Access to finance

Farm Africa helps smallholder farmers and agribusinesses gain access to the affordable finance they need to thrive.

Despite agriculture being the mainstay of eastern Africa's economy, the sector remains underserved by the financial industry. Smallholders and agribusinesses lack the financial products they need to develop profitable and sustainable enterprises.

Smallholder farmers' access to finance

Smallholders often do not receive prompt payments for their produce, don't have readily available cash to buy inputs and lack finance to invest in new technologies. They also often lack awareness about loans and savings that could potentially help them address critical cashflow problems. 

Farming and livestock rearing carry significant risk, especially in semi-arid areas. Frequent droughts that cause crops to fail and pasture to dry up often result in vulnerable households selling valuable assets, such as land and livestock, that are essential to their future ability to earn money.

Millions of farming families in eastern Africa risk being plunged into extreme poverty when their harvests fail, simply because they have no financial buffer to fall back on. Without some form of insurance, smallholders find it hard to afford inputs for the next season when climate shocks affect their yields and profits. 

Farm Africa helps smallholder farmers and rural agribusinesses to access the money they need to cover essential family expenses, and also invest in the high-quality inputs, like improved seeds or fertiliser, needed for a good harvest and healthy profit.

We work with smallholder farmers to develop access to finance via village saving and loans associations (VSLAs), savings and credit cooperatives and micro-finance institutions.

Agribusinesses' access to finance

Rural agribusinesses that sell inputs to smallholder farmers and/or buy their produce find it difficult to obtain working capital to purchase farmers' produce and offer inputs on credit, and investment capital to grow their businesses.

Commercial banks and impact investors are typically risk-averse, often do not understand smallholder and 'last mile' business constraints and opportunities and do not offer affordable financial products that address their particular needs. This is particularly true for clients who do not have physical assets or firm sales contracts to offer as collateral. 

Farm Africa improves businesses’ financial management skills so they can identify and successfully apply for loans, and develop well-designed plans for what to do with the funds.

Joining the dots

We facilitate mutually beneficial contracts between farmers, buyers, suppliers and financial institutions. By strengthening links between actors across the value chain we help in opening up new markets for smallholders. Farm Africa helps design contractual agreements between buyers and sellers that boost productivity, increase market competitiveness and promote more efficient resource use.

Farm Africa harnesses the power of new technologies, such as mobile banking, to develop accessible and affordable financial products that meet the needs of rural farming communities.

Village saving and loans associations

The market systems project in amhara, ethiopia, 2017-23

Many farmers are excluded from access to finance due to cultural and religious beliefs that prevent them from taking out loans with interest applied, such as under Shariah law. Shariah-compliant financial service provisions were almost non-existent in the area before the start of Farm Africa's project, which was funded by Sida. The project developed inclusive financial products including the provision of interest-free loans to support agricultural input and output financing.

7,947 smallholder farmers accessed financial services introduced by the project. Prior to the project starting, just four farmers had access to financial services.

Project participants' total savings increased by 11,591%, from 2017 to 2023.

Tsedey Bank / ACSI financed the purchase of 12 tractors for clients through an interest-free finance system in the Oromo Zone.

Women's economic empowerment

Megerisa Village VSLA in Chafe Misoma kebele, Ethiopia is one of 14 VSLAs supported by Farm Africa's Central Rift Valley project, funded by Sida. Established in February 2019, the VSLA has 18 members, all of whom are women.

The VSLA members meet every fortnight to make their contributions to the group’s savings. Every member contributes 50 Ethiopian Birr (ETB) to the savings fund and 10 ETB to the social fund at every meeting. Over the first year, the group saved a total of 77,725 ETB, and issued a total of 30 loans. The group earned 9,910 ETB in service charges applied to the loans given to the members. In October 2020, the group shared out the accumulated funds of 87,635 ETB, and began
a second round of saving.

"After we organised into a VSLA, we gained access to loans in our village without long processes and according to our saving amount. This has created favourable conditions to run small businesses."

One of the members of the all-female Megerisa Village VSLA.

The group members reported that they previously had problems in accessing the credit needed to run small businesses. They used to travel long distances in search of microfinance institutions they could apply for loans from. Now, the women have easy access to affordable finance, enabling them to invest in small businesses to increase their incomes.

VSLA member Jemanesh Merga, a 28-year-old mother of two boys and one girl took out a loan from the group, which she used to buy seven goats. After fattening the goats for four months, she was able to earn enough to repay her loan and make a good profit from the resale of the goats.

VSLAs in Benishangul gumuz, ethiopia

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