Climate Adaptation Financing Practice: A Case Study of Bidhaa Sasa

Climate Adaptation Financing Practice: A Case Study of Bidhaa Sasa

By Joseph Lutwama and Douglas Karugonjo

The Climate Challenge
Uganda is among the world’s most vulnerable and least adapted to climate change countries scoring 166 out of 181 countries on the ND-GAIN Vulnerability Index in 2018[1]. Its vulnerability has been attributed to the huge dependency on natural resources provided by primary sectors such as agriculture, water, energy, and fisheries which are highly vulnerable to impacts of climate change. Historically, Uganda was mostly dominated by a tropical climate with a single rainy season in the north and two rainy seasons in the south. The effects of climate change are affecting the seasons with the country experiencing shorter or longer rains and harsher droughts – especially in the eastern and north-eastern regions[2].

Uganda’s most pressing agricultural risks are directly related to climate change: droughts, floods, crop/ livestock pests and diseases, post-harvest loss, hailstorms and thunderstorms, and other natural risks such as landslides. The lack of ownership and control over land and resources, and their disproportionate burden of unpaid care work, restricts access to finance, extension services, and technological innovation, especially for Ugandan women involved in farming.

These women predominantly prefer Village Savings and Loan Associations (VSLAs) to formal financial institutions for savings and credit. The high usage of informal services results in less consumer protection, fewer opportunities for women to build credit histories, and less access to structured services such as seasonal loans[3]. To enhance opportunities for women, an efficient strategy for climate adaptation is needed.

Bidhaa Sasa Building a Case for Climate Adaptation Finance
In 2021, FSD Uganda partnered with Bidhaa Sasa, to pilot a unique business model that leverages mobile money technology and group lending to enable women to access credit for energy saving household equipment and climate adaptation tools. Bidhaa Sasa is a Kenyan last-mile distribution and finance company operating in Uganda since 2019. It offers a range of household goods that improve the quality of life of rural families such as technologies for clean lighting, clean cooking, and climate smart farming.

Integration of mobile money technology
Bihdaa Sasa’s entire credit process hinges on mobile money technology, thereby opening a door for rural buyers to develop their digital financial footprint and potentially engage in formal financial service, often for the first time. Bidhaa Sasa’s exclusive use of mobile money coupled with its digital literacy training of clients helps it to get more rural households into the digital financial services ecosystem and increase their likelihood of accessing other financial services.

Tailored credit approach
The Bidhaa Sasa business model is built around rural women’s needs. It offers a tailored credit approach that makes relevant technologies for households and farming more accessible and affordable. Low-income rural women, who form the majority of Bidhaa Sasa’s customers, are typically unbanked and lack their own collateral. With the use of the group liability model, they can acquire both life improvement products and agricultural tools via payment plans for goods that typically save time or money (solar saves kerosene, LPG gas saves time, stoves save wood or charcoal, and the quality of indoor air and health of a family improves when using both technologies) while keeping credit risks low.

The model does not require collateral (the products act as collateral) and there are no credit checks conducted because most clients, particularly women, tend not to have credit histories. However, the social capital of clients that exists in villages is leveraged to ensure timely repayment. Clients are typically organised in groups of at least five and share the liability since all act as cross-guarantors. This group liability model is well understood by women who are already very active in several self-help or socially-minded groups.

This intervention enables rural households to improve their productivity at home and in their farms through ownership and use of relevant technologies. For example, an improved cookstove uses less than half the charcoal the user would normally use saving them up to $200 per year. In addition, the use of solar technology and improved cookstoves reduces or eliminates the use of non-sustainable fuels like kerosene and charcoal.

The quality of indoor air and health of the family improves when using solar for lighting and improved cookstoves for cooking. In rural Uganda for example, a single efficient charcoal stove can avoid 3 tonnes of CO2 emissions each year when continuously used.

From a climate adaptation perspective, Bidhaa Sasa also provides Purdue Improved Crop Storage (PICS) bags also known as hematic bags as part of their product portfolio. Hematic bags are an affordable and effective approach to minimising post-harvest losses for farmers. Hermetic storage is airtight and works by restricting organisms such as insects and microorganisms that can damage stored commodities from thriving in its internal atmosphere by keeping its oxygen levels low. Hermetic storage is also flood-proof.

The Impact
Over a two-year period, Bidhaa Sasa has been able to support 2,206 low-income customers access energy saving equipment and climate adaptation agricultural tools. Canvases and hematic bags accounted for the biggest proportion (42 percent) of the goods sold. Over 50 percent of Bidha Sasa’s customers have been women. The overall loan payment performance over the period stood at an average of 10.6 percent PAR >30 with the female slightly lower at 7.2 percent PAR >30.

It is clear from the case of Bidhaa Sasa that social networks within rural communities once integrated with mobile money technology can deliver positive climate adaptation and mitigation solutions for both rural households and their farms.


[1] The index summarizes a country vulnerability to climate change and other challenges in combination with its readiness to improve resilience.
[2] The International Organization for Migration (IOM), 2021
[3] Financial Protection Forum, 2019. VSLA: Village Savings and Loan Associations.


How to narrow the gender gap in digital agricultural platforms

How to narrow the gender gap in digital agricultural platforms

By Geoffrey Okidi
While digital agricultural platforms can boost farmer productivity, they also risk entrenching gender inequalities if not gender intentional. Research shows that only 25% of Sub-Saharan Africa digital agricultural platform users are women, and they are not served sufficiently.

Based on the best practices framework for incorporating gender into digital agricultural platforms developed by ISF Advisors and Value for Women (VfW) with support from Consultative Group to Assist the Poor (CGAP) (December 2022), this blog identifies four key opportunities to create shared value for platforms and the women that engage with them.

  1. Embedding gender into the organisational strategy: To become gender intentional, a good place to start is for the platform to develop a holistic gender strategy, with clear objectives and targets defined using their data. This will enable the platform to unlock new market opportunities, improve organisational performance, and reach scale more quickly. The gender strategy should include key performance indicators to assess progress towards targets, and measure success (e.g., active usage, disaggregated by sex, measured quarterly; percentage of women in leadership, measured annually).With the gender strategy in hand, the platform should then develop a gender action plan, outlining specific actions that need to be implemented to reach the gender goals outlined in the strategy (with roles/ responsibilities, allocated resources/ budget, and the timeline for completion of each action).
  2. Leveraging sex-disaggregated data for better decision-making: The collection and analysis of sex-disaggregated data is the typical starting point for increasing gender inclusion inside a company and through its products and services. Data can tell how many women a platform is serving, how well it is serving women, and the value being generated by women as customers and/or agents. Therefore, a systematic approach to data collection and data-driven decision-making can help platforms leverage their data for commercial and gender outcomes. Platforms can start to do this through the following:a) Target setting and prioritisation: Once a platform has defined their gender strategy and associated key performance indicators, they should establish a strategy-priorities-targets-measurement system centered around data. This will enable action on priorities.
    b) Understanding customer patterns: An important step is for platforms to sex-disaggregate existing data– such as customer ratings or satisfaction scores –to understand satisfaction levels for different sub-segments of women (and other users, such as men and youth). Platforms can also collect data through publicly available datasets, focus groups, and feedback pop-ups on the platform.
    c) Designing products: Insight into customer patterns from the preceding action can then be leveraged in the product design process. This could result in finding ‘quick wins’ (i.e., shifting land requirements from individual names to family names given barriers for women to access land) or more robust product shifts (i.e., designing products specifically for women
  3. Experimenting with women-focused innovations: Platforms can leverage their own data and industry leading practices to continuously innovate. A good place to start is by looking at the current platform offering with a gender lens to determine if there are any “quick wins” that can be achieved. Collecting user feedback on the offerings available and sex-disaggregating these findings could be helpful. Based on the context and platform model, there are promising platform innovations that provide inspiration. For example
    i. Use of in-person agents to increase registration for digital marketplaces (e.g., DigiFarm Village Advisors)
    ii. Use of interactive features, such as Interactive Voice Response technology, to make digital tools easier to use by digitally illiterate customers and to deliver capacity building and advisory to customers (e.g., Opportunity International Uganda)
    iii. Offering preferential terms to users earning income on the platform (e.g., zero registration fees, referral bonuses) as an incentive to onboard rural women customers (e.g., Jumia’s Women & Youth Empowerment Program)
    iv. Providing tailored training and services to increase the income-generating potential of women platform users (e.g., Copia’s asset financing product)Rural women should be embedded throughout the product and service design process. Concretely, this means including a representative sample of both men and women customers in market research efforts, testing prototypes with women, and collecting sex-disaggregated feedback.
  4. Increasing income generating opportunities for women as service providers: Evidence shows that women tend to be successful field agents. An IFC study of agent transactions in the Democratic Republic of Congo (May 2016) found that women were significantly more successful than male agents in terms of volume and value of transactions. The abundance of platform field-based positions provides a unique opportunity for women to integrate into more formalised labour, expand their earning potential, and pursue a career that works with their household responsibilities and personal aspirations.Of note is that capacity building is key to supporting women who earn an income on the platform. Tailored support could include:
    i) Providing digital literacy training,
    ii) Training on how to use the platform,
    iii) Value-added financial services (e.g., credit, insurance, or savings products),
    iv) Providing assets necessary for livelihoods earned on the platform (e.g., smartphones,
    v) Access to support networks within the platform ecosystem

Supporting refugees to find freedom by expanding access to finance

Supporting refugees to find freedom by expanding access to finance

“Independence”, “having the power or right”, and “liberty”, are some of the phrases that describe freedom. This year’s World Refugee Day theme is ‘finding freedom’ and access to financial services is a key component to achieving that once refugees resettle so that they become self-reliant and economically independent.

Though important, little has been known about the financial strategies employed by refugees over time to build their livelihoods and manage their finances.

To learn more, the Financial Sector Deepening (FSD) Uganda and FSD Africa commissioned the Financial Inclusion for Refugees (FI4R) project. The project aimed at deepening and broadening access to and usage of formal financial services among refugee and host communities in Uganda, with a focus on the West Nile and South-West regions. The project also had a learning and research component to assess refugees’ incomes and expenses to inform the development of financial products and services offered to them in Uganda.

Consequently, the project supported three financial institutions; Rural Finance Initiative (RUFI), VisionFund Uganda, and Equity Bank Uganda Limited to rectify this grim situation by enabling them to offer a variety of savings and credit products as well as financial literacy programmes to refugee groups in the target areas.

Florence is one of many refugees who benefited from the Financial Inclusion for Refugees project by getting a RUFI loan through her savings group. The single mother of two who lives in the Palorinya refugee settlement in Moyo district arrived in the settlement five years ago from South Sudan. She is a tailor belonging to three saving groups where she saves Ushs 4,000 (1.04USD) and Ushs 20,000 (5.2USD) weekly in each group.

She used the loan as capital for her business and continued to save money together with her group so that she can later purchase stock.

Over a period of 12 months, Florence has increased her contributions to the savings group as she has realised saving diligently is essential to growing her business.

Through its implementation, the project addressed some of the key barriers to increasing access to financial services for refugees including, low-risk appetite among the financial service providers highlighted by the limited appreciation of refugees as a potential market and underdeveloped ecosystems where there is high reliance on saving groups and limited adoption of formal financial services.

In addition to evaluating the impact of financial services on refugee livelihoods in Uganda, the learning and research component also provided insights for financial institutions on how to improve access to financial services in the refugee settlements.

The project endline study reports that Ushs 7.6 bn was disbursed in loans by the three financial institutions to savings groups. Additionally, over Ushs 12 bn was deposited in savings accounts with three financial institutions.

Florence’s experience and the endline report numbers demonstrate that refugees are a viable market segment. For that to be fully exploited, respondents’ reasons for hesitation to use formal financial services must be tackled.

Interested commercial banks and micro-financial institutions should therefore improve access by deploying more agents in the different villages of the settlement. This is in place of having a few agents in the major trading centers which are far away from the settlements.

Additionally, information regarding details of products and services offered including interest rates, fees, and prerequisites should be availed and simplified even when services are offered digitally.

Further, the high transactional costs of using mobile money should be revised as these were sighted as a reason for limited or avoidance of usage.

When these adjustments are made, financial service providers will register transactions worth more than the recorded Ushs 7.6 bn and Ushs 12 bn in loans and deposits/savings respectively in the two years of the Financial Inclusion for Refugees project’s implementation. This will make financial inclusion for refugees and host communities a win-win for financial service providers whose decisions are profit based as well as the target market segment.


Women and Girls’ Access to Education and Health Services, and finance in Uganda

Women and Girls’ Access to Education and Health Services, and finance in Uganda

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    In line with Financial Sector Deepening’s 2.0 strategy, FSD Uganda aims to move beyond a predominant focus on financial inclusion to also impact the real economy.

    The objective of this assignment was to develop a more comprehensive understanding of the health and education markets and identify opportunities to improve access and outcomes for women and girls through financial sector intervention. This report therefore:

    • Assesses women and girls’ access to and use of health and education services with financial services as a key enabler in meeting those needs.
    • Provides recommendations to FSDU on how they might intervene to improve outcomes for women and girls. This will include recommendations about possible intervention options as well as potential partners.

    MSE Recovery Fund at One Report

    MSE Recovery Fund at One Report

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      The Micro and Small Enterprises (MSE) Recovery Fund was launched on February 24, 2022. The fund aims to facilitate access to finance directly to 50,000 MSEs (at least 40% women and 30% youth). This is with an objective to shorten the recovery trajectory of youth and women-owned and operated businesses from the COVID-19 pandemic effects, by providing their businesses with much-needed capital injections. In turn, this is expected to jumpstart the economic livelihoods of entrepreneurs to secure and create job opportunities for young women and men in Uganda.

      Six microfinance institutions and SACCOs (Tier III and Tier IV financial institutions) have received funds to on-lend to small and medium enterprises recovering from the effects of the Covid-19 pandemic.
      These are; Pride Microfinance Limited, FINCA Uganda, Lyamujungu Cooperative Financial Services, Mushanga SACCO Limited, Hofokam Limited, and UGAFODE Microfinance Limited, operating across the country.
      Jointly, the institutions have on-lent UGX 13.42bn to 10,832 MSEs at an average interest rate of 16.0%. So far, the funds have been disbursed to 40% of youth and 55% of women. The average ticket size borrowed is UGX 950,000.


      Narrowing the gender gap in digital agricultural platforms

      Narrowing the gender gap in digital agricultural platforms

      Women are highly engaged in agriculture and rural economies, as labourers, consumers, and producers, both for markets and their households. According to the Consultative Group to Assist the Poor (CGAP), an estimated 79% of economically active women in developing countries report agriculture as their primary activity. However, there are gaps in women’s productivity due to: a lack of land ownership, lower access to quality inputs, credit, and training, less access to paid and unpaid family labour, smaller land sizes for cultivation, and restrictive norms e.g., focusing women on low-value crops. In many value chains, women provide most of the labour, but payment for outputs goes directly to men. This discourages women from supporting productivity growth and limits their economic potential.

      Digital agricultural platforms can boost farmer productivity but also risk entrenching gender inequalities if not gender intentional. Research shows that only 25% of Sub-Saharan Africa digital agricultural platform users are women and are not served sufficiently. To focus the FSD Uganda-supported digital platform partners on being gender-intentional in their business models, FSD Uganda held a “Gender in Agricultural Platforms” co-creation workshop with Emata Uganda Ltd, Ensibuuko Tech Ltd and Quest Digital Finance Ltd.

      Gender co-creation activity

      The engagement raised awareness of the gender issues in agricultural value chains. It also allowed each of the partners to reflect on how these issues manifest in the customer journey starting from acquisition, credit scoring/financing, impact, retention, and advocacy.

      The key takeaway from the gender co-creation workshop was a curated list of best practices that these platforms can adopt to create shared value for the platforms and the women that engage with them. For gender intentionally, the partners were tasked to prioritise the best practices for adoption, indicating how to implement them and the relevant support that may be required. This is an activity all stakeholders in the digital agricultural platforms space can partake in to bridge the gender gap in the platforms.

      A word from the participants

      This is what participants had to say about how gender gaps in digital agricultural platforms can be reduced.

      “One-way platforms can be more intentional about reaching women is through the financing mechanisms like the payment mechanism for the sale of agricultural products – these could use different acquisition strategies to reach female farmers including focusing on female-focused value chains. We can also consider women-based agent network models and others that might be more effective at impacting women not just reaching many women,” Julie Zollman, FSD Network Gender Collaborative Programme.

      “We need to focus on business activities that women are actively involved in for better inclusion such as catering services, poultry and identify how we can help them diversify on digital platforms. We can also skill them up to make their businesses profitable,” Winnie Namubiru, Quest Digital Finance Ltd.

      “Gender is a very important aspect of our business because it promotes specificity right from the organisation level through how we offer services. It is important to us given that our clientele are rural poor in saving groups with 80% of members being female. So, my key takeaway is to identify gender gaps in the value chains and be able to offer appropriate value chain financing products that will most influence specificity from all angles,” Roger Nyakahuma, Ensibuuko Tech Ltd

      “We want dairy farmers to dream big and we cannot achieve this dream without involving both females and males. This is key for maximum impact on the farmers’ lives. Going forward, we need to combine both tech-based solutions with on-ground field support to enable us to bridge the gender gap and encourage more women to understand how to use financial services and embrace technology,” Lillian Nassanga, Emata Uganda


      Bridging the gap between youth and access to financial services

      Bridging the gap between youth and access to financial services

      Social norms, product suitability and lack of collateral are some of the hindrances to inclusive finance for women and youth cited by the Mastercard Foundation partners under the Young Africa Works Program in Uganda.

      This was discussed during the launch of the Young Africa Works community of practice on inclusive finance in January 2023. Inclusive finance means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit, and insurance – delivered in a responsible and sustainable way.

      The community of practice on inclusive finance will provide a platform to convene and share ideas, resources, and lessons on a wide range of topics related to financial inclusion. It is one of many collaborative and intentional approaches of the Mastercard Foundation Young Africa Works program to ensure more impactful delivery and achievement of benefits for young people.

      “The ultimate intention of the community of practice on inclusive finance is to deepen understanding of the various aspects of inclusive finance and drive a more collaborative and intentional approach to program implementation,” said Arnold Byarugaba the Foundation’s MSME Finance Lead during the launch.

      Composed of all partners under the Young Africa Works program in Uganda, the community of practice on inclusive finance will review ongoing challenges, gains, and opportunities affecting financial inclusion within the Young Africa Works interventions in Uganda and pivot accordingly to achieve greater impact.

      During the first gathering, partners learnt from each other what others are doing to sustainably enable young people in work. Group discussions brought to light the financial inclusion gaps for each partner as well as recommendations on how these can be filled or addressed for that matter.

      Even though the community of practice on inclusive finance membership is primarily for Young Africa Works partners, bridging the gap between youth and access to financial services isn’t exclusive to the partners. Establishment of the community is evidence that all stakeholders seeking to impact youth need to reflect on their financial inclusion gaps, come up with solutions on how they can be bridged and implement them.

      A steering committee was set up and is responsible for both governance and technical aspects of running the community of practice on inclusive finance, including tasks such as setting or reviewing the community’s objectives. Going forward, meetings will be held on a quarterly basis tackling different themes that are relevant to the impactful implementation and deepening access to finance amongst women, youth and refugees under the Young Africa Works Programs funded by the Mastercard Foundation.

      Since its launch, one quarterly meeting has been held in March 2023. The theme of the meeting revolved around ‘unlocking access to finance partnerships for program participants’.  A key highlight from the meeting is acknowledgement that traditional financial institutions are not sufficient to meet the needs of startup enterprises yet majority of these make up the Young Africa Works target group. Partners agreed to intentionally craft solutions on how to meet the finance and growth needs of businesses at ideation and start up stage.

      About the Young Africa Works Program

      The Young Africa Works Program works closely with key stakeholders to enable young women and men, including refugees, internally displaced youth, and those living with disabilities, to acquire the skills needed to find employment or create work opportunities. Financial sector Deepening Uganda is leading the partnership on financial inclusion.


      Rapid Gender Assessment of the Horticulture and Dairy Value Chains in Uganda

      Rapid Gender Assessment of the Horticulture and Dairy Value Chains in Uganda

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        A rapid assessment to obtain insight into women’s economic opportunities within the dairy and horticulture value chains was commissioned by the FSD Network Collaborative Gender Programme to support FSD Uganda.

        This report presents insightful findings from the literature reviewed and a field study conducted in selected districts across the tomato and dairy value chains in Uganda. The report provides an overview of the transformative potential on rural women’s livelihoods per value chain, and further explores interventions supporting women to achieve greater resilience, increase their income and exercise greater decision-making.

        The findings of this report will aid development of interventions in line with FSD Uganda’s mandate, under which it works with both public and private sector players, to develop sustainable improvements in the livelihoods of low- income individuals (particularly women) through reduced vulnerability to shocks, increased incomes, and employment creation.


        FSD Uganda pilots platform economy masterclass

        FSD Uganda pilots platform economy masterclass

        Simply put, the platform economy is economic and social activity facilitated by platforms. A platform business is a multi-sided model focused on creating value by facilitating interactions between two or more interdependent groups usually, consumers and producers. The common forms of interactions between the groups include selling, buying, and sharing of goods and services. Common examples of platforms include Facebook, Amazon, Airbnb, SafeBoda and Uber.

        In early March 2023, FSD Uganda run the first platform economy masterclass. Attended by the first cohort, the recently developed curriculum was piloted during the five-day class.

        The inaugural masterclass was attended by 24 participants in the platform economy drawn from ecosystem enablers such as, AgriTechs, HealthTech, Fintechs, and others.

        The masterclass seeks to support technology platform entrepreneurs to enhance their business models, diversify their income streams, and revamp their value propositions. Additionally, it seeks to see the businesses expand their customer base and collaborate or partner with other ecosystem players (both locally and globally) and deepen financial inclusion, thus improving the ecosystem they serve.

        More cohorts of the platform economy masterclass will be conducted to obtain industry and participant feedback to enable the refinement of the curriculum.

        Ultimately, FSD Uganda intends to enable the ecosystem to run the masterclass as a regular program for capacity building of platform economy participants and ecosystem enablers. The target participants include fintechs, agritechs, MSMEs, financial services providers, consumers, development partners, etc. This is expected to spur the growth of Uganda’s nascent platform economy.

        This is what some of the participants from the first cohort say about the masterclass.

        “During the class, we got insights into case studies which showed us what has worked before in other countries. For us in the agriculture industry, we have learnt about how the likes of Twiga Foods in Kenya are operating and that provided valuable information on how to scale” says, Annet Nanyanzi, Co-founder, Green Shares Limited.

        “I have understood better what digital and platform economy is and how to make money in the different business models as well as the risks involved. The case studies were very helpful in aiding my understanding. The most important thing is how we are going to apply what we learnt to help us scale faster – we know that we must move away from just providing the products to facilitating the transaction on the platform so that we reach more users within a short time,” Zilla Arach Mary, Chief Products, and Innovation Officer, EzyAgric said.

        “The masterclass provided useful tips and insights and different business models that we can apply to grow our customer base. The different case studies for example the talk by SafeBoda enlightened us on how best we can improve our services, our infrastructure, and reduce costs. Because of the class, we will be able to redefine our products and provide better service to our customers,” says Michael Francis Kalyango, the Chief Technical Officer at Quest Digital Finance.


        Embracing digitalisation in agriculture for inclusive growth

        Embracing digitalisation in agriculture for inclusive growth

        By Geoffrey Okidi

        The COVID-19 pandemic was a wake-up call for businesses across various sectors to develop plans to ensure business continuity amidst disruptions of that magnitude. Most of these plans include embracing digitalisation.

        For economies such as Uganda’s which are heavily dependent on agriculture, Digitalisation in agriculture can be a sector game changer. Digitalisation for agriculture is the use of digital technologies, innovations, and data to transform business models and practices across the agricultural value chain. This in turn helps address bottlenecks in productivity, postharvest handling, market access, finance, and supply chain management. This aims to achieve greater income for smallholder farmers, improve food and nutrition security, build climate resilience, and expand the inclusion of youth and women.

        Financial Sector Deepening Uganda’s 2020 study on the impact of COVID-19 on agricultural finance in Uganda in September 2020 affirms the importance of digitalisation. The study points out that the lack of digitisation along the agricultural value chain exacerbated firm-level economic effects indirectly caused by COVID-19 measures. The study points out opportunities for digitisation that could have saved the day and fostered greater resilience to the impact of the COVID-19 lockdown measures. The study notes that there was a sudden growth in e-commerce (for example, door-to-door delivery) by 100 to 300 percent in some cases, albeit off a very low baseline, showing underlying demand for digitisation.

        According to McKinsey Global Institute’s 2016 study titled Digital Finance for All: Powering Inclusive Growth in Emerging Economies, digital technologies cut the cost of providing financial services by 80 to 90 percent.

        Findings of a similar study conducted by aBi Finance on the performance of SACCOs during COVID-19 lockdown are consistent with the McKinsey Global Institute Study. The aBi Finance study found that during the COVID-19 lockdown, fully digitalised SACCOs performed much better in terms of loan portfolio quality and savings mobilisation than their non-digitalised counterparts.

        Uganda and other East African countries have some of the most conducive conditions for increasing uptake of digital finance technologies in the agricultural sector (about 56 percent of adults are already using mobile money – FSD 2018). However, agricultural payments in Uganda remain predominantly cash-based and many people remain unbanked (Better Than Cash Alliance, 2017).

        To reap from the potential benefits of digitisation of the agricultural value chain, there is need to address the key challenges hindering it. According to the UN Capital Development Fund, the key challenges to digitalisation in Uganda are:

            • Low education levels, fluctuating incomes, price sensitivity/preference to pay with cash amongst many consumers
            • Formal financial exclusion and limited usage of available financial services
            • Limited infrastructure for digitalisation, for example, poor mobile network, high costs of mobile network expansion and maintenance
            • Gaps in the policy and regulatory environment, for example, SIM registration requirements were thought to limit smallholders’ access to mobile phones
            • Many agribusinesses do not have the internal systems in place to take advantage of digitalisation
            • Challenges in managing a national level digitalisation programme given diversity of languages across Uganda

        To accelerate transformation in the agriculture sector, hindrances to the adoption of digitalisation must be addressed. According to The Digitalisation of African Agriculture Report 2019, Digitalisation for Agriculture solutions are categorised into five primary use cases: (i) advisory and information services; (ii) market linkages; (iii) supply chain management; (iv) financial access and (v) macro-agricultural intelligence. The report highlights the recommendations below to stakeholders to address the challenges in digitalisation.

        Recommendations to address the challenges to digitalisation
        To improve use, drive greater inclusivity, impact and reap the benefits of digitalisation of agriculture, priority should be placed on the following:

            • Development of human capital at every level of the digitalisation for agriculture ecosystem, including increasing awareness of digitalisation for agriculture, improving digital literacy and, greater digital skill building among actors across the agricultural value chain
            • Driving greater business model sustainability by, for instance, improving value for farmers, identifying, and promoting successful business models and mobilising funding to support a more diverse set of companies
            • Creating greater impact by making digitalisation for agriculture solutions more inclusive of women and other marginalised groups, as well as smallholders in geographies with relatively less digitalisation for agriculture investment
            • Investment in the missing middleware infrastructure. Successful digitalisation for agriculture solutions require access to a wide range of data (from remote sensing data to farmer-specific data) to deliver high-quality services to farmers
            • Investment in good data stewardship and designing for the risks and limitations of digital systems
            • Investment in the digitalisation for agriculture knowledge agenda
            • Creating an alliance of key digitalisation for agriculture stakeholders to promote greater investment, knowledge sharing and partnership building

        Supporting development of the National Fourth Industrial Revolution Strategy

        Supporting development of the National Fourth Industrial Revolution Strategy

        Technology has completely revolutionised the way we do business; it is growing in various industries and will change all aspects of life. That is why the Third National Development Plan (NDP III) Digital Transformation Programme goal for Uganda is to increase ICT penetration and use of ICT services for social and economic development. One of the key focus areas for the government is to support the development and uptake of emerging technologies such as Fourth Industrial Revolution technologies, writes Judith Nabakooba, former Ministry of Information Technology and National Guidance (MICT-NG). To implement this, it was deemed important to develop the National Fourth Industrial Revolution (4IR) Strategy.

        Digital technologies, if harnessed, can support the country attain its social and economic goals including financial inclusion. For the financial sector, the value of 4IR solutions resides in the development of use cases that can reduce the cost of serving existing consumers as well as acquiring new ones, making new business models possible for previously unreachable demographics. Several financial service providers have adopted these technologies to minimise inefficiencies in their businesses, manage customer and business risk, and create more seamless experiences for their customers.

        The Financial Sector Deepening (FSD) Uganda, under its work on developing an inclusive financial system (infrastructure and environment) to support the digital economy, joined the Expert National Task Force on the Fourth Industrial Revolution to support development of the strategy.

        To kick start the process, an in-depth foundational assessment of Uganda’s 4IR opportunities and readiness was conducted to identify the areas that must be further developed to achieve these objectives. The approaches taken by peer countries in formulating national fourth industrial revolution technology strategies were also considered. A comprehensive process of local stakeholder consultation to reflect the country’s developmental objectives was conducted and their input was included.

        The findings from the assessment later informed the strategy which identifies opportunities in the Ugandan economy where 4IR applications would have the most significant positive impact and critical enablers required for execution. The strategy also specifies mechanisms to ensure the interventions are implemented effectively and efficiently. The identified opportunities are:

          • Unlocking productivity in agriculture by enhancing small-holder productivity from pre- to post-harvest to increase outputs to the value of 2% of GDP each year.
          • Transforming human capital development by broadening access to cost-effective, high-quality education and healthcare to improve school survival rates by 50% and increase average life expectancy by an additional two years.
          • Overcoming the economic opportunity shortfall by enhancing supply chains and access to digitally traded services to create 300,000 new earning opportunities.
          • Supporting urbanisation and governance by managing rising pressures on urban settlements by supporting the extension and delivery of critical urban services.
          • Tripling the uptake of e-government services and halving the current number of manual government processes.

        These four critical areas of opportunity cover a variety of sectors and processes that will be critical to Uganda’s ability to navigate powerful forces of change. These forces include climate change, rapid urbanisation, the youth wave, and the global dispersion of production. Building and scaling the opportunities across these zones will be instrumental in Uganda’s ability to realise structural transformation, harness the demographic transition, and mitigate emerging risks facing the global economy.

        Overall, the strategy’s vision is to create a continental 4IR hub that enables a smart and connected Ugandan society. Its mission is to transform and accelerate Uganda’s development into a creative, innovative, productive, and competitive society using 4IR technologies by 2040.

        Executing the opportunities presented in the strategy requires 4IR connectivity, regulatory agility, upskilled population, eGovernment and cyber security, resource mobilisation and investment promotion. To harness the prospects the 4IR offers, coordinated effort between the government, private sector and civil society is key.

        The strategy is now finalised and on December 8, 2022, FSD Uganda joined the Ministry of Information Technology and National Guidance to handover the National Strategy on 4IR to the Prime Minister.

        The strategy awaits approval from cabinet, although implementation of key recommendations, like the development of the National Artificial Intelligence Ethical Framework, is already underway. Furthermore, the Government and other stakeholders are making use of the opportunities presented by the strategy to roll out innovative products and services that help them meet their goals.


        World Consumer Rights Day: It’s in the Ts & Cs

        World Consumer Rights Day: It’s in the Ts & Cs

        By Anthea Paelo, PhD

        When did you last read the terms and conditions (Ts & Cs) of any digital product before clicking accept? Or review the Ts & Cs before taking up that digital loan or ordering a product off an e-commerce platform? If you are like most digital consumers, you accept the terms and conditions without reading them. As it is World Consumer Rights Day, it is a good time to consider Ts and Cs.

        With rapid technological advances in the past decade, we are very much in the digital age. In East Africa, this has been more apparent in digital financial services led by mobile money. These new technologies have increased the convenience of transactions, increased efficiency in accessing financial services and been instrumental in facilitating trade and business.

        However, the increased efficiency brought about by the digital economy has not kept up with consumer education on their rights and the risks of using digital financial services. For instance, consumers are increasingly becoming overindebted and falling prey to predatory money lenders due to the increased ease of access to digital credit. The quick access to credit over the phone has eliminated the requirement of a loan officer who might have, in normal circumstances, been able to explain to consumers the key terms and conditions of the loan they are getting, including the repayment periods and penalties.

        Additionally, due to the unsecured nature of these loans the interest rates are often higher than what would typically be experienced from traditional financial service providers. While these high-interest rates may be specified in the terms and conditions presented to the consumer before they subscribe to the products, only a few read them, and if they do, even fewer comprehend them. This may be due to desperation for money. Still, it is important to acknowledge the role of opaque and lengthy terms and conditions in limiting consumers’ understanding of the details of the products they subscribe to.

        In 2020, with support from Financial Sector Deepening Uganda, Uganda Communications Commission conducted a study on data transparency and consumer consent to understand how digital consumers engaged with the terms and conditions of digital services. A key finding from the study was that the Ts and Cs of digital service providers assessed in the market were filled with jargon that needed explanation. Additionally, these service providers did not adequately disclose information on fees or how the company would use the consumer’s data.

        The study also employed an experiment in which one group of consumers was given terms and conditions from digital service providers in their typical format. The other group was provided with a summary of the terms and conditions that listed vital elements such as the price to be paid for the data and how the company would use their data. After that, the consumers were asked questions to check their understanding. As expected, those who received a summary of the terms and conditions had higher comprehension of the products.

        The study’s key recommendation is essential for digital consumers as we observe consumer rights day this year. Digital service providers should provide consumers with a summarised version of the terms and conditions that customers can quickly

        review. With the implementation of the General Data protection Regulation, websites have adopted a summarised version of a consent form for the use of consumer data. A similar approach can be adopted for digital financial services, including price information. The summary can be disseminated using USSD (such as *130#) technology to account for most digital consumers in Uganda who use feature phones.

        Digital service providers benefit from consumers’ lack of understanding of their Ts and Cs, so a push from the regulator may be necessary to ensure implementation of the use of summarised Ts and Cs. In the meantime, before you take that loan, do you know the interest rate charged on the loan, the amount you will be expected to pay each month and the penalties of default? Read those terms and conditions.

        Photo credit: Pch vector on Freepik

        Anthea Paelo, PhD is FSD Uganda’s Intervention Manager, Business Environment


        Grassroot financial institutions receive funds to on-lend to enterprises to recover from the effects of the COVID-19 pandemic

        Grassroot financial institutions receive funds to on-lend to enterprises to recover from the effects of the COVID-19 pandemic

        Six microfinance institutions and SACCOs (Tier III and Tier IV financial institutions) have received funds to lend to enterprises recovering from the effects of the COVID-19 pandemic. This is part of a five-year Micro and Small Enterprise (MSE) Recovery Fund intervention by the Financial Sector Deepening (FSD) Uganda, in partnership with the Mastercard Foundation under the Young Africa Works initiative.

        The institutions have operations across the country and are part of the 25 institutions that are expected to reach 50,000 enterprises with loans.

        Jointly, the institutions have disbursed UGX 6.43bn to 6,738 MSEs at an average interest rate of 14.8%. So far, the fund has been disbursed to 40% of youth and 55% of women. These funds are being invested in general merchandise, agro products, agriculture, and trade among other businesses. The geographical concentration of lending is highest in the central region at UGX 3.5bn, followed by UGX 1.7bn in the western region.

        The fund aims to shorten the recovery process, from the negative effects of the COVID-19 pandemic of youth and women-owned businesses. The fund will directly secure 100,000 at-risk jobs while enabling 150,000 additional opportunities for dignified and fulfilling work for young people.

        “This is important because MSMEs are a significant driver of employment in Uganda. According to the Annual Labour Forces Survey 2018/19, more than half of the working population (65%), is employed in the informal sector. When the COVID-19 pandemic struck, Individuals and households that worked for and with MSEs were worst hit. The fund is targeting this sector and as MSEs recover from the effects of the pandemic, young Ugandans will access dignified and fulfilling work,” explains Joseph Lutwama, Director of Programs, Financial sector Deepening Uganda.

        MSEs in the program will receive credit worth between UShs100,000 and UShs10 million, which will be delivered through participating microfinance institutions and SACCOs.

        In addition to supporting MSEs, the fund will build the resilience of grassroots Financial Service Providers by digitising workflow processes and strengthening their capacity to attract more long-term institutional capital to address shocks and ensure the sustainability of systemic growth.

        The recovery fund is being implemented in partnership with ASIGMA, the facility manager, who ensures effective management of the funds. Another partner, gnuGrid Credit Reference Bureau, is providing credit referencing services to support improvements in credit information markets. MicroSave Consulting is handling the monitoring and evaluation aspects of the intervention.


        Can financial inclusion ease the back-to-school pressure?

        Can financial inclusion ease the back-to-school pressure?

        By Anthea Paelo, Ph.D

        At the start of this academic year, schools reported a low turn-up of students, with parents citing the lack of money to pay for school fees. Beyond school fees, students often require additional material to facilitate their attendance. For cash-strapped parents, the financial demands of the beginning of a school term are excessive. As a result, several students begin the school term late or without the necessary material to aid their studying resulting in poor performance, especially in rural schools.

        While parents are aware of the necessity for school fees months in advance, it is still a challenge for most to plan for timely payment due to low incomes. The other challenge is that even where parents have a steady source of income, they need access to financial services to help them plan, save, or access credit that would provide cash flow during the opening of the school term. Such parents could benefit from financial inclusion.

        Financial inclusion refers to the access and usage of financial services. According to the 2021 Global Findex study, 66% of Ugandan adults own a regulated deposit account, an increase from 59% in 2017. The Bank of Uganda also reports that there were over 22 million active mobile money subscribers and 235 financial access points for every 10,000 adults in Uganda, thrice the number five years ago. Uganda has thus seen significant progress in access to some financial services.

        However, there needs to be more growth in the usage of financial services and the benefits consumers derive. For instance, according to the 2021 Global Findex study, of 71% of Ugandan adults who saved money, only 39% did so using an account from a formal financial institution. Additionally, of the 75% of Ugandan adults who borrowed money in 2021, only 29% did so from a formal financial institution.

        Statistics suggest that while Ugandans require financial services such as savings and credit, which could come in handy during the back-to-school period, minority access these services from financial institutions. Likely, the type of savings and credit products available at these institutions do not cater to the specific profile and needs of a large portion of the Ugandan population. Financial service providers need to go beyond their traditional services to meet the needs of their clients by, for example, developing customised tailored services to support parents in planning, saving, and borrowing to meet their school fees demands. These financial service products should have three key features to help solve beginning-of-school term dilemmas.

        First, these products should let parents deposit money as and when they receive it, not monthly. Much of the Ugandan population are seasonal income earners, Uganda being an agricultural economy. Given the sector’s seasonality, income is only available during specific periods of the year. These periods only sometimes coincide with the opening of schools. This feature would enable parents to save their income during the harvest season when products are on sale and shore this up for periods of planting and low income.

        Second, these financial accounts should be low-cost or even zero-rated. Finscope 2018 survey data cited the high bank fees as one of the reasons Ugandans avoid formal financial institutions. Low-fee accounts would incentivise parents to open and continually deposit income as and when it is received. The frequent use of the account would help parents obtain a credit history that would form the basis for small loans to capture shortfalls at the start of the school term. Financial institutions would benefit from increased deposits and use of the services by the parents.

        Third, these financial services should be convenient. The account should be easy to open and maintain. Parents should be able to access the account through their phones and even carry out some transactions using USSD such as *130#. Deposits should be possible through various channels, such as agents. Schools could consider being agents to ease the collection and payment of fees.

        An inclusive financial sector can alleviate stress caused by the demands of the start of the school term. However, financial institutions must be prepared to develop and provide innovative financial services that meet the needs of consumers.

        Photo credit: Image by Freepik

        Anthea Paelo, PhD is the Intervention Manager, Business Environment at Financial Sector Deepening Uganda


        Testing the viability of technology platforms in the agriculture sector

        Testing the viability of technology platforms in the agriculture sector

        Agriculture is the cornerstone of the Ugandan economy and one of its most promising sectors. The sector contributes 24.1% to the gross domestic product (GDP), 33% of export earnings, and about 70% of employment based on the Uganda Bureau of Statistics (UBOS) 2021/2022 data. Regardless, Uganda’s’ agriculture productivity is only at 10-20% of its potential. This is partly, due to most farmers being smallholders who do not have access to agricultural finance needed to invest in farm productivity-enhancing technologies such as high-quality seeds, fertiliser, and irrigation.

        The share of lending of the total private sector credit to the agriculture sector in Uganda is about 12.9% according to 2019 data from the Bank of Uganda. Smallholder farmers receive a small fraction of all formal lending to agriculture since formal financial institutions prefer to lend to large agricultural companies, agricultural processors, and traders.

        This access to finance imbalance is attributed to many reasons; smallholder farmers are widely dispersed with low production capacity, no collateral, scanty records, seasonal incomes, and limited or no capacity for scale. This makes them highly susceptible to social and economic shocks and increases the risk and cost of transactions to financial institutions.

        Financial Sector Deepening Uganda (FSD) Uganda believes that the use of digital technologies can be a game changer for smallholder farmers.

        FSD Uganda believes that technologies can be used to create gains in production, efficiency, information flow, financial inclusion for marginalised groups, and transparency across segments in the agricultural value chain — all of which contribute to improved outcomes for small-scale producers.

        To increase access and utilisation of finance for the underserved market segments and unlock the agricultural sector’s potential, the Financial Sector Deepening Uganda has partnered with three technology platforms to test the viability of embracing technology platforms:

        Emata Uganda Ltd is scaling up the digitisation of cooperatives and farmer records to create alternative credit scoring to enable the provision of affordable digital loans to farmers in Uganda.

        Ensibuuko Tech Ltd is implementing a unique Fin-tech-led innovative data-driven agricultural lending based on an innovative predictive credit algorithm to expand affordable formal agricultural credit and insurance to smallholder farmers through a one-stop digital ledger platform for smallholder farmers, particularly women. Ensibuuko will also enhance the digital literacy skills of the beneficiaries to drive informed and higher uptake of financial services and digital services.

        Quest Digital Finance Ltd seeks to increase the uptake and usage of digital financial services and a wide range of bundled digital products and services to farmers & MSMEs through piloting and testing a freemium business model. The main goal of this model is to reduce the barrier to accessing the Quest Digital Finance digital ecosystem and instead monetise the transactions on the platform.

        Overall, FSD Uganda will support the three partners to develop sustainable business models, products/services, and solutions for the delivery of financial services to the unserved and underserved market segments.


        Are digital platforms a clear path out of poverty for Uganda’s smallholder farmers?

        Are digital platforms a clear path out of poverty for Uganda’s smallholder farmers?

        By Geoffrey Okidi

        John, a 50-year-old smallholder farmer in Mbale district grows maize, beans, and cassava on less than one acre of land for own consumption and sale. His farm production is affected by over reliance on traditional farming practices, use of low yielding varieties, small farm size and limited access to finance. John often sells his produce at his farm to middlemen at a low price, earning less than UShs1 million annually. John’s story is that of a typical smallholder farmer. His story represents that of 6.9 million households in Uganda according to the 2019 Uganda Annual Agricultural Survey report.

        Fortunately, this narrative stands to change if Uganda’s third National Development Plan (NDP III) 2020/21 – 2024/25 goal to increase household incomes and improve the quality of life of Ugandans is realised. The NDP III recognises that a high proportion of the population is still dependent on subsistence agriculture due to: (i) low agricultural production and productivity; (ii) poor storage infrastructure; (iii) poor market access; (iv) low value addition; (v) limited access to agricultural financial services and critical inputs.

        To solve these challenges, the government is committed to the Agro-Indutrialisation Programme, increase of ICT penetration and use of ICT services for social and economic development. But how can this commitment solve the challenges being faced by Uganda’s smallholder farmers?

        The Financial Sector Deepening Uganda believes that embracing technology platforms is one way to activate this commitment.

        The technology platform concept is fundamentally simple: create a place where producers and consumers can come together in interactions that create value for both parties using digital technology. Examples of digital platforms include Uber, Airbnb, Amazon, Jumia among others.

        There are multiple ways by which digital platforms can create gains in production, efficiency, information flow, inclusion for marginalised groups, and transparency across segments in the agricultural value chain—all of which contribute to improved outcomes for small-scale producers. Some of the potential benefits of digital platforms include:

        Market aggregation: Platforms create new efficiencies by aggregating unorganised markets. Market aggregation provides information and power to platform users who formerly engaged in interactions in a haphazard fashion, often without access to reliable or up-to-date market data. Using platforms, economies of scale can be realised when numerous dispersed smallholder farmers get organised into viable economic units or groups that are engaged in producing for the market. The 2019 Uganda Annual Agricultural Survey report revealed that only six percent of the adult household members belonged to a farmer group. To improve their incomes through collective actions, small holder farmers need to join farmer groups. Working in groups increases their bargaining power, possibilities of sharing services, assets, and infrastructure such as warehousing and processing equipment. This enhances post-harvest handling, value addition and product quality. Additionally, working in organised groups reduces the unit cost of production and delivery of services to smallholder farmers thereby increasing the possibilities of profitability and growth.

        Appropriate value and supply chain financing: Access to finance remains a limiting factor for many farmers to invest in productivity enhancements. As such, only four percent of Ugandan farmers use a full package of production enhancing technologies (a combination of fertilisers and improved seeds) and supportive services according to the NDP III. This is partly because smallholder farmers are engaged in the production of a variety of enterprises that makes it uneconomical and increases the risk for lenders. Using a market-led approach to farming, smallholder farmers should be supported to participate in one or two profitable value chains appropriate to their agro-ecological zone. This will enable them increase access to internal and external value chain financing opportunities that platform participants can proffer. To begin with, smallholder farmers should be rallied around the 10 priority commodities in NDP III namely, coffee, tea, fisheries, cocoa, cotton, vegetable oil, beef, maize, dairy and cassava. Specialisation in these commodities will facilitate the development of appropriate value and supply chain financing business models and financial solutions in the digital marketplace.

        Strong and sustainable partnerships in the platform economy: Within the digital platform, producers and consumers will be connected to each other to exchange value. For example, a platform would facilitate interactions between smallholder farmers, off takers, input suppliers, Financial Services Providers (FSPs), providers of social services, etc. Digital data from platform activities can drive increased financing to farmers, both as buyers of services and sellers of produce. The platform would also afford participants economies of scope which increases the opportunities for economic multiplier effects for the financial service providers, other economic actors, and the value chain actors. For example, FSPs can deliver financial services to different actors across the value chain thereby increasing the possibilities of revenue and profits. Platform participants would have increased access to various services across the value chain in addition to the primary economic activity. There is also increased ability to bundle services together to alleviate multiple constraints at one time. For example, platforms can easily facilitate contract farming while tying output markets to credit markets. Risk mitigation measures such as agriculture insurance and irrigation can also be bundled up with other services on the platform.

        To determine the viability of embracing technology platforms, the Financial Sector Deepening Uganda has partnered with three technology platforms – Ensibuuko Tech Ltd, Quest Digital Finance Ltd and Emata Uganda Ltd to pilot three-year programs. The programs will digitise different agricultural value chains, trade, and light manufacturing supply chains. This is with a goal to support the development of sustainable business models, products/services, and solutions for delivery of financial services to the underserved market segments. Learnings from these pilots will be shared in subsequent blogs and case studies.

        Photo credit: Image by Freepik


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