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Friday, February 3, 2017

Bringing financial services to smallholder farmers.

Financial inclusion has made considerable progress in recent years. There are now a wide range of financial products which can help small farmers: debt financing, short term working capital to finance purchasing of inputs, long term working capital to finance machinery, equity and factoring. Whereas banks used not to want to go the ‘last mile’, ICT innovations have made it possible and profitable to do so. Vision Fund, for example, has over 1.2 million customers. There is nonetheless still a large financing gap for smallholders: $50billion is being offered, but over $200 billion is needed. This means that smallholders often have to resort to loan sharks. In India for example 37% of loans are still from the informal sector with interest rates of 20-40%. At the “Future of Small Farms” conference, organised by CABI and the Syngenta Foundation on 24-25 January in Basel, four bottlenecks were identified which constrain the growth of financial services to small farmers: 1)Little interest in agriculture shown by banks and formal lenders. This is due in part because they do not fully understand the sector, its needs and cycles. continue