> Posted by Center Staff

Yesterday a digital finance event in Bogota hosted by the Colombian government and the Better Than Cash Alliance celebrated a pioneering business-to-business electronic banking program that’s led to over 300,000 Colombian coffee farmers receiving access to formal banking services. Launched in 2006 by the Colombian Coffee Growers Federation (FNC), the Smart Coffee ID Card program offers the farmers represented by FNC with a dual identification/e-banking card that can be used for payments, debits, and savings. It now encompasses over 8 million transactions totaling nearly $1 billion. The event launched a Better Than Cash Alliance case study on the Smart Coffee ID Card program, which finds that the FNC initiative is a benchmark example of how transitioning from cash to e-payments in emerging economies can lead to increased safety, productivity, growth, and greater quality of life.

For Smart Coffee ID cardholders, the identification components give farmers access to FNC services, such as participating in coffee grower elections, while the banking component, backed by Banco de Bogota, enables banking online or at 230,000 commercial establishments. A savings account has been paired with the Smart Coffee ID Card since 2014. Card use also allows farmers to develop a banking history and in turn obtain lines of credit.

For the Colombian Coffee Growers Federation, the program improves institutional organization and farmer payment efficiency. It also helps with payment flexibility – especially helpful in incidences like emergency support. Through the cards’ ability to offer farmers incentives cost-effectively, the program has helped facilitate sustainable farming practices. At the event in Bogota, Julian Medina, FNC’s Chief Financial Officer said, “Without the Smart Coffee ID Card, FNC initiatives to combat climate change, such as encouraging growers to plant more productive and coffee leaf rust-resistant tree varieties and implementing ambitious plant renovation programs to improve yields, would have been impossible to develop.” More recently the card network has been leveraged for providing government incentives and credits.

The Better than Cash Alliance case study on the Smart Coffee ID Card program is the first study to examine a cash-to-electronic payment transition in a large-scale rural business-to-business context. The event in Bogota also launched a Colombian market diagnostic, which found that Colombia has made big progress in the shift to e-payments, but that there’s room for improvement in addressing the informal cash economy and strengthening merchant acceptance and consumer adoption.

Colombia is considered a “cash-light” economy, as 69 percent of money is spent electronically. However, most payments are still conducted via cash. In 2012, less than 10 percent of the 828 million payments were made electronically. Essentially, large payments are made digitally, and most small and medium ones are made in cash.

The government has been a leader in furthering Colombia’s transition to electronic payments. About 94 percent of government payments by monetary value and 76 percent by volume are made electronically.

The Better Than Cash Alliance’s diagnostic indicates that Colombia’s area for greatest improvement in shifting to e-payments is consumer purchases. Barriers to expansion include: high costs for merchants to support payment card programs; limited value proposition for banks expanding their networks; and consumer access to card services.

Have you read?

Electronic G2P for the Poor: Does Electronic Social Protection Need Better Consumer Protection?

New Council to Expand Responsible Financing for Agriculture

Pending Presidential Approval: Colombia’s Financial Inclusion Bill Set to Become Law