Serving smallholder farmers : recent developments in digital finance

Abstract

This focus note introduces some recent developments in this rapidly changing space. The featured case studies (i) identify traditional pain points in serving smallholder farmers (such as the cost and risk of making payments to farmers and delivering subsidized credit), (ii) discuss how DFS are being used to overcome these pain points, and (iii) highlight some initial obstacles and successes. Given the embryonic and rapidly developing state of DFS for smallholders, it is too early to draw clear conclusions from the examples to date. Initial evidence suggests, however, that while DFS via mobile channels offer great promise for improving the lives of smallholders and their families, significant challenges remain. One key obstacle is the lack of mobile phone penetration and network coverage, suggesting that different forms of technology also should be considered. Furthermore, smallholders’ receptiveness to DFS via mobile channels in the case study countries appears to vary depending on their experience with mobile phones in general and with mobile money services in particular. This suggests that the success of mobile-enabled DFS may depend in large part on factors such as nationwide mobile money adoption and smallholders’ experience using mobile phones for services such as voice, messaging, and agricultural information.