The document describes SMS bookkeeping, a solution developed by TechnoServe to help coffee wet mills, farmers, and lenders manage risks. SMS bookkeeping involves wet mills sending daily financial and stock information via SMS, which is analyzed and made available to lenders online. It provides advantages over paper-based systems by allowing continuous remote monitoring. The results section provides examples of SMS bookkeeping increasing working capital and profits for farmers in Rwanda by helping lenders provide hedging. The document argues SMS bookkeeping has potential for scale and could incorporate new technologies for increased transparency.

1. 2014
Reducing Risks in the Coffee Value Chain for
all Actors via SMS Bookkeeping

2. Risks in producing coffee
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3. 3
IMAGINE A FARMER OWNED WET-MILL IN EAST
AFRICA

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COFFEE WET-MILLS FACE SERIOUS PROBLEMS IN OBTAINING
WORKING CAPITAL – RELUCTANCE OF BANKS IS OFTEN LOGICAL
SITUATION FOR WET-MILLS…
§ Heavy working capital
requirements – due to
high expenses pre-
and during coffee
harvest season
§ Businesses with little
or no credit history
§ Little or no collateral
(especially true for
cooperative
structures)
… IS REINFORCED BY RISKS
Wet-mills are subject to
many substantial risks
§ World market price
risk
§ Operational risk
§ Quality risk
§ Mismanagement
Banks are
often highly
unwilling to
lend to coffee
wet-mills

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NOW IMAGINE A BANK LENDING TO
COFFEE FARMERS IN EAST AFRICA

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SITUATION FOR LENDERS …
LENDERS FACE SERIOUS PROBLEMS IN RISK MANAGEMENT WHEN
LENDING TO COFFEE WET-MILLS
… WITH ASSOCIATED PROBLEMS
At times lenders are forced to
lend to cooperatives (e.g.
national policy) or lend for
legacy/ historic reasons
(cooperative banks)
§ High working capital
exposure for exporters/
banks
§ Need to monitor wet-mill
performance and stocks
closely
• High costs and much time needed to monitor
working capital due to remoteness of many
wet-mills
• Paper based bookkeeping can not be shared
and continuously controlled
• A number of other risks such as world market
prices affect the wet-mill, making working
capital lending even riskier
• Mismanagement at wet-mill often happens
unnoticed

7. SMS Bookkeeping – an
instrument to minimize risks for
all actors in the market
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SMS BOOKKEEPING BY TNS PROVIDES AN EASY AND ESTABLISHED
SOLUTION FOR THE MONITORING PROBLEMS OF LENDERS
IT WORKS …
§ Key financial and stock info SMS sent in
via wet-mill accountants
§ Data is confirmed through feedback loop
and uploaded to platform
§ Data is analyzed and made accessible to
lenders via cloud-based website
coffeetransparency.com
… IS PROVEN WITH 100+ WET-MILLS …
… AND MAKES LIFE EASIER
ü Easy solution to monitor working
capital and operational performance of
inaccessible wet-mills
ü Daily updates – no time delay
ü Automatic analysis of key metrics
ü Continuous monitoring prevents
mismanagement and flags wet-mills
inefficiencies
§ Ethiopia
§ Rwanda
§ Tanzania
§ Guatemala

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SMS BOOKKEEPING IS EASY TO IMPLEMENT AND IS A LOW-COST
SOLUTION FOR WORKING CAPITAL LENDERS
EASY TO IMPLEMENT… … AT LOW COST
§ Provisions of trainings to working
capital lenders, including proficiency
test – focus on key metrics and
analysis of data
§ Provisions of trainings to wet-mill
accountants, including proficiency test
– focus on data compliance
§ Troubleshooting and support
§ Ongoing development and
improvement of system at no
additional cost
§ Low service-fee for harvest season
calculated based on working capital
disbursed
§ Service fee potentially be matched by
donor – and thus initial operating
costs are decreased
Example: Rwanda – Service Fee Model
Working capital Service fee
1 000 USD≈ 100 000 USD
1 %

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Process overview

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Paper-based
bookkeeping
SMS bookkeeping
§ Easy to share
§ Information updated
daily
§ System analyzes
performance metrics
§ System allows
benchmarking
§ Historical data stored
for review
§ Difficult to share
§ Information delay
§ No analytics
§ Easy to falsify data at
end of season
TECHNOSERVE’S SOLUTION SMS BOOKKEEPING HAS VAST
ADVANTAGES OVER PAPER-BASED BOOKKEEPING

12. SMS BOOKKEPING IS TAILORED TO EACH TARGET GROUP’S
NEEDS
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§ SMS interface
§ Confirmation, edit/ undo
functions for accountant
§ Reports shared with wet-mill
observers
SIMPLE TO USE FOR FARMERS KEY FEATURES
SOPHISTICATED INFOS FOR LENDERS
§ Cloud-based online interface
§ Compliance data and editing
functions
§ Portfolio and Individual wet-mill
view
§ Performance Metrics Analyses
!
KEY FEATURES

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Results

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CASE STUDY (1) – SMS BOOKKEEPING HAD PHENOMENAL IMPACT
FOR RWANDAN PARTICIPATING WET-MILLS
OVERVIEW
§ System used by two largest
exporters/ working capital
lenders in country
§ 51 Participating wet-mills
§ Very high data compliance
and quality
EFFECTS
§ +100% working capital
received - also in time
§ Lower operational
expenses
§ No non-performing loans
§ All coffees hedged and all
wet-mills turning a profit
NEXT STEPS 2015
§ Include two banks as
working capital lenders
§ Have 75 participating wet-
mills
§ Keep up high data quality
and compliance
§ Update system with
feedback from lenders and
farmers
EFFECTS
§ Increase profits for farmers
§ Increase transparency and
efficiency of supply chain

15. § Hedge earned approx. 232 RWF/kilo or
16 cents/lb
§ Without hedge, some cooperatives
would have made a loss
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§ Rwanda Trading Company is a CSP and
also financing around 40 wet mills p.a.
§ Closely monitor the wet mills to obtain up-
to-date stock and cash movement
information
§ Put up a hedge for all wet-mills and is
able to turn a profit in volatile market
USE OF SMS BOOKKEEPING
EFFECTS
Rwanda Trading Company
Type - Exporter
Location - Rwanda, Kigali
CASE STUDY (2) – SMS BOOKKEEPING HELPED THE LENDER PUT UP
A HEDGE AND ENSURE A PROFIT FOR SMALLHOLDERS

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SMS BOOKKEEPING IS TECHNOLOGY WITH LARGE POTENTIAL IN
SCALE AND SCOPE
AFRICA
CENTRAL AMERICA
Ethiopia
Tanzania
Rwanda
Implemented
Guatemala
Implemented
POTENTIAL FUTURE DEVELOPMENTS
A. Increase coverage in countries, where
SMS bookkeeping has already been
implemented – e.g. in collaboration
with partners
B. Include new TNS countries in SMS
bookkeeping
C. Develop innovative transparency
modules complementary to SMS
bookkeeping – such as QR enabled
traceability, or the “cash-less
cooperative”

17. Thank you.
Any additional questions?
Please get in touch.
Moritz Waldstein (Transparency Innovations Manager)
mwaldstein@tns.org
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