Financial Innovation for Smallholder Families

There are an estimated 500 million smallholder farming households (representing 2 billion people) relying to various degrees on agricultural production for their livelihoods. They represent the largest client segment by livelihood of those living on less than $2 a day.

Smallholder families are not just agricultural producers, though. They are also consumers who have diverse financial needs, typically earning income from a variety of nonagricultural sources, including labor and off-farm enterprises. Relatively little is known about the financial services needs of smallholder families, however, and the first step in reaching these clients successfully is to better understand their needs, preferences, aspirations and behaviors.

With that knowledge, financial services providers and other stakeholders can develop and pilot more effective financial services and products designed to enhance the value proposition for smallholder families, focusing on improving their risk management ability and lowering provider delivery costs through the use of technology.

Photo Credit: Reza Golchin. 2012 CGAP Photo Contest

Understanding Demand

The world’s smallholder households are not homogenous and can be distinguished by meaningful differences in both their agricultural and financial lives. As part of its work in financial innovation for smallholder households, CGAP is pursuing two demand-side research projects aimed at identifying key smallholder segments and profiles, and build stronger business cases for the financial tools they demand:

  • Smallholder diaries. CGAP conducted financial diaries in Pakistan, Tanzania, and Mozambique to more deeply understand the financial needs and behaviors of smallholder families. Working with approximately 100 households in each country, the smallholder diaries tracked all cash flows in the households over a year. On each fortnightly visit, enumerators recorded the events and transactions of the preceding two weeks on a tablet computer, working to capture and balance each household’s sources of money and its uses. This detailed process offers a unique window on the lives of smallholder households, and a deep, systematic view of their money management mechanisms. Data collection is now complete and analysis is underway.
  • National surveys and segmentations. Complementing the more qualitative work of the diaries, CGAP is conducting nationally-representative surveys of smallholder households in Mozambique and Uganda, with additional countries planned in 2016. Working at the national level, these household surveys are designed to elucidate the heterogeneity of the sector, including households’ agricultural and non-agricultural activities and cash flows, financial behaviors and tools, mobile phone usage, and perceptions of their agricultural and financial lives. This data will then be used to segment the smallholder sector in each country, profile the financial tools relevant to each segment, and identify opportunities for innovation and improvements in their financial inclusion.

Resources on Understanding Demand:

Driving Innovation

In addition to establishing an evidence base around smallholder demand, CGAP works with financial service providers and the broader financial inclusion community to translate demand-side insights into market impact. CGAP is partnering with FSPs from around the globe to design new financial products and services for smallholder families - with a focus on digital innovations that promise to break down barriers to serving smallholders. CGAP recently concluded four human-centered design projects with FSPs from Zimbabwe, Senegal, Cambodia and Rwanda. This engagement with FSPs also aims to develop their internal capacity to build and launch financial products and services for smallholder families, thereby ensuring that these providers not only have an enhanced understanding of smallholder demand, but also the ability to effectively respond to that demand. Finally, CGAP is collaborating with a diverse array of stakeholders in the financial inclusion space, including donors, policy makers, regulators, and implementing agencies in order to ensure that new evidence around smallholder demand is actionable and tailored to address the important data gaps that have thus far stymied efforts to drive financial innovation for smallholder families.

Resources on Driving Innovation:


23 October 2017
This survey explored the agricultural and nonagricultural activities, financial practices and interests, and challenges and aspirations of over 3,300 smallholder families throughout Nigeria.
Download PDF: 
English (93 pages)
24 July 2017
Côte d’Ivoire is the largest producer and exporter of cocoa beans and cashew nuts, and a top exporter of coffee and palm oil. Nevertheless, Ivorian smallholder farmers who contribute the most to the agricultural sector are largely neglected by formal financial institutions.
Download PDF: 
English (114 pages) | French (126 pages)

From Our Blog

Smallholder in Uganda receives cash payment
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From hurling sacks of money out of planes to transporting cash in armored cars, the methods used to pay farmers in Uganda can be unsafe and inefficient. So why haven't digital payments taken off?
Map of innovation proposals from Africa
13 September 2017
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.