Agribusiness Management in the Coffee Value Chain A smartphone-based IT system ensuring transparency and traceability

The challenge

Uganda is one of Africa’s largest coffee ex porters. More than 1 million

farming households (approx . 7 million individuals) rely on growing and

selling coffee beans as their major source of cash income. For the larger

region of East Africa, these figures can almost be tripled. Smallholder

farmers face a number of challenges such as inadequate agricultural

practices, limited information and market access as well as limited access to

financial services.

In order to address some of these issues, about 54,000 Ugandan

smallholder coffee farmers have been organised in producer groups to

channel their produce through commercially managed bulking stations being

provided with direct market access and released from dependencies and

captive relationships with informal middlemen.

However, important challenges have remained: Above all, transparency,

efficiency and accountability were still problematic at many bulking stations,

leading to a lack of trust and hampering cooperation. The manual and

paper-based systems were error-prone and did not provide timely and

comprehensive overviews.

Our approach

The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

and the software company SAP have joined forces through the

develoPPP.de programme on behalf of the German Federal Ministry for

Economic Cooperation and Development (BMZ) in order to provide farmers

with the opportunity to grow and market more and higher quality coffee and

to thereby increase their income.

Within the development partnership the partners have developed an IT

solution for the coffee value chain, featuring a smartphone application linked

to a central database with a sophisticated analytical and geographical

information system (GIS).

Coffee farmers deliver their bags to bulking stations, where they are

registered and issued a bar-coded membership card.

Using the SAP smartphone application, their bags are not only recorded on

delivery, all subsequent transactions such as cash advances, bulking,

hulling, selling to ex porters and final payments are captured digitally and

synchronised with the central database as soon as mobile network

coverage is available. The path of both, the produce and the money, is

traced throughout the entire value chain.

Addressing the needs of farmers, traders, processors, exporters as well as service providers While farmers are provided with SMS notifications on deliveries, weather

updates as well as information on agricultural practices and prices, traders

utilise the system to increase their efficiency when buying, bulking and

arranging their transport logistics. Up-to-date market prices can be sent to

the bulking stations via smartphone on a daily basis.

Centrally, the system provides aggregated seasonal and geographical

analytics, yield reports as well as traceability of produce, which is especially

relevant for certification. After the initial field trial in July 2013, the demand

for the tool was so high that the full rollout using 12 smartphones catering

for more than 7,000 farmers was started in October 2013.

“This joint PPP is an entry point for SAP to new

markets in the developing world. The early adoption

and end usage of our system in Uganda is more

than promising and proves our intention for a

globally applicable solution.”

Christian Merz, Research Manager, SAP AG

Contact GIZ Uganda

Dr. Dirk Steinwand

P +256 414-253840

E dirk.steinwand@giz.de

GIZ develoPPP.de

Anna Karolina Lamik

F +49 6196 79-2372

E anna.lamik@giz.de

SAP AG

Christian Merz

F +49 62 27 75 25 44

E christian.merz@sap.com

Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Sitz der Gesellschaft Bonn und Eschborn Geschäftseinheit Zusammenarbeit mit der Wirtschaft Dag-Hammarskjöld-Weg 1-5 65760 Eschborn, Deutschland

T +49 6196 79-2371 F +49 6196 79-1115 I www.giz.de

Printed by Top Kopie GmbH

Photo credits SAP AG

As at April, 2014

A project by

Implemented by

On behalf of Federal Ministry for Economic Cooperation and Development

Divison Cooperation with the private sector; service point

Impact

The smartphone application addresses various gaps in the coffee value

chain ensuring traceability as well as increasing efficiency and transparency.

Producers, sellers, buyers and service providers can now collaborate

seamlessly through a system tailored to Base of the Pyramide (BoP)

businesses.

In this way electronic communication of market information prevents

arbitrary prices and handling fees fix ed by middlemen. Farmers gain direct

access to ex port markets improving their competitive position and

bargaining power, increasing their sales margin and fostering their cohesion

as producer groups. Similarly, ex porters show great interest in tracing not

only the origin of their quality coffee beans but also ensuring that fair prices

are paid to the original producers.

Additionally, agricultural and financial service providers as well as input

suppliers are starting to link into the system. For ex ample, digital cashless

transactions (“ Mobile Money” ) can now be initiated seamlessly through the

smartphone application and immediately at the point of sale of the produce.

With a complete transaction record for each individual farmer at hand, banks

now have – for the first time – sufficient data to evaluate their risk

adequately in order to provide loans for agricultural or even household

purposes. Similarly, input suppliers can deliver well-targeted quantities and

quality input and link into the ex isting payment flow.

With declining transaction cost and increasing control, profitability increases

for all players involved. As a result, smallholder farmers benefit from higher

incomes, ultimately leading to improved livelihoods of farmer households.

Scaling up

Coffee has been identified not only by Uganda but also by its East African

neighbours as one of the key cash crops, hence the dissemination of this

successful approach through national apex es and industry associations is

receiving significant support.

With the ex isting IT system being a state-of-the-art solution to multiple

challenges of smallholder farmers in developing countries, its potential has

to be assessed beyond coffee farming, as it is just as relevant in many other

value chains of cash crops and staple foods.

At a glance Ter m: January 2013 – May 2015

Countr y: Uganda Objective: The project objective is to enhance transparency,

efficiency and traceability of business operations in the coffee value chain in cooperation with the Uganda Coffee Farmers Alliance (UCFA).

Par tner : SAP AG

Impacts: • Improving farmer incomes and livelihoods • Increasing transparency, efficieny and

accountability in agricultural value chains • Enabling traceability for certification • Central collection and monitoring of data

• Opening the door to tailor-made financial services for smallholder farmers