What Cost are Cocoa Farmers enduring for KOA's Transparency system to function?
The Assessment of KOA's transparency system continue
Continued from Part 2
o Why is it problematic for Koa to pay cocoa farmers through mobile money?
Mobile money as a financial system was introduced to support the non-banked population, mostly in rural African agrarian communities, to perform financial transactions efficiently. The basis was that the financial institutions found it costly to set up “retail banking centres” in rural areas. It was also argued that there were high risks associated with the informal systems in which these unbanked populations managed their finances, mainly theft. It was also argued that the unbanked population, primarily farmers, do not save their money in a financial system but rather invest it in farming activities, making them prone to the risk of losing their funds through the usual risks associated with farming (drought, yield losses, etc.). So, let's see where farmers’ money is protected through mobile money. David Quartey did a beautiful analysis in 2018 on the transactional cost mobile money inflicts on the poor whom the money is supposed to save. If anything, this has become much worse in 2022 due to the introduction of the digital tax by Ghana.
Below are two different graphs developed by David with raw data from the telcos, demonstrating the cost of transferring via mobile money. The reason why it's essential to understand the transactional cost associated with the amount of money transferred is due to the kind of transactions that people in rural areas make. Whereas Koa may be causing significant sum transactions to the farmer via mobile money (incurring less overall transaction cost), the farmer uses their mobile money to perform smaller daily transactions within the Ghc10 and Ghc100 range. The graph shows how regressive the mobile money system is as lower sum transaction attracts high transactional cost as opposed to more significant sum transaction. Graph 4 shows that one is charged at least a 10% transactional fee if they transfer Gh¢10 with MTN mobile money transfer to another network, attracting as high as 15.5% transactional costs. As opposed to transfers of Gh¢1000, the minimum transaction cost was estimated at 0.85%, with the most increased transactional cost being Airtel/Tigo transfer to MTN at 2.485%.
Graph 4 – How much will be paid in fees if Gh¢10 is transferred?
Graph 5: How much will be paid in fees if Gh¢1000 is transferred?
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