The expenses borne by cocoa farmers due to KOA's transparency system operation.

Forked up, Unfiltered, and Unleashed: Unmasking Mobile Money Hidden Costs for Cocoa Farmers

Mobile money was designed to provide a solution for rural, unbanked African communities, particularly farmers, enabling them to perform financial transactions efficiently. However, it seems this silver lining has a darker side, especially for cocoa farmers working with Koa in Ghana. Let's delve into the troublesome transaction costs associated with mobile money and discuss its implications.

First off, mobile money providers charge a fee for transferring money via their platform, and it's essential to understand the price tag that comes with these transfers, depending on the amount of money in question. You see, whereas Koa may be paying significant sums to farmers through mobile money, incurring less overall transaction costs, farmers employ this system to carry out daily smaller transactions within the Ghc10 to Ghc100 range.

Take a gander at these graphs developed by fintech guru, David Quartey, showcasing mobile money transfer fees. (Graph 4 and Graph 5) As the graphs reveal, the mobile money system is regressive, with lower sum transactions attracting high transactional costs, in stark contrast to larger transactions that carry a more moderate fee. For example, transferring Ghc10 via MTN mobile money to another network will set farmers back at least 10%, while transferring Ghc1000 incurs a meager 0.85% fee. It's a raw deal, and quite frankly, a slap in the face to these hardworking farmers.

What about Koa's argument that mobile money is the most convenient payment system for rural farmers? I'd challenge that assertion, arguing instead that Koa used mobile money to facilitate their transparency system. This means they placed demonstrating their moral virtue over the financial implications it imposed on the farmers—farmers who are essentially being bled dry by the system they're using due to its purported advantages.

But it's not Koa's fault, right? Well, not exactly. The problem lies in the gross mismatch between Koa's declaration of economic gains for farmers versus the bogus transaction costs they're being forced to shoulder. Compare this to banks, which reward their customers with interest on their accounts and free withdrawals rather than charging for intra and inter-transfers like mobile money providers do.

So, why is it unacceptable to ask farmers to bear these transaction costs for Koa to demonstrate the impact they're making on farmers' lives? It's a tricky issue, but isn't it ironic that farmers, who are already struggling, are being asked to foot the bill for Koa's goodwill and public legitimacy?

Should farmers trade these costs for implementing a transparency system that allows Koa to gain public approval? Absolutely not! In fact, Koa should be footing the transaction costs for farmers instead of making a needless donation to MTN, as doing so would significantly reduce the actual value of farmers' income from the pulp trade.

Moreover, Ghana has introduced the E-Levy, a controversial tax targeting mobile money users, further increasing transaction costs for farmers. This new policy means that farmers will hand over at least 1.5% of their earnings from Koa to the government, free of charge. Additionally, Koa, as the sender, will give 1.5% of the value they're sending to farmers to the government in the form of E-Levy. Combined, these additions reduce the actual value of farmers' income from pulp trade by a whopping 13%.

Research shows that 83% of mobile money users in Ghana disagree with the implementation of the E-Levy, with the majority pointing out that it particularly impacts the poor, the tax burden is already too high, and it's not a fair tax. It's essential for Koa to find a payment system that places farmers' financial wellbeing at the forefront, or else they risk being complicit in the exploitation of these vulnerable farmers.

Koa needs to hold themselves accountable and prioritize ethical trading with farmers, rather than viewing them as the objects of their charity. Only then can the cocoa industry truly transform and prove to be a force for good.

Koa's Response:

"We're all about taking responsibility for our supply chain and ensuring farmers profit. Our goal is to partner closely with farmers and tackle challenges together in the dynamic and unbalanced cocoa sector. Founded in 2017, we're a startup committed to revolutionizing the cocoa industry by increasing smallholder farmers' income through the upcycling of cocoa pulp. As of today, 2,200 cocoa farmers have benefited financially through this process. With our second factory coming online, we're set to multiply this impact and serve as a model for large-scale change."

Stay tuned for more insights on the cocoa-chocolate industry, and consider subscribing to our newsletter cocoadiaries.substack.com or engaging us on a project, research, or strategy development basis that pertains to this fascinating industry.

Mobile money, initially designed for banking the unbanked, results in hefty hidden costs for cocoa farmers in Ghana, particularly for smaller daily transactions.
Graphs developed by fintech expert David Quartey show that mobile money transfer fees are regressive, with higher transactional costs for smaller amounts.
Koa uses mobile money to facilitate transparency with farmers, prioritizing demonstrating moral virtue over the financial burden on the farmers.
Banks offer interest on accounts and free withdrawals, whereas mobile money providers charge for transactions.
The recent E-Levy policy in Ghana increases mobile money transaction costs for farmers, with a combined impact of 13% reduction in the value of farmers' income from the pulp trade.
Research shows that 83% of mobile money users in Ghana oppose the E-Levy, mainly due to its impact on the poor and the already high tax burden.
To avoid complicity in the exploitation of farmers, Koa needs to prioritize ethical trading and a payment system that focuses on farmers' financial wellbeing.
Koa should strive to revolutionize the cocoa industry by increasing smallholder farmers' income, and uphold their commitment to partnership and tackling the challenges in the sector through accountability and ethical trading.