Over a few scattered plots in rural Mozambique, Adriana Peres* grows beans, cassava, peanuts and maize. Most of what she produces is consumed by her household, which includes her husband and their five children, her sister and her two boys, and her mother. Sometimes Adriana grows enough to sell, even with a family of 11, but not recently. Monkeys destroyed the maize last year, and birds damaged much of the rice. But she also sells a traditional alcoholic drink and makes a modest income from that. To manage their money she participates in a ROSCA and an ASCA, borrows from family and friends, takes some informal loans at a nearby shop, and sometimes lets customers buy her drinks on credit. Overall, Adriana’s family is just getting by, barely breaking even.
The Peres family is one of about 475 million smallholder households worldwide, and their blend of income sources and agricultural activities points to the tremendous diversity of smallholder families. Their experience also raises important questions about the relationship between agricultural activities and financial services. What proportion of their household income is from agriculture and how does this impact their cash management? Are the financial mechanisms that Adriana uses adequate to support her agricultural activities? Would she find additional financial tools useful, perhaps to improve post-harvest storage or put aside money for school fees? Does Adriana see her farm as a business or more like a safety net? And how do the circumstances of the Peres family compare to other smallholders in Mozambique, and beyond?
We’ve been introduced to Adriana through the ongoing CGAP financial diaries in Mozambique and will continue to get to know her family over fortnightly visits through June 2015. Building on CGAP’s global segmentation of smallholder households in 2013, the diaries detail the financial lives of approximately 300 smallholder households across rural Mozambique, Tanzania and Pakistan. They’ll track all the households’ sources and uses of income over the year and generate a detailed balance sheet for each family, as well as a vivid picture of their agricultural and financial lives.
Complementing the financial diaries, CGAP will also conduct national surveys of smallholder households in Uganda, Mozambique, Tanzania, Côte d'Ivoire, Nigeria, and Bangladesh. The objective is to detail the sector at the national level and identify distinct segments of smallholder households, according to the most compelling variables that emerge (e.g. household poverty status, the proportion of income from agriculture, mix of crops and livestock, market relationships). Then, for each segment of smallholder households, CGAP will outline their demand for financial tools, profile the current supply of informal and formal financial services, and highlight promising opportunities to add value, both as agricultural producers and general consumers. The results should help donors, financial service providers, regulators, agricultural development organizations, and academics working with smallholder households to better respond to the specific and varied needs of smallholder households.
Other research has ably tackled different aspects of these questions. The Living Standards Measurement Study-Integrated Surveys on Agriculture, led by the Development Research Group of the World Bank, focus on agriculture and explore the linkages between farm and non-farm activities, but only include a few questions on access to formal credit. The FinScope surveys developed by FinMark Trust provide insights into how consumers and small and medium enterprises source their income and manage their financial lives, though do not emphasize agriculture or generate a representative sample of smallholders. The Agricultural Finance Markets Scoping tool, developed by the Gatsby Charitable Foundation, Financial Sector Deepening Trust Tanzania, and FinMark Trust, was designed to identify commercially-viable agricultural enterprises for formal financial institutions, which excludes most smallholders. Each research effort has significantly contributed to the evidence base and will inform how the CGAP surveys explore both agriculture and financial services in smallholder households.
As this research gets off the ground, CGAP asked colleagues working with data and smallholder households to highlight the relevance of CGAP’s smallholder surveys to their work, and how its results might be used. Together this range of expertise reinforces the importance of learning more about Adriana’s household, as well as the millions of other smallholder families, and using this evidence base to catalyze improvements in their portfolio of financial services and advance financial inclusion.