Reaching Small and Marginal Farmers Through Innovative Finance
This series will feature ideas and innovations focused on enabling financial services for agri-dependent households. Practitioners, researchers and thought leaders will explore the role of markets, public and private partnerships, client segmentation, and the creation of an enabling ecosystem that makes markets work for poor farmers
In 2001, NRSP (National Rural Support Program) designed a research project to address the issues of access to finance and advisory services to small sugar cane farmers. The basic idea was to create an “out of box” microfinance model that threads together the small farmer, the MFI and the processor into a high impact value chain with high financial and social returns. The project “Sugarcane Production Enhancement Project” (the SPEP) focused on small poor farmers with a maximum land holding of around three acres, as well as share croppers and farmers who generally rent agriculture land from large land lords.
To enable financial inclusion for small farmers, the entire value chain needs to be understood and supported, and financial products have to be designed keeping in mind their unique needs. We at Bank of Khartoum believe that Islamic microfinance products can effectively reach small farmers in Sudan when customized to their needs.
In March of 2012, a new regional television program launched in Kenya which aims to provide information to millions of farmers on how to improve their incomes and livelihoods. Funded by DfID's AECF (the Africa Entrepreneurship Challenge Fund), "Shamba Shape-Up" profiles a farm each week and suggests improvements that demonstrate financial principles and teaches farmers how to grow more food, make more money and build better lives for their families.
With 22 million farms covered by a yield based index, 3 million by a weather index insurance and 340,000 farms covered by an insurance combining the two indices, India is probably today the most innovative and experienced country in agricultural index insurance in the world.
In some African countries as much as 80% of the population is employed in the agricultural sector. Even so, these countries need improved productivity and access to financial services to ensure food security and reach their potential. So, what policies can support innovative finance that reaches smallholder farmers?