Africa | Smallholder farmers
Ugandan milk coops thrive with help from an app
Demand for milk outstrips supply in Uganda despite sustained growth in dairy. But a new digital bookkeeping app is helping the sector reach its potential. The app is already transforming local economies and unlocking finance for farmers.
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The Ugandan dairy sector has grown by 6 percent per year for the last two decades. Smallholders keep herds of about ten cross-bred cows each and sell their milk to local dairy cooperatives that treat and distribute it. Unlike crop farmers who must wait for the harvest, dairy farmers are paid frequently, usually once or twice a month. The payment process, however, tends to be slow, as most coops still keep track of deliveries on paper. Thanks to a new app, some are now switching to digital accounting.
Emata (the name comes from the local word for milk) is a recordkeeping app specially designed to boost efficiency and transparency at dairy coops, who are then expected to pass on the resultant cost savings to their members. The app captures the quality and quantity of farmers’ milk deliveries without the use of manual ledgers. It also confirms by text message the exact quantity to the farmer, as well as how much he or she is owed.
“This app brings affordable financing to the underserved”
Financing underserved communities
The app is already transforming the local economy. In particular, more local merchants are prepared to provide goods on credit if there is reliable data confirming how much a farmer will be paid and when. Obtaining loans at fair interest rates is also easier once farmers build up a credit history. He or she can then invest in better feed or vaccinations and even equipment or more cattle, creating a virtuous circle of increased productivity and incomes.
“Emata is our way of leveraging advanced financial technology to bring affordable financing to the underserved,” says Timothy Musoke, Head of Technology at Laboremus Uganda, the fintech company which developed Emata. “The app even works in remote villages with limited access to mobile networks.”
Loan losses are minimized through advanced risk analytics and because the payments from coops to farmers are used as a repayment source. The loans are funded via a revolving structured debt fund. The initial capital is provided by the Laboremus group. Further capital will be provided by the United Nations Capital Development Fund and impact investors (including potentially Rabo Foundation). Emata allows them to see the direct impact of their debt investments.
Rabo Foundation started working with Laboremus in early 2019. Together, they are developing a dashboard to add to the app. The goal is to allow coops to gain insights from the data they collect. They can compare productivity internally and with other coops that are using the dashboard. Farmers who are doing well might be asked to share best practices, while those who lag behind can be offered inputs or other support.
Following a successful pilot of the app in western Uganda in 2018, three dairy cooperatives near the capital, Kampala, began a second pilot in February 2019 and will start working with the dashboard when it becomes available later this year. The pilot is being kept deliberately small – the coops have about 900 members between them – because project partners want to co-develop the dashboard with the users and be able to respond quickly to any technical hitches.
Resolving technical issues fast
Edward Mukimbiri is one of the farmers in the February cohort. He is pleased with the new level of transparency in recordkeeping and pricing, and hopes the app will eventually help him get a loan for a tractor. In the short term, he aims to buy medicine for his cows if they get sick. But he explains that he and other members of his coop have struggled with some aspects of the app.
“Internet access is expensive,” he says. “And only a few of us have smart phones, so sending and receiving the information is still a challenge. The app is supposed to SMS a confirmation message after we deliver the milk, but we aren’t receiving those yet. We’re talking to Laboremus to solve the problem.”
The partners behind the project are aware of the issues. “One of the coops didn’t initially own a smart phone at all, which resulted in interruptions in entering daily data. But that’s since been resolved,” says Jimmy Ekemu of Agribusiness Development Centre (ADC), which is training the dairy coops to use Emata. Based in Kampala, ADC is backed by Rabo Foundation and local bank dfcu to train farmer-based organizations in governance and leadership, financial literacy, and marketing.