Agricultural Finance that Reaches People Facing Poverty, Gender and Age Barriers
Ending extreme poverty in Africa requires addressing small-scale agriculture, using a multidimensional intervention and addressing underlying inequalities. Approaches that incorporate inclusion of women and young people — or people facing other barriers — will not only reach more people facing poverty, but will also have a higher impact on agricultural production. Opportunity International’s Agricultural Finance (AgFinance) program in Africa demonstrates how a high-tech, high-touch, high-impact (H3) approach to agricultural finance enables expansion of financial service markets to people facing poverty, gender, age and other barriers to economic empowerment.
At the center of the AgFinance model are community-based farm advisors who provide high-touch and high-tech training in financial management, good agricultural practices, inclusion and resilience. These advisors — Farmer Support Agents (FSAs) — also use digital data systems to assess farmers and link them to appropriate financial service providers, input and equipment suppliers, and markets. From the financial service provider’s perspective, FSAs reduce cost and risk. Over time, clients develop a digital financial footprint to open doors to financial services and value chain partners for previously excluded populations.
The FSA system effectively deepens outreach beyond the mainstream farmer associations that are so often the target of private sector out-grower schemes and development program to small-scale farmers. As community members, FSAs are well-positioned to engage deeply with farmers, because they do not have the same class, language or cultural barriers as more formal agents or bank representatives external to communities. The FSAs are screened for and well-trained in gender and age dynamics, which facilitate their capacity to reach across gender and age barriers in local communities.
In Malawi, where Opportunity International has applied the most complete version of this model, outreach to these populations was high: 72% of clients were living in extreme poverty, 57% were female and 40% youth; 31% were first-time borrowers. As of the third quarter of 2021, the AgFinance program facilitated an active portfolio of loans to 68,262 clients with an outstanding balance of $24.82 million. This outreach and scale demonstrate a market systems model — the H3 approach — with deep outreach at scale. In addition to Malawi, the model is being deployed in Uganda and Ghana.
For more information, see the upcoming March Special Edition of the Enterprise Development and Microfinance journal, focused on Inclusive Financial and Market Systems Reducing Extreme Poverty and Improving Food Security. The journal will be open sourced for this special edition. Find out more about this journal edition on a recent LinkedIn post by Dan Norell.