The continuous use of cash in Ghana’s cocoa sector is costing stakeholders approximately US$ 21.5 million, equivalent to 19 percent of licensed buying companies (LBCs) revenues per year, a study by the World Cocoa Foundation has revealed.
In Ghana, cash is the primary payment method used to purchase cocoa, with over 90 percent of farmer-level transactions – more than GHc 7 billion, or US$ 1.26 billion – conducted using cash every year.
The study indicates that LBCs use funds from COCOBOD and banks to purchase cocoa from farmers, using a network of local purchasing clerks (PCs). The PCs, who are non-salaried agents of LBCs, withdraw cash from District Offices (DOs), then transport that cash to the farming communities they live in, where they use it to purchase cocoa.
“This is threatening the financial viability of key players in the value chain, and causing serious risks to people’s physical safety. There is an urgent need for greater collaboration and action to tackle these serious challenges. Many of these threats, risks, and costs can be lowered significantly, if not removed entirely, by digitization of payments,” the report stated.
Currently, the transition away from the use of cash in Ghana’s cocoa value chain has begun, as cocoa-buying companies are searching for new ways to deliver greater benefits to farmers while improving efficiency, sustainability, and transparency in their cocoa procurement.
According to the report, digitizing payments in the value chain can mitigate the substantial risks faced daily by staff and agents of buying companies. At the same time, digital payments can lower the significant financial costs that threaten the profitability of the sector. End-to-end financial transparency can help cocoa processors around the world to verify where their product is sourced and reduce the risk profile of the sector for domestic lenders.
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