On paper, digital financial services can sound like a silver bullet to reach millions of rural, underserved smallholder farmers. In reality, the challenges can be greater than the deployment of a low-tech solution.
The terms "smallholder farm" and "family farm" are often used interchangeably, but technically refer to different dimensions of agriculture. Getting better clarity on the basic composition of the world's farms is challenging, but critical.
Cellulant developed a mobile wallet network in Nigeria that extends to some eight million farmers. With more than 40 million transactions in just two years, smallholder farmers in Nigeria are poised to adopt digital financial services more broadly.
Although Gideon, a participant in CGAP's financial diaries of smallholder families research, is technically a rice farmer, much of his income is comprised of income from other crops and and non-agricultural activities.
Banks that recognize the unique characteristics of farmers as customers and adapt their businesses using financial and skill-based support from donors will be best positioned to address the huge gap in demand for smallholder financing.
CGAP received nearly 200 proposals from digital financial services providers across Africa interested in piloting new products. A look at those proposals — from 30 countries — shows that innovations are spreading beyond hot spots like Kenya.
For smallholder farms, expenses come early in the season before the planting while income arrives only several months later with the harvest. How, then, can these farmers access the cash they need to plant their crops and, more importantly, to survive between harvests?