Leaving no one behind: financial inclusion for rural people

By Alice Marks 

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Women in agriculture: A female farmer (left) and agrodealer (right).

As delegates return from last week’s Global Conference on Agricultural Research for Development (GCARD3) event in South Africa, the notion that we must “leave no one behind” will be at the forefront of the minds of all of those who attended. This commitment was not only the theme of GCARD3, but it is also a key message in the Sustainable Development Goals (SDGs) and Paris agreement. It hopes that everyone, all over the world, can be included on the development agenda, so that each individual can achieve the rights described by the SDGs.

For the agri-food research discussed at GCARD3, an important ingredient for this will be ensuring that farmers, many of whom are women, are able to participate in the processes from which they will benefit, such as research and innovation. For example, participatory research asks farmers what their needs are, and helps to make their ideas a reality – you can find case studies here. Another important ingredient will be using interventions that turn research into impact that is scalable, as well as ensuring there is efficient evaluation to help learn from good and bad experiences and improve interventions in the future.

Young people: risk and opportunity

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Young people from the Aven cooperative who received support Technoserve

Young people in rural areas are a group that is at particular risk of being left out and left behind. Indeed, 60% of unemployed people in Africa are between the ages of 15 and 24. However, because agriculture and agricultural value chains are such important drivers of the economy in developing countries, the sector has the potential to provide many opportunities for employment, better more stable incomes, and potentially more sustainable livelihoods.

During a recent trip to Rwanda, the Ag4Impact team met a number of young people who had received support from Technoserve and One Acre Fund (OAF) that encouraged their entrepreneurial spirit. These young people had all benefitted from being able to access finance that was affordable and appropriate for their needs and circumstances to help start their businesses. Many people said they were keen to gain access to further financing in order to realise their ambitions in the future. With OAF reporting that 98% of the finance they provide is repaid, helping young and rural people access finance can be the kind of intervention that is scalable, effective and provides people with services that they want, need and will make good use of.

The right kind of finance

On Monday 11th April, the Initiative for Smallholder Finance (ISF) and the Rural and Agricultural Finance Learning Lab released a new report “Inflection Point: Unlocking growth in the era of farmer finance.”The report upholds that the demand from smallholders for finance is largely unmet, and in order to overcome this shortfall concerted efforts must be made by the industry around customer centricity, progressive partnerships, and smart subsidies. Under current conditions, if providers are to meet even half of the demand by 2025 they must double their annual rate of growth.

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Bookkeeping at a coffee business in Rwanda

Matt Shakhovskoy, Executive Director of ISF, says that “In the past five years we have seen a new focus and resolve around tackling the smallholder finance challenge; our task now is to work with this momentum to fundamentally shift the current growth trajectory of models that are working.”

The report makes three main recommendations to ensure this happens. Firstly, financial service providers need to open a dialogue with clients to help design a product that works for them, which will not only increase demand but also reduce risk. If a program does not address the specific needs of smallholder farmers, uptake will be low and the intervention is, therefore, unsustainable. The second recommendation is that progressive partnerships, such as those between financial institutions and value chain actors, can enable cost and risk sharing. This means that the reach of a service can be wider because it needs fewer subsidies.

The final recommendation addresses the need for these subsidies to be more intelligently thought about because the need for them is unlikely to disappear altogether. ‘Smart’ subsidies bring in capital via ‘blended capital models’ which have the potential to significantly increase the total flow of funding to smallholder finance. This is because they use public or philanthropic investments to entice private investment, either by helping to overcome initial up-front start-up costs or by offsetting the ongoing costs associated with providing the service.

Including rural people

Formal financial institutions and value chain actors meet less than a sixth of the current requirement for finance, but finance is desperately needed and wanted by rural people. Furthermore, it can have a particularly significant impact on the very groups most at risk of being left behind – women and youth. Scaling up success stories in a way that puts the needs of these at-risk groups at the heart of financial projects and products will be vital to ensure that inclusivity is widespread. Surely, a financial sector that is customer centric, has an extensive spread and uses investment wisely will be instrumental in ensuring that no one is left behind.

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