In Nepal, access to financial services is key to building farmers’ resilience. Yet, due to a host of barriers — banking fees, distance from banks, low literacy levels and cultural barriers that make farmers hesitant to approach formal banks — only 45% of Nepalis use formal banks. Instead, much of Nepal’s mostly rural population either stores cash at home or takes credit from the informal sector where interest rates can soar as high as 48%.

Commercial banks are committed to reaching the underserved and providing agriculture-specific loans, but they lack the appropriate networks and technical knowledge needed to do so. Further, the operational costs to open full-time bank branches to directly reach these segments of the population are far too high. One solution is branchless banking (BLB), which brings financial services to hard-to-reach customers through mobile agents who operate from existing businesses. Yet, despite some success, BLB has struggled to reach farmers and the agriculture sector.

In response, the USAID/Nepal Feed the Future Knowledge-Based Integrated Sustainable Agriculture in Nepal (KISAN) II project stepped in to help banks fill this gap. Through a no-cost partnership with Nepal's Laxmi Bank, KISAN II is helping the bank expand BLB to directly serve farming communities through the project’s extensive network of almost 60 agricultural supply stores — known as agrovets — over 25 districts. Agrovets bring an existing customer base of farmers, as well as the necessary expertise to oversee agricultural loans.

"Agrovets are friends to farmers, and their outlets serve as a common meeting point for hundreds of farmers," said Laxmi Bank representative Bidha Sharma.

Together, KISAN II and Laxmi Bank identified agrovets to serve as BLB agents. Nepal’s central bank reviewed and approved agents to ensure adherence to national banking standards. Selected agents are given a digital tablet, plus training on how to handle the devices, and provide secure digital financial services such as deposits, withdrawals, loan processing and loan repayment. Once operational, farmers can easily approach their preferred agrovet to enroll in financial services that can help expand and sustain their farming livelihoods. The collaboration boosts the agrovet’s sales and customer base, while enabling banks to better meet underserved and agriculture targets, benefiting each party. 

Mira D.C. Chhetri, a BLB agent for Laxmi Bank, said their transactions have increased by 75% compared to the previous fiscal year. "People now have access to interest-subsidized loans," Chhetri said. "Farmers are happy."

Through BLB, banks meet their targets to reach poor and rural populations and to disburse agriculture loans, while agrovet agents enjoy financial incentives and business growth. Meanwhile, farmers gain access to formal financial services to expand and sustain their production. Particularly grateful was Jaya Kumari Dangi, who said, "I was not aware of agriculture loans at a low interest rate. Janata Agrovet informed us about such loans through branchless banking and facilitated the process for us. We received a 2,000,000 NPR ($16,000) loan from Laxmi Bank at an interest rate of 3.45%. My husband and I now plan to establish a goat farm."

Each of the parties has an incentive to engage and benefit from the promotion and continuation of BLB. Ongoing support to BLB agents helps them adapt and respond to unexpected constraints — and there is no greater example of a constraint than the current COVID-19 crisis and nationwide lockdown, which severely limited access to agri-inputs, support and financial services for farmers. Despite the challenges, BLB agents have managed to keep their doors open and handle increased demand for their services, while ensuring adequate safety precautions.

During a challenging time, collaborations such as BLB are showing that progress can still be achieved in advancing development goals.