Few people in sub-Saharan Africa use traditional banks and bank accounts, since these are typically urban-based and serve a narrow market.
For example, in Uganda only about 20% of people have bank accounts. However, a further 60-65% of the population have accounts with non-bank financial institutions, such as savings and credit cooperative societies (SACCOs). There are currently more than 6,000 SACCOs operating in Uganda, serving more than 18 million people. In neighbouring Ethiopia, some 20,000 financial cooperatives are grouped into 36 cooperative unions, with more than 14 million members between them.
Despite serving such large numbers, more than 80% of these cooperatives use rudimentary paper-based tools to manage their daily data and processes, such as recording members’ profiles, savings and loans information, sales of inputs and purchases of outputs.
This has high costs for the cooperatives, including:
- Loss of time on administrative issues and looking for documents;
- Employing large numbers of staff to handle manual recording;
- Lack of reliable data for planning and decision-making;
- Loss of income from unsettled loans;
- Loss of value on stored inputs and outputs due to lack of knowledge;
- Lack time to focus on important issues, such as marketing, loan repayment and sales; and
- Difficulties when applying for loans due to lack of reliable business data.
Many cooperatives continue to use paper-based data management systems for a number of reasons. These include lack of awareness of existing digital solutions, incapacity to use technology, digital illiteracy, weak enabling environments, lack of capital, and social and cultural opposition to new technologies.
Five big benefits
Digitalisation presents five major operational benefits for cooperatives:
- Reduced work-day
- Improved accuracy/fewer errors
- Increased revenues/collection
- Reduced cost of delivering services
- Improved documentation and reporting
Such digital systems free up cooperatives to focus their efforts on important matters, such as marketing, and to improve productivity for members. They also offer users better prospects of securing bank loans and contracts from big aggregators, since cooperatives using digital systems can easily show that they are reliable and profitable.
A SACCO seeking to implement a digital financial system must first research and identify packages that provide the services required by the business and its members. The first step is to determine what features the SACCO needs, and any additional services it would like the system to deliver. Based on this, the SACCO should assess the costs and benefits of each available package, as well as the potential for future growth in using the package to provide additional services. Examples of such services are the provision of weather forecasts and agronomic advisories, market information or goods tracking.
A digital culture
It will be important to negotiate fees and the provision of services, such as training. SACCO employees will need to be trained in using the system, and this will have to be budgeted for if it is not included in the package. Any agreement should include support and maintenance from the company.
The next phase will be to set up the system and migrate existing data from other electronic forms or paper-based formats. The company providing the package will be responsible for setting up and testing the system, but there will need to be agreement on who will migrate the data – how much assistance the provider will offer, and how much of this work will fall to the client. At this point, it will be crucial to ensure that any customised features and reports required are functioning, before testing the system during a trial period, in parallel with existing systems. During this period, staff should become familiar with using the system, and management can determine whether it meets the needs of the SACCO and its members. If the trial period is successful, it is now time to stop using the old systems, and switch to exclusive use of the new digital one.
To reap the benefits from such digital financial packages, cooperatives should identify a staff member who can take the digital lead, bringing the whole business into the digital era, and developing a digital culture for the organisation as a whole.
This article was created through a CTA-led process to document and share actionable knowledge on 'what works' for ACP agriculture. It capitalises on the insights, lessons and experiences of practitioners to inform and guide the implementation of agriculture for development projects.