Blog Series: Digital Finance for Smallholders
As a follow-up to a new focus note, CGAP asked experts who use digital channels to improve smallholder access to financial services for an inside look at how their work is faring and what others can learn from it.
The Focus Note, part of CGAP’s initiative on Financial Innovation for Smallholder Families, takes a look at how digital financial services, or DFS, can help overcome the traditional "pain points"—including higher cost and risk—of serving smallholder farmers.
Much of the enthusiasm around DFS, of course, derives from the impact mobile banking has had in extending financial services to the traditionally unbanked. But evidence compiled in the Focus Note suggests that going the "last mile" to serve smallholder farmers with DFS will hinge on those farmers' willingness to adopt—and trust—the technologies driving these services.
In addition, early evidence suggests that DFS innovations tailored to the agricultural context—while benefitting smallholders—often are driven by the interests not of smallholders but of other parties, such as governments seeking to reduce costs of cash subsidies or commodity buyers seeking to reduce costs and risk associated with cash payments. Future efforts should focus on complementing current DFS innovations with other innovations based more solidly on the financial needs, behaviors, and aspirations of smallholder families.