Rwanda’s tea sector: The Potential $8 million Savings through Responsible Digital Payments

Over 100,000 people are directly employed by the tea sector in Rwanda, making it the country’s third-largest employer. The sector contributes to the livelihoods of about 1 million Rwandans. A new study published by the United Nations-based Better Than Cash Alliance and its member the Ethical Tea Partnership suggests that scaling up responsible digital payments to farmers could result in a saving of $8 million over 10 years. These funds could be reallocated to address climate change and other pressing socio-economic issues.

By adopting the UN Principles for Responsible Digital Payments, the tea industry can expand digital payment usage, which will bring advantages to tea farmers and rural communities, especially women. Moreover, it can also benefit actors involved in the tea value chain and financial service providers (FSPs), while simultaneously promoting sustainable economic growth at the national level.

In 2021, out of the 18 tea factories in Rwanda, seven had adopted digital payment solutions such as mobile money, automated savings, and credit cooperatives (SACCOs), and online/mobile banking systems to pay their farmers. This shift to digital payments has led to a remarkable 87% reduction in payment timelines for farmers. Factories have also benefited from a 10% reduction in worker costs and a 30% increase in productivity. If more responsible digital payment methods were implemented across the entire tea sector, the benefits could bring much wider impact to the whole agriculture sector in Rwanda, with the potential to reach 3.8 million smallholder farmers, including 2.1 million women.

The Rwandan government is taking bold steps towards creating a cashless economy through digitization, and policies and regulations have been implemented to facilitate the digitization of agricultural value chains. This move has been further supported by the appointment of chief digital officers in every ministry, as well as public-private partnerships aimed at introducing innovative digital solutions, like the Smart Nkunganire System and the Smart Kungahara System (SKS), into the agricultural sector. In addition, the National Bank of Rwanda (BNR) is working on automating the Umurenge SACCOs, demonstrating their unwavering commitment to realizing a cashless economy through digitization. These initiatives are set to revolutionize the agricultural sector and improve the overall efficiency of Rwanda’s economy.

The report puts forth a recommended strategy for expanding digital payments in the Rwandan tea industry, which builds upon the progress of the payments ecosystem. The approach highlights six critical areas of action that demand a multi-stakeholder approach to ensure that farmers are the focal point of a responsible and sustainable digital payment expansion. The six areas include recommending that factories lead in the transition to digital payments to improving recourse mechanism for smallholder farmers to enhance trust and save time spent on queries.

“A core theme of the strategic plan under the NAEB is to develop its capacity on the strategic analytics that will facilitate data-driven decisions. SKS forms a part of this strategy and there are plans to introduce it in the tea sector,” said Claude Bizimana, Chief Executive Officer of Rwanda’s National Agricultural Export Development Board (NAEB).

Tea workers and their communities can benefit from using digital financial tools and services beyond simply receiving their wages and payments digitally. With the goal of eliminating the ongoing risks associated with “cash in hand” payments, the focus is on investing in solutions that promote transparency, accountability, and interoperability. This approach seeks to provide smallholder farmers and workers in the tea sector, and their communities, with a range of digital financial services to improve their financial well-being and reduce their financial risks.