could be used to mitigate the changes negatively impacting adoption and scaling. This study was conducted in June/July 2018 by John A. Mushomi (PhD), of Makerere University Department of Population Studies, School of Statistics and Planning (SSP), College of Business and Management Sciences (CoBAMS). John worked closely with the AgriFin Mobile program team to produce this report. Methodology and Study Sites The methodology of this crosssectional study employed qualitative and quantitative data collection techniques and a review of the relevant literature. The research drew from the views of District Production Officers and leaders of the farmers associations in the Ugandan districts of Kitgum in North, Kumi in the East, Masaka in the Center, Kabale in the Southwest, and Kasese in the West. The quantitative phase involved Semakula Emmanuel/Mercy Corps face-to- face interviews with smallholder farmers (SHFs) using a semi-structured questionnaire scripted on a mobile data collection device. In-depth interviews were held with key informants in government, telecommunications companies, and agricultural research agencies to get their insights about mobile technology in agriculture in Uganda. Quantitative data was downloaded from the server and converted to STATA format to generate descriptive statistics and bivariate and multivariate analysis. Using Atlas TI software, keywords and frequencies were analyzed to pick out the outstanding stories. These stories were then used to complement the derivations of the quantitative data analysis, while others have been inserted in the report as quotes. MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 3

4 CLASSIFICATION OF THE 314 SHF RESEARCH RESPONDENTS Description Number of Percentage (%) SHFs interviewed 314 Cultivating on own land % Cultivating more than 5 acres of land 11.15% Cultivating on family/communal land Cultivating on rented 14.65% Cultivating on leased land 0.64% Average age 42 years Females Primary level of education 52.87% Secondary level education 25.48% Own a mobile phone 77.4% MNO Use of phone 61% MTN, 36% Airtel, 3% Africell 6% RAS, 42% voice calls & SMS Type of RAS Mkt prices 34%, inputs 24%, Ag tips 19% Interest in RAS 76% Type of phone Smartphone 14%, feature phone 86% FIGURE 1: RESEARCH APPROACHES AND TECHNIQUE Face to Face Interview 314 Quanitative Face to Face interviews with small holder farmers in Kumi, Kitgum, Masaka, Kasese and Kabale districts Quantitative Phase Qualitative Phase National Level Ministry of Agriculture, Animal Industry and Fisheries Uganda Communications Commission Uganda National Farmers Federation MTN AIRTEL District Level District Production Officer District Farmers Association Officials (3 per district) Focus Group Discussions with small holder farmers (2 per district) MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 4

5 AGE CLASSIFICATION 66 years and older years 12% 11% years 22% 28% years 27% years Findings: SMS/USSD Usage Experiences and Policy The study examined the effectiveness of mobile applications like SMS/USSD as mediums in provision of agricultural rural advisory services. It also considered how policy changes impact adoption, especially in regards to taxation on mobile money. Factors related to these issues can be looked at in two categories: demand side factors and supply side factors. Demand side factors Phone ownership and type of phones To access agricultural rural advisory services via SMS or USSD, farmers need mobile phones. Ideally, they should own or have access to smartphones with most of the applications being smartphone driven. Uganda s National Information Technology Authority (NITA) FY2015/16 Statistical Abstract reported Uganda s tele-density at 62.1%. Tele-density represents the number of telephone connections for every hundred individuals living within an area (in this case, the whole country of Uganda). Of the 314 farmers interviewed for this study, 77.4% owned a phone, with a majority (86%) owning feature phones. A 2005 independent study by the Pew Research Center reported Uganda smartphone penetration to be only 4% of the population. Of the farmers interviewed for this study, 14% owned a smartphone. Mobile network coverage Although mobile network coverage is increasing in most parts of the country, low levels of mobile phone literacy and mobile application-specific knowledge remain a great barrier to the uptake of mobile technology beyond making voice calls. Digital literacy 48% of the interviewed farmers lacked knowledge on how to use a mobile phone to access agricultural services. Improving farmers digital literacy skills is key to building the capacity of local farmers and increasing uptake of mobile technology in agriculture. Emphasis should be placed on increased inperson, practical training for farmers, as the written instructions in commonly-used books exclude less educated farmers. MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 5

6 FIGURE 2.8: FIXED, MOBILE PHONE AND TOTAL SUBSCRIPTIONS AND TELEDENSITY; 2009/ /16 25,000,000 20,000,000 15,000,000 10,000,000 5,000, Fixed phones subscriptions Mobile phones subscriptions Total phone subscriptions Teledensity 2008/ / / / / / / / , , , , , , , ,851 9,464 10,375 14,676 15,535 16,665 19,244 21,910 22,034 9,678 10,641 15,019 15,866 16,872 19,506 22,286 22, Mobile money fees and other access costs New fees and taxes on mobile money transactions are likely to delay farmers access to financial services. These new charges come at a time when mobile money is seen as an increasingly important channel for financial inclusion. With limited access to formal financial services, poor rural farmers rely heavily on mobile financial services, and additional costs on transactions could result in slowing progress in financial inclusion. Mobile money fees affect all stakeholders in the value chain. Farmer receiving digital payments from traders are negatively impacted when faced with mobile money fees or taxes. The increased cost of purchasing agricultural inputs electronically reduces profits from selling their produce since some farmers are paid by traders using mobile money. Rural farmers in remote locations rely on sending mobile money payments to agrodealers in urban areas, whom upon receipt of payment load the farm inputs on vehicles that deliver to the farmers. The cost of inputs increases, as farmers need to remit the agrodealer withdrawal charges on top of their sending fees. Long distances to mobile money agents Mobile applications sometimes involve subscription payments for access with mobile money as payment channels. As a result, long distances to mobile money agents can be an excluding factor if these payment channels are difficult to access. MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 6

7 Access to Mobile Airtime The Uganda move to ban the selling of airtime scratch cards is negatively impacting rural households and farmers, who rely on voice calls to coordinate with buyers of produce and other services related to agricultural inputs. Few mobile money agents in rural areas are able to make electronic airtime top ups, with other farmers travelling longer distances to access agents who can provide this service. Mobile money accounts in Uganda are close to 50% of the total SIM subscriptions, which implies that the option of using mobile money accounts to top up airtime is inaccessible for half the subscribers. For example in 2018, MTN with market share of 53% reported only having 50% (5.3million) of their 10.5million subscribers with mobile money accounts. Farmers who mainly use rural village savings and loan associations (VSLAs) as their provider of financial services cannot access mobile top up and other digital financial services. This is because their VSLAs rely on paper based operations and are not yet operating digitally like formal financial institutions, which provide mobile banking services to their customers. This leaves physical MNO agents as the main channel for farmers to access airtime. Semakula Emmanuel/Mercy Corps Social media taxation The UGX 200 social media tax is likely to affect the extent to which SHFs use social media to access agricultural-related information. Farmers who have formed WhatsApp groups for agronomy and market information are likely to find it expensive to pay the Over the Top (OTT) social media tax. SHFs have used WhatsApp to post pictures of their diseased plants or share knowledge with other farmers through on-farm videos.. By requiring that the social media tax be paid only via mobile money, farmers with functioning SIM cards that are not mobile money registered are excluded from being able to pay the tax and access social media to promote their activities. Need for trust and safeguards The lack of a trusted community of agro-input suppliers limits the reliance of farmers on the mobile financial technology. One respondent pointed out the following: People should first be trustworthy: imagine sending money to buy farm supplies to someone and they don t deliver. Another farmer suggested: There should be a campaign to remove the middlemen between suppliers and farmers. Intermediaries are perceived to cheat farmers. MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 7

8 Supply Side Factors Mobile device use cases Over 70% of farmers reported using their mobile phones to obtain agricultural information, including communicating with potential produce buyers, produce intermediaries, and suppliers of agricultural inputs. They mainly received information regarding market prices for their produce (34%), agrarian inputs (24%), and farming tips (19%). Very few (6%) of the farmers interviewed were aware of any farmeroriented mobile phone applications, which reflects a severe lack of access to such relevant information. A majority of the rural farmers (83%) have used mobile phones to access mobile money services at some point. The most common mobile money services they used included buying airtime (38%), receiving or paying for goods and services such as agricultural inputs and farm produce (37%), and mobile banking (10%). The most common reasons for not using mobile money are lack of a personal mobile phone (48%), lack of registered SIM cards on mobile money (17%), and lack of funds to send or receive messages (13%). These responses imply that the majority of rural farmers lack the finances to buy mobile phones, and also lack the funds to make the necessary mobile money transactions. Only 29% of the respondents reported that they save funds through the mobile money services platform. Out of those who save, 34% save infrequently, such as once a year. Only 31% save on a weekly basis, and 27% save on a fortnightly basis. Semakula Emmanuel/Mercy Corps Service provision and quality gaps Although some of the farmers reported that they received SMS weather and agronomy tips, most did not have access to market linkages. Farmers need accessible digital platforms where they can login anytime to connect with market information and get quick responses to their problems. Some groups of farmers mentioned untimely delivery of advisory SMS. For example, some reported receiving messages about weeding when it was already past the weeding time. Another respondent added: the SMS always comes in English, which is not easily understood by farmers with low levels of education. Impact of commodity prices The field research results showed that commodity prices influence how farmers use mobile financial services. When the general commodity prices are low, the incomes among farmers are low, and there is not enough money to save in banks or spend on mobile phones or mobile application. MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 8

9 Siloed data collection activities and tools The limited data sharing and diverse data collection parameters/tools has resulted in multiple data collection activities to capture data sometimes from the same farmers. Most of the data collection applications used do not update frequent enough to provide more current farmer profiles. Whilst database could also allow various stakeholders to extend services and products, practitioners in digitization of agriculture need tools that speak to each other and strategic partnerships to limit recipient fatigue experienced by farmers. Semakula Emmanuel/Mercy Corps Recommendations Effective E-extension services through mobile could fill the gap in agricultural extension. This will require efforts to increase digital literacy, mobile phone ownership, and appropriate content and delivery mechanisms such as matching the application platforms with the devices the farmers use. Mobile service providers should consider sending messages in both English and local languages to those not proficient in English. Sending voice messages could also be a way to address the low literate populations. Innovations should be tailored to solving the problems the farmers face. The mobile technology innovators should work closely with farmers in order for the mobile technology to reach its full potential. This collaboration will encourage farmer buy-in. The cost of purchasing mobile phones is still a barrier for many farmers. This may contribute to a lower mobile phone teledensity of below 70%, compared with neighboring Kenya whose teledensity is above 95%. However mobile teledensity measures mobile subscriptions against the given population which could misrepresent individual who have more than one sim card registered to them and are thus counted twice. For this reason mobile phone ownership is lower than mobile subscriptions. Introducing low price phones or bundles may increase ownership, especially if it includes phone charging energy solutions since mobile phone ownership introduces this MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 9

10 new energy demand on the households. Mechanisms to stagger phone purchase payments will also enable more purchases and increase mobile phone ownership since the initial full cost can be prohibitive. Social media tax needs to be reviewed in light of its impact on mobile payments in agriculture. Diversifying payment mechanisms can also be explored to enable those without mobile money wallets to gain access. For example, MTN telecom, with a 53% market share in Uganda, has 10.5 million subscribers. Only 5.3 million of these subscribers have mobile money wallets, meaning that 50% of subscribers are excluded per the current taxation payment mechanisms. Mobile money usage fees or taxes need to be reduced if more farmers are to be included in use of mobile services. Many farmers mentioned the need to reduce the costs of using the mobile services. As reported by one of the farmers: The costs should be reduced so that the services are affordable. We need to be trained in the use of mobile technology. Also, we need to have smartphones at lower prices since the ones we have cannot perform all those functions. The mobile technology applications should be free for the farmers, especially the small-scale farmers. Mobile technology should be part of the entire supply chain if it is to be promoted in our villages. Taxation of mobile money. In November 2017, Uganda s National Financial Inclusion Strategy promoted access to mobile financial services as an opportunity to unlock economic growth by helping people raise their incomes, accumulate savings and better cope with shocks to their income, thereby enhancing their welfare. The African Financial Inclusion Policy Forum also declared that scaling up mobile financial services through mobile technology is a unique opportunity for Africa to unlock and accelerate financial inclusion. Officials should consider the recommendations above to ensure that Uganda does not miss out on this crucial moment to connect SHFs to mobile technology. Tax policy will also influence the direction of this initiative. The taxation of mobile money transactions undermines the investment in financial inclusion at a time when mobile operators are already under significant cost pressure to expand networks, improve service quality, and address new regulatory requirements. Mobile money enables more efficient payments for goods and services, reduces the informal economy, creates employment and protects vulnerable segments of society from financial shocks. The positive externalities of mobile money also spill over into other sectors, such as agriculture, healthcare and education. In short, there are strong incentives for the state to support the growth of mobile money, the opposite of what an excise duty is typically designed to achieve. In a number of countries, mobile money has increased financial inclusion, particularly amongst society s most marginalized populations. The negative impacts of taxing mobile money transactions is likely to fall most heavily on these individuals, which would have ripple effects throughout the country s economy MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 10

11 Conclusion Access to Agricultural extension and financial services has a significant contribution to increasing market oriented agriculture and the GDP contribution of Agriculture. Electronic extension mechanisms such as SMS, IVR and smartphone applications accelerate reach of extension services to wider section of farmers. Majority of farmers use feature phones which presents challenges with more mobile applications focusing on smartphone enabled applications. Whilst this exclusion of farmers with feature phones is of concern, the implication for startups developing these solutions is that they take longer to break even and have sustainable products due to the small customer base of few farmers accessing their products on smartphones. Where applications are developed or exiting applications are used, there is need for product-user fit such as making sure the language, timing, and content of the SMS messages resonate with the condition or needs of the farmers. This will drive continual investment by farmers for subscription based SMS agricultural advisory services. This calls for effective data collection that empowers the solution providers to provide precision advisory services to the farmers and develop additional data driven products. Mobile phone network connectivity infrastructure and low mobile phone ownership present additional challenges. Statistics presented show not just low smartphone penetrations but generally low mobile phone ownership which limits access of farmers to agronomy tips sent via SMS. Energy for phone charging can also be a challenge and as a result of the multi-dimensional nature of increasing mobile phone ownership, a product/service bundling process might be suitable. For example bundling energy products, mobile phone with financial products over suitable payment terms/channels. Mobile network operators would need to broaden the infrastructure return on investment consideration to include alternative use cases beyond voice, data to include other mobile driven services and products to inform the rural infrastructure investment go/no go decision. Developing bottom of the pyramid mobile use cases for utilization will catalyze profitable mobile network infrastructure investments. Digital literacy emerged as a major gap for adoption along with the other challenges of phone ownership, mismatch for application medium-market fit. With products layered on top of other digital financial products creates compounded digital literacy challenges. For example SMS based agronomy services which rely on mobile money payments require literacy on subscription of the agronomy service application plus the mobile money payment application in addition to phone devise literacy itself. This calls for more partnership and collaboration given the various layer of mobile phone literacy required to increase active usage. Analysis shows that policy can have far reaching impact on use of digital solutions for agriculture. Increased costs on mobile payment, and access to communication platforms due to taxation on mobile money and social media are likely to reverse or slow gains made in supporting farmers access much needed financial services, and agricultural information and communication for a country in much need of increasing commercial agriculture beyond the present 3.7% working population. The right policy that encourages investment, adoption and usage in digital solutions is likely to spur a sector that employs over 68% of Ugandans yet returns GDP of 23%. MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 11

12 References Cynthia, E. N., & Nwabugwu, T. S. (2016). Challenges to Adoption of ICT Tools by Agricultural Extension Workers in Anambra State, Nigeria. Asian Journal of Agricultural Extension, Economics and Sociology, 10(4), 1-6. Henriques, J. J., & Kock, B. E. (2012, October). Empowering smallholders and local food 25,000,000 markets with smartphones and social networks. In Global Humanitarian Technology Conference (GHTC), 2012 IEEE (pp ). IEEE. Jaffee, S., Henson, S., & Diaz Rios, L. (2011). Making the Grade: Smallholder Farmers, Emerging Standards, and Development Assistance Programs in Africa-A Research Program Synthesis. Muriithi, A. G., Eric, B., & Sarah, O. (2009). Information technology for agriculture and rural development in Africa: Experiences from Kenya. Munyambonera, E., Mayanja, M. L., Nampeewo, D., & Adong, A. (2014). Access and use of credit in Uganda: Unlocking the dilemma of financing small holder farmers. Triki, T., & Faye, I. (2013). Financial inclusion in Africa. Tunisia: African Development Bank. Zahedi, S. R., & Zahedi, S. M. (2012). Role of information and communication technologies in modern agriculture. International Journal of Agriculture and Crop Sciences, 4(23), National Agricultural Extension Strategy. (2016). Publication Version National Information Technology Authority - Uganda (NITA-U) Statistical Abstract 2016 Semakula Emmanuel/Mercy Corps MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 12

13 CONTACT TREY WATERS Program Director Agri-Fin Mobile RONALD RWAKIGUMBA Uganda Country Coordinator Agri-Fin Mobile About Mercy Corps Mercy Corps is a leading global organization powered by the belief that a better world is possible. In disaster, in hardship, in more than 40 countries around the world, we partner to put bold solutions into action helping people triumph over adversity and build stronger communities from within. Now, and for the future. 45 SW Ankeny Street Portland, Oregon mercycorps.org MERCY CORPS Agri-Fin Mobile: Mobile Applications and Policy impact on Agriculture - Uganda A 13