Data-driven smallholder tea production in Uganda

Hamlus Owoyesiga

A spatial data management system to profile tea farmers and map tea plots among members of the Igara Tea Growers Factory (IGTF) in Uganda has led to increased access to financial services for producers, and higher repayment rates for input loans. An immediate impact has been increased productivity and a dramatic fall-off in the practice of side-selling – so much so that other tea companies are now considering adopting the model.

IGTF grows, processes and packages eight grades of tea for export and local consumption. The IGTF agribusiness is owned by 7,321 smallholder farmers, about 20% of which are women. The majority of these tea farmers are small-scale farmers with less than 10 acres under tea production, along with a number of medium-sized farms and estates. IGTF owns and operates two tea-processing factories (Igara Tea Factory and Buhweju Tea Factory) and is the largest smallholder tea factory company in Uganda, contributing about 10% of Uganda’s tea production. Despite IGTF’s leading position among tea factories in the country, it has experienced challenges with business operations.

Until early 2017, IGTF was storing shareholders’ information on one database but individual data sets were incomplete, not necessarily verified and lacked crucial geo-referencing. In other words, IGTF did not know where its individual members were located on the territory or how large the tea gardens were. At the time, IGTF provided members with small loans and inputs, such as fertilisers and agrochemicals on credit, based on the quantity of tealeaf delivered the season before, and not on the actual farm size. Lacking a clearly identified location of the single tea gardens offered the opportunity for unscrupulous farmers to file multiple requests for input credit and loans for the same farm. Due to low repayment rates and insufficient rigour in financial administration, IGTF registered a loss of €289,000 in 2015.

To address this issue, IGTF and CTA, in partnership with consulting company the Environmental Surveys, Information, Planning and Policy systems organisation (ESIPPS), launched a project in the summer of 2017 to build on a spatial data management system. The digital profiling of tea farmers, completed in early 2018, involved compiling geo-referenced information about tea farmers and their land using GPS-enabled tablets. Extension officers then uploaded the data onto a dedicated online platform (ONA / ODK), and subsequently onto the IGTF’s QGIS database. The system now in place offers a fully functioning data collection platform and a Geographic Information System where all data are stored and spatially analysed. The profile database is linked to a financial and accounting system, allowing IGTF to build track records of transactions with member farmers. The system can thus serve as a basis for fertiliser distribution and tracking, with data on amount of fertiliser distributed, costs, dates of distribution and due dates for payments.

Lower interest rates, higher repayment rates

An additional important outcome of the project is it has stimulated IGTF to launch a Savings and Credit Cooperative (SACCO) in Butare Kyamuhunga in February 2018. Profiled IGTF farmers can become shareholders of the co-saving initiative, which uses its financial capital to distribute loans to its members, enabling small-scale tea farmers to access finance in a sustainable manner. The prospect of access to savings and credit proves to be an incentive for farmers to participate in the digital profiling exercise, since only profiled farmers have access to loans via the SACCO. As of mid-2018, 4,500 IGTF members and their tea gardens have been profiled – 32% more than the target set in the project design.

 The SACCO is well on course to take over the supply of inputs on credit and loans to farmers, previously handled by IGTF. For the tea farmers, the benefits are tangible. The SACCO operates a more favourable application procedure and charges lower interest rates than the previous system. More importantly, since the risks of supplying loans to small-scale farmers are considerably reduced through the introduction of a database that monitors farmer produce and tracks delivery to the factory, producers have easier access to credit. For example, they can apply for soft loans for farm inputs, or financial services through banks, with the SACCO acting as broker and the profiling database serving as collateral.

As of November 2018, 1,737 farmers (24% of IGTF’s members), 35% of which were women, had joined the SACCO and obtained credit. The average value of loans issued since the opening of the SACCO was € 351,569 per month, with a repayment rate of 98%.  The loans enable farmers to sustain their businesses in a competitive way, improving production using better inputs.

“I am happy I can get my payment for my leaf from a bank that is owned by IGTF. Each time I need fees for my children I come for short loan from the SACCO”, says Jolly Nshumbusha, IGTF farmer and SACCO member.

UAV (drone) image of tea farm, Igara-Bushenyi

Transparency pays dividends

The project has included the pilot testing of drone technology. A total of 42 farms were surveyed using a drone equipped with a multispectral sensor. Data captured were processed and visualised in the form of crop diagnostic geo-referenced maps, which show the health status and plant density of the crop, and its location. The maps combined with farm profiles were submitted as ‘enhanced dossiers’ to lending institutions to support the creditworthiness of applicants. Already, the Stanbic Bank, a subsidiary of Standard Bank Group, has expressed interest in adopting and upscaling the concept. After acquiring a professional drone equipped with a multispectral sensor, IGTF now plans to upscale drone-based services to its members.

The farmer profiling has also helped to solve the issue of fraud. Fresh tealeaf is in high demand from competing processing plants in the western Ankole Corridor, where most tea cultivation is concentrated. IGTF has faced difficulties in ensuring that its members deliver products exclusively to its own factories and that they used input credit and loans obtained from the agribusiness to cultivate tea destined for IGTF. The advent of geo-referenced profiles and spatial data analysis has allowed management to identify fraudulent credit applications. Thanks to greater trust and loyalty and reduced side-selling to competing factories, the quantity of fresh leaf delivered to IGTF factories peaked to the highest level recorded in 15 years, during the second quarter of 2018. This trend has been evident since the start of the profiling process. In turn, the higher production levels have resulted in more timely payments to farmers, increased efficiency in extension service delivery, and greater business profitability for the farmer-owned company.

Such has been the scale of the impact that there are moves to extend the model further afield. IGTF management has shared results of the system with competing tea factories, which have expressed a willingness to adopt digital profiling in their own companies. IGTF has now submitted a project proposal to CTA to upscale the system. Through extension of the spatial database, companies that were once competitors can become partners, using digital technology to increase productivity, support farmer access to crucial inputs and enhance agribusiness efficiency.

other articles in this issue

Copyright © 2016, CTA. Technical Centre for Rural and Agricultural Cooperation

CTA is a joint international institution of the African, Caribbean and Pacific (ACP) Group of States and the European Union (EU). CTA operates under the framework of the Cotonou Agreement and is funded by the EU.