AGRA

The Agricultural Finance Corporation (AFC) will receive Sh1.5 billion from the Treasury in the next three years as one of the strategic State-owned entities.

The AFC is expected to further its programmes, including credit extension and technical assistance to clients covering agriculture, rural development and food security.

Describing it as a strategic investment in a public enterprise, the Treasury has set the target for the year starting July as Sh500 million and another Sh1 billion in the next two years.

“The amount of capital injected and absorbed into the strategic State-owned entities (AFC) [is targeted at] at Sh500 million for 2020/21, Sh500 million for 2021/22 and Sh500 million for 2022/23,” said the Treasury in the Programme-Based Budget released to Parliament late last week.

In a concept note on ongoing programmes, especially to promote women in the agribusiness, the AFC says it is looking for partners to aid in increasing the funding of its clients through concessional credit, risk-sharing, grants and technical assistance.

“To facilitate a successful deployment [of loans to women], the corporation is looking for partners, to assist through financial concessional credit lines, guarantee mechanisms, risk-sharing facilities, innovation funds, grants for technical assistance and even grants for enabling environment and infrastructures like post-harvest handling at communal levels to generate confidence in warehouse receipts systems. This could benefit many smallholder farmers most of who are women,” says the AFC.

The organisation is promoting loaning of the cash to female-led enterprises as part of its Women Affirmative Action Window. The initiative is motivated by the success of other initiatives notably that between the Kenyan government and the International Fund for Agricultural Development, which is implemented through the Alliance for Green Revolution in Africa.

The AFC became involved in the affirmative action initiatives after realising its loans had mainly benefited men with only five per cent of its lending going to women — largely because women did not have hard collateral in the form of land.

“Through the years, AFC has been loaning using ‘hard’ collateral in an effort to safeguard the taxpayers’ investment…This among other reasons has gravitated loaning largely to men with less than five per cent of total loaning going to women through the years. This data has troubled AFC and it’s the basis upon the rethink of how better to include women in agricultural finance in Kenya,” says the agricultural sector financier.

May 7, 2020 TONY BLAIR, AGNES KALIBATA

Protecting food supply chains is the key missing component of an effective COVID-19 strategy. Global partnerships – particularly among the private sector, governments, development banks, and farmers’ organizations – must be established rapidly to prevent a catastrophic food crisis in developing countries.

LONDON/NAIROBI – Every year, some nine million people worldwide – equivalent to the population of Austria – die of hunger or hunger-related diseases. That is tragic enough, but COVID-19’s disruption of food supply chains risks doubling this number in 2020.

This is the hidden cost of the coronavirus pandemic, and it will fall on the poorest and most vulnerable. To prevent these avoidable deaths, we must first recognize that Africa, South Asia, and other poorer regions cannot go into lockdown or seek to contain the disease by mimicking measures adopted in the West. Instead, they must find their own way to balance the risks of the virus with the risks to livelihoods and lives arising from attempts to defeat it.

Above all, however, the international community must act now to keep food supply chains operating. Otherwise, for the poorest parts of the world, the unintended consequences of the cure will be worse than the disease.

The United Nations World Food Programme has identified 26 countries that are most at risk from increased food insecurity because of the COVID-19 crisis, with Ethiopia, Nigeria, and Mozambique among the most vulnerable in Africa. In these three countries alone, the WFP estimates that 56 million people (out of a combined population of about 334 million) were already chronically food insecure. In addition, of the 1.5 billion children worldwide who are currently out of school because of the pandemic, 350 million depend on school meals to avoid going hungry.

COVID-19 is presenting poorer countries with four main food-security challenges.

For starters, households have less income to buy increasingly expensive food. Per capita output in Sub-Saharan Africa is set to contract by more than 4% in 2020 owing to the pandemic, while remittances from Africans working abroad are plummeting – by 80% at one payment company in the United Kingdom. And a household survey in Bangladesh shows that the poor have already seen their incomes drop by a staggering 70%; almost half are now reducing their food consumption as a result.

Second, transporting food has become more time-consuming and costlier. Global shipping activity dropped by 25% in the first quarter of 2020, while the cost of sending cargo across the Pacific Ocean tripled in March alone. And new hygiene and social-distancing measures are delaying goods clearance and delivery.

Third, the pandemic is disrupting the global supply of agricultural products. Farmers in India have been asked by the Indian Council of Agricultural Researchto postpone their wheat harvest until after the lockdown, while countries such as Vietnam and Cambodia are restricting rice exports. This directly affects Africa, which imports $4.5 billion worth of rice each year.

In addition, food is becoming more expensive as poorer countries struggle to secure foreign currency to pay for imports. For example, rice prices in Nigeria increased by 30% in the last week of March, partly because of a steep decline in export revenue following the global oil-price collapse.

There are also mismatches between supply and demand. In the UK, five million liters of milk are at risk of being thrown away every week because of reduced restaurant demand . But this surplus could instead have been turned into powdered milk and exported to where it was needed.

Finally, COVID-19 is affecting farming and food availability in markets, as inputs remain scarce and vital agrochemicals are delayed in ports and at customs checkpoints. The World Bank estimates that agricultural production in Africa could decline by up to 7% in 2020, depending on the extent of trade blockages.

Given these challenges, governments should provide cash transfers and safe food distribution channels to ensure that vulnerable citizens are protected. Crucially, policymakers need to focus on clearing logistics bottlenecks in both domestic and international value chains, so that food can move freely between and within countries. Furthermore, investing in the planting season now will boost countries’ adoption of technological solutions and reduce their reliance on food imports.

At the global level, four types of action are needed.

First, the international community must increase funding for food-relief and social-protection measures.This support must come quickly, because otherwise the eventual bill will be larger as famine spreads and agricultural systems’ viability is undermined.

The second priority is to invest in local agricultural production. Disruptions to local and regional food-production systems should be mitigated swiftly, particularly at critical times in the planting season, when the distribution of inputs such as fertilizer is crucial. Other investments should aim to help poorer countries build up three months’ worth of strategic food reserves, as the Alliance for a Green Revolution in Africa (AGRA) recently recommended. And supporting market systems for food and non-food crops alike would help poorer countries to become more resilient.

Third, we must alleviate disruptions to global food and agricultural produce supply chains by supporting regional and local logistics hubs. The WFP is best placed to coordinate such hubs and needs $350 million immediately for that purpose. That is not a lot of money to ensure that food goes quickly to where it is needed most.

Finally, we need to incentivize the private sector to fund agroprocessing and agtech companies. Resources should be channeled rapidly toward investment opportunities that are emerging as a result of the pandemic, especially for innovative value-chain solutions. Priorities include supporting e-commerce and e-market platforms in developing countries – especially in Africa – and propping up food processing.

Commercial travel, workplace arrangements, and much else are already affected by COVID-19. The pandemic creates an opportunity to transform food systems as well. The new partnership in Kenya between the African online retailer Jumia and Twiga, an e-market platform for local farmers, is a great example of what can be done.

Protecting food supply chains is the vital missing element of an effective COVID-19 strategy. While the challenges involved are huge, they can be solved through global partnerships, particularly among the private sector, governments, development banks, NGOs, and farmers’ organizations. But these solutions must be implemented rapidly if we are to prevent a catastrophic food crisis in developing countries.

Tony Blair, Prime Minister of the United Kingdom from 1997 to 2007, is Chairman of the Institute for Global Change.

Agnes Kalibata, President of the Alliance for a Green Revolution in Africa, is the United Nations Secretary General’s Special Envoy for the 2021 Food Systems Summit.

For Mwatitha Brainati, 39, a mother of four from Mkukhi Village, Traditional Authority Kalonga in Salima District, farming is an occupation she vows to continue pursuing for her children to get the best education.

“I do not farm for fun or just to find food for my family. I am a businessperson and farming has been one of the reasons I am able to send my children to school and get them necessary school items,” she says.

Brainati has been a cotton and maize farmer, but groundnuts’ farming has not been one of her passion.

“Ever since we started having unpredictable rains, I did not believe in groundnuts farming as my harvests were not enough to sell and for home use,” she adds.

Brainati decided to make her farming activities more beneficial by joining Chilimika Cooperative where, among others, the farmers sell their produce collectively.

The 60-member cooperative find markets even before harvest, a development that has led to transformation in their families and area.

“Of course we are within Chinguluwe settlement area where most of us have five hectares of land, but we believe in using this opportunity to make changes in our economic life,” says Brainati.

Upon seeing their dedication in farming activities, Alliance for a Green Revolution Africa (Agra), through Global Seeds Malawi, selected 10 farmers from the cooperative to be out-growers of a new groundnut seed.

Brainati is one of the four female farmers in the group.

Through contract farming with Global Seeds, she has learnt new methods of planting groundnuts and from the look of the crop, she is convinced of a bumper yield this season.

Cooperative chairperson Manase Chijalo says any step in their farming journey is under the guidance of extension services from their facilitators.

“Whatever we will produce here will be considered seed for other farmers in future, we therefore need to be careful with the pesticides we use; hence, the need for guidance from our extension officers,” he says.

On how they coordinate, Chijalo says the cooperative has rules and regulations that guide it and every farmer operates within the content.

“Being a chairperson, I check on my farmers and see how they are progressing and when they need help, I am the one who links up with extension officers for help,” he adds.

Chinguluwe Extension Planning Area (EPA) agriculture extension development coordinator Alice Kafunda says the involvement of farmers in seed multiplication will help them benefit more as marketing will not be an issue.

“The issue of readily available markets is what motivates farmers to do a great job in their farms. It is my hope that these farmers will use the opportunity of having a readily available market to prove to the buyers that they can do it,” she says.

Global Seeds Malawi sales and marketing officer Mike Chibwe says the company is ready and prepared to buy the CG 11 multiplied groundnut seed from the farmers.

The company is expecting to buy 20 metric tonnes from the 10 farmers.

Says Chibwe: “We have never had issues with our contract farmers because they normally produce the expected quantity and this helps us to avoid having misunderstandings.”

Agra Malawi country director Sophie Chitedze says it is pleasing that the technologies being implemented through various partners like Global Seeds are really trickling down to the household level of the farmers.

She says: “We have seen a great impact in yields and also the healthy crops in the fields. When we see smallholder farmers being seed breeders it is encouraging that they will be economically empowered.

Chitedze adds that despite having challenges in extension services, farmers have demonstrated to work hard on their own and use the opportunities they have in their farming activities.

“We would like to employ other ways of providing extension services like going digital, for example, to make up for the inadequate extension officers in the country,” she adds.

The past 10 years have seen the production of groundnuts increasing in the country as most farmers are transitioning from tobacco to other cash crops.

One reason for the increase is also attributed to the availability of quality seed, readily available markets and programmes that are encouraging crop diversification and nutrition.

Aside challenges such as lack of national technical response to aflatoxins and unregulated informal markets, farmers of the crop still have hope that their lives will continue transforming with the sales made from groundnuts.

According to Food and Agriculture Organisation, groundnuts have a significant economic value to Malawi as about 40 percent of total production is marketed.

Invasion of desert locusts, civil conflicts in parts of the West African region, and the global outbreak of COVID-19 pause a huge threat to Africa’s 2020 food security despite highly favorable climatic conditions in most parts of the continent.

According to the latest Food Security Monitor report by the Alliance for a Green Revolution in Africa (AGRA), 2020 rainfall as already witnessed and forecasted in the East and West African regions indicate increased precipitation and wetter conditions (above normal rainfall) in most of the countries.

Such increased chances of above normal rainfall, says the report, presents favorable conditions for agricultural productivity despite chances of flooding especially in East African region, which may lead to post-harvest losses, and landslides that could lead to deaths and losses of property.

However, there exists a major threat. The unprecedented outbreak of coronavirus (COVID-19) that was first reported in China in November 2019 has since spread all over the world including nearly all countries in Africa. As a result, governments have instituted strict measures to contain the spread of the highly contagious viral disease.

The measures being implemented range from travel restrictions, mandatory quarantines, border closures and restrictions of entry to non citizens. This has affected the food system in terms of supply and demand, the purchasing power of many of the poor who have lost their livelihoods and income sources has completely reduced, and the capacity to produce and distribute food within the poor and vulnerable communities has been the most affected.

According to the AGRA report, food supply disruptions might affect availability of food in the medium to long terms if at all the containment measures are prolonged. Authors of the report further note that the ongoing measures if prolonged would results in disruptions in production, processing and marketing of food supplies.

This is happening when the new cropping season is starting in East and West Africa while in Southern Africa the harvesting season is on-going.

Building resilient food systems is therefore critical to help countries withstand the threats of COVID-19 and other future shocks.

According to the report, innovative ways of getting health and food supplies to the affected and vulnerable remains critical across the continent. Social safety nets are therefore important to support the health and nutrition needs of the vulnerable populations.

The AGRA report calls for government regulation and transparency in ensuring efficient emergency response systems for the affected populations to receive adequate health and food requirements.

Above all, authors have pointed out that the private sector has an important role to play in supporting governments to ensure that health and food needs by the affected population are readily available, for example, through use of innovative e-commerce interventions to move health and food products from surplus regions to areas of need.

Before the COVID-19 pandemic, the East African region was already experiencing an upsurge of desert locust which according to the UN Food and Agriculture Organization (FAO) is the worst in 25 years in Ethiopia and Somalia and the worst in 70 years in Kenya. This complicates the food security situation even further.

According to FAO, the desert locust situation is complex and extremely alarming. The locusts have so far spread within the Horn of Africa and East Africa and have affected southern Kenya, northern Tanzania, northeast Uganda, southeast South Sudan and northeast D.R. Congo.

About 9.5 million people living in the most affected areas in Ethiopia, Kenya and Somalia are currently or projected to experience serious food crises despite the season rainfall forecasts indicating favorable crop growing conditions with a projection of good harvests.

The worst case scenario given the available information (although not considered likely – according to AGRA experts) is that desert locust will cause significant crop losses during the 2020 main and secondary season leading to below-average harvests and thereafter cause major losses of pasture and browse in arid and semi-arid regions resulting in dire food security outlook.

AGRA authors further observed that crop production in parts of the West African region has been constrained by civil insecurity and localized dry weather conditions.

Countries expected to experience localized shortfalls in cereal production due to unfavorable seasonal rainfall include Carbon, Cape Verde, the Gambia, Mauritania and Senegal.

In addition, persisting insecurity and large-scale population displacements are affecting agricultural activities in northeast Nigeria, the Lake Chad Basin, the Lac and Tibesti regions of Chad, northern and central Mali and the Liptako Gourma region that include parts of Burkina Faso, Mali and Niger.

Outbreaks of Fall Armyworm and locusts have also contributed to crop losses in countries such as Chad, Burkina Faso, Mali and Niger.

Despite the above-average 2019 cereal production in West Africa, food insecurity levels have remained high particularly in conflict-affected northern Nigeria, Lake Chad Basin and Liptako Gourma region.

So far, different countries are working on different policy interventions as a way of tackling the multifaceted challenges that are currently threatening to worsen food security on a continent that is already food insecure.

Read our March Food Security Monitor here and the April one here

Despite the lockdown to control the spread of COVID-19, Rwanda has not witnessed disruption in the supply of seeds to farmers, according to the Ministry of Agriculture and Animal Resources. And neither is that expected to happen in the future.

After a decade of various attempts, the country is now on course to achieve its target of being self-sufficient in seed supply. It is also exploring the possibilities of exporting seeds.

According to Jean-Paul Ndagijimana, the Country Manager of Alliance for a Green Revolution in Africa (AGRA), before 2018, Rwanda was importing around 3,000 tonnes of hybrid maize seed, 800 of wheat and 700 tonnes of soybean.

In 2019, local production of maize seeds increased to above 50 per cent of the demand.

“We are in a good status because we had already started the seed self sufficiency plan, which is currently at a good level, at 80-90 per cent, we could say that we are in a good status,” Dr Gerardine Mukeshimana, the Minister of Agriculture and Animal Resources said.

This has been made possible thanks to the partnership between the Government and AGRA.

The latter provides a series of grants for research, development, production, policy advice, inspection and certification of varieties of maize, beans, soybeans and Irish potatoes.

According to Fidele Nizeyimana, maize breeder at Rwanda Agriculture Board (RAB), after the 2009 grant by AGRA, the first maize hybrid seeds were available in 2010, but there were no companies to multiply them.

A few years later, AGRA supported RAB through a project named, “Securing Early Generation Seed for Emerging Seed Industry in Rwanda”, which aimed to build capacity for local seed companies.

At the time, Rwandan companies did not have the ability to breed hybrid seeds, and the country relied on imports.  

“The grant has made things look possible because people used to…treat seed production like myth,” Nizeyimana said.

AGRA Rwanda is currently implementing Tera Imbuto Nziza Program since 2017, a five-year seed roadmap implementation strategy worth $11 million and funded by USAID, Bill and Melinda Gates Foundation as well as Rockefeller Foundation.

It aims to inspire Rwanda to seed export level by 2021.

This is part of Partnership for Inclusive Agricultural Transformation in Africa (PIATA), aimed at driving inclusive agriculture transformation across the continent.

Prof. Daniel Rukazambuga, Associate Program Officer, Seed Technology in AGRA, said that in July 2017, AGRA gave a grant to RAB to train seed companies on how to produce hybrid seeds. The training benefited 11 companies.

In season 2017A, which run from September 2016 to February 2017, only three tonnes of hybrid maize seed variety named RHM104 had been produced. A year later, following training of the seed companies, 219 tonnes of hybrid maize seed were produced in Season 2018A, and 40.8 tonnes in Season 2018B, which was from February to June 2018.

Prof. Rukazambuga said the hybrid maize seed production increased to 1,654 tonnes in Season 2019A. The production is projected to rise.

Currently, there are four maize seed varieties for mid-low altitudes; RHM104, RHM1402, RHM1407 and RHM1409.

There are also four varieties for high lands; RHMH1520, RHMH1521, RHMH1601 and RHMH1611.

Prof. Rukazambuga says that both season A and B of 2020, if all goes well, we are expected to produce more than 4,000 tonnes of hybrid maize, which is slightly more than the local demand for the same seed.

Dr Charles Bucagu, Deputy Director-General in charge of Agriculture at RAB, said that; “Our researchers got grants from AGRA to carry out researches on local production of seeds, capacity building, most especially and finding new varieties.”

The researchers include seven PhD holders in plant breeding, and 12 Master’s degree holders in crop science.

He insisted that the 2018 National Leadership Retreat helped add impetus to local seed production efforts.

The retreat tasked the agriculture ministry to end the seed imports by 2021.

On average, the production of today’s maize hybrid seed is seven tonnes per hectare, while the traditional varieties exceed two tonnes per hectare.

Citing the example of South Africa where farmers generate 10 tonnes from a hectare, Dr Bucagu said research is underway to see if Rwanda can get varieties with such bigger quantities.

 “Seed is not something you can make once and use it for a long time, varieties are updated often because one variety ends up losing the capacity of giving you the same production due to different challenges like climate change and its effects, pests and diseases, which weakens the production,” he noted.

According to the official, a farmer has to buy hybrid seeds every season, because they cannot plant a hybrid seed and then plant grains they harvested the following season and expect the same amount of production.

“The advantage of using hybrid seed is that we know the parents of the breed and we are sure that the production will be huge,” he discussed.

It takes around 3-years for a seed to come from a researcher to a farmer, because the first year consists of production of “pre-basic” seed, the “basic” in the following year, which is finally used to produce a “certified” seed.

Though there are eight certified maize seed varieties, RAB researchers indicate that there are 10 more varieties that will be available next year.

Fidele Nizeyimana said once the local seed demand is satisfied, it will be a boost to Rwanda’s exports.

Rwanda has recently secured ISTA (International Seed Testing Association) membership and is seeking laboratory accreditation to be able to export quality seed.

“We have two rainy seasons, and we have marshlands and irrigated lands, which is an advantage for us to produce enough seeds for ourselves and for exports. For seed companies, selling hybrid seeds is more profitable than OPV seeds, and this could produce jobs for many, and farmers will buy at a reduced price,” Nizeyimana argued.

Instead of being sent abroad to import seeds, the money stays in the country and this means a lot to the country’s economy, he added.

The 2018 figures show that 81.3 per cent of the Rwanda population is food secure.

AGRA in partnership with Hinga Weze project are working with RAB to ensure seeds are availed to farmers across the country and all arable land is put under production to sustain gains already made and mitigate any possibility of a food crisis that might be triggered by COVID 19.

Founded in 2006 and based in Nairobi, Kenya, AGRA is transforming smallholder farming into thriving businesses across Africa, it is operational in eleven African countries and is led by Dr Agnes Kalibata, a Rwandan agricultural scientist, and former Rwanda’s Minister of Agriculture.

FAO and AGRA bring partners together to share knowledge in fight against the global pandemic

23 April 2020, Accra – With over 60 percent of the African continent’s population in rural areas and dependent on smallholder or family farming, the risk from the COVID-19 pandemic to food supply chains, market access and nutrition is high. The Food and Agriculture Organization of the United Nations (FAO) and Alliance for a Green Revolution in Africa (AGRA)/ African Green Revolution Forum (AGRF) brought together private sector partners, economists and business leaders to identify these risks and gaps in response efforts while proposing solutions.

Abebe Haile-Gabriel, FAO Assistant Director-General and Regional Representative for Africa, welcomed over 565 participants.

“The concerns COVID-19 poses to public health cannot be separated from the food security concerns. Hence, it is important to prioritize protection of the food supply chain and livelihoods as an integral component of the response to the crisis,” he said.

Ensuring trade to prevent a crisis within a crisis 

In his keynote presentation, FAO Chief Economist Maximo Torero stated that there is not a shortage of agricultural commodities across the world but rather a bottleneck of access and logistics to reach consumers. He also identified the building of buffer stocks by countries as a loss of valuable resources as supply is abundant and prices are dropping. He suggested that countries focus instead on ensuring global and particularly intra-regional trade remain vibrant while ensuring all health and safety protocols to prevent the further spread of the virus.

Ziad Hamoui, Ghana National President of Borderless Alliance, highlighted that this is an opportunity to remove non-tariff barriers. “We need to eliminate non-tariff barriers to promote the movement of essential items within Africa,” he said. He added that this can be taken as an opportunity to put the tenets of the African Continental Free Trade Area (AfCTA) into effect.

Amar Ali, CEO of Africa Improved Foods, added that the biggest challenge his company faces is not a lack of supply but rather delays in the supply chain due to border closures and more stringent import/export and transportation regulations. He encouraged governments to keep local and regional supply systems open while ensuring health and safety.

Vanessa Adams, Vice President of AGRA, in her closing remarks urged all the participants to use the crisis as an opportunity to build more resilient food systems and be more inclusive, particularly reaching out to women through better coordination across government ministries, better collaboration among development partners and more effective public and private partnerships.

To view the recording of the webinar, click here.

FAO’s commitment to Africa

Africa and the world have food stocks available to feed communities through this crisis, but it is now incumbent on governments, business leaders and partners to work together to keep the food supply chain alive to prevent worsening food insecurity and undernourishment. FAO is providing governments across the continent with assessment tools, policy advice and real-time data on food prices, import and export volumes, food stocks and other information for them to make the most informed decisions in their COVID-19 responses.

In this interview, Dr. Kalibata discussed the effects of COVID-19 and how to mitigate the disruption of our Food Systems but most importantly creating a plan post COVID-19. 

With support from AGRA’s Financial Inclusion for Smallholder Farmers in Africa (FISFAP) program, the Eastern Africa Farmers Federation (EAFF) deployed an integrated digital farmer services platform known as e Granary, to improve the living standards of smallholder farmers in Kenya through increased incomes and financial inclusion.

The main objectives of the initiative was to increase market access by smallholder farmers, increase access to financial services/credit, enhance capacity of farmers on structured trade and financial literacy, and lastly to increase awareness of the e-Granary platform by farmers.

As a result, AGRA has come up with a number of lessons and experiences that can help inform practitioners, researchers and funders about the kinds of issues encountered in such interventions/solutions and also approaches to addressing them.

The underlying fact is that any rural digital initiative encounters significant challenges when it starts. One key lesson learned from the e-Granary project is that there is need for careful selection of the platform partners if one has to be successful. Thus, for the roll-out of similar or near similar technology-driven service platforms for smallholder farmers, the interests of the participating partners must be well aligned and defined from the beginning.

AGRA notes that moving towards financial linkages in particular has been challenging.  Although EAFF has piloted input supply on credit with cooperatives, an initial partnership for individual credit in this context with a company called MO-DE was not successful.

e-Granary also tested a weather index insurance product with ACRE Africa and an insurance underwriter that utilized farmer data to screen farmers for crop  insurance cover. However, the scheme was put on hold as the insurance partnership fell through following the drought in 2017 and an increase in the basis risk. Still on the same, ACRE Africa and e-Granary continue to be in dialogue on new approaches to enroll farmers and distribute agriculture related insurance solutions.

Other fundamental lessons from this intervention are that a simple integrated model at inception is essential and that collecting accurate data is often the biggest requirement and challenge in financial product design.

It was noted that large agribusinesses are reluctant to link directly with smallholders or to offer optimal output markets and prices due to the lack of data on farmers, the cost of monitoring and supervision of assets (crop, inputs, equipment etc.), as well as the cost of cash handling and disbursements.

At the farmer level, productivity is impeded by lack of finance and information. Reasons behind this could include the lack of formal identification, credit histories and collateral or the lack of awareness on appropriate agriculture practices.

Additional issues are that financiers often have a heightened risk perception of agriculture and low visibility into yields and productivity. EAFF has also identified exogenous factors such as weather variability, particularly drought, low landholding size and price fluctuations, that affect the productivity, incomes and competitiveness of Kenyan farmers.

Critically, smallholder farmers that want to participate in markets face high transaction costs due to unpredictable market prices coupled with high transportation costs and weak market information.

Another very important lesson is that farmers should see real value in the initiative right from inception, which is critical for driving active use and getting the right commercial partners to the platform.

Read the full case study here

When smallholder farmers deliver their farm produce to the buyers, evidence based studies have demonstrated that they often need instant payment for immediate use and reinvestment into their economic systems and livelihoods.

Delayed payments may mean they have to take a loan and incur interest costs to bridge consumption or invest in a new seasonal crop. The delays can also impact their profitability directly by increasing costs or indirectly by impacting their ex-ante market behavior.

It has further been observed that lack of trust in a buyer’s ability to pay on time can influence a farmer to side-sell or choose an option which offers favorable payment terms, but a lower return on the farm produce.

This was the gap AGRA through its Financial Inclusion for Smallholder Farmers in Africa (FISFAP) program in collaboration with Umati Capital Limited (UCAP) sought to bridge using digital solutions in a partnership that ended in 2018.

Umati is a financial services company based in Nairobi, Kenya that seeks to revolutionize access to finance through the innovative use of technology. Through a system called Supply Chain Finance (SCF), Umati allowed a supplier (smallholder farmers) at the time of delivery of farm produce, to access 80% of the invoice value through mobile money at any time before they are paid by the buyer.

The SCF system however, requires a formal contract or agreement between a supplier and a buyer. Payments are received directly from the buyer on behalf of the supplier with funds transferred via integration with bank and mobile money systems.

Umati’s initial assumption was that the possibility of getting spot cash on delivery gives farmers a reason not to side- sell to traders and opts for a professional buyer who offers a better price and other additional services like input credit and extension services.

By the end of the partnership, AGRA sought to understand developments in Umati’s business and service model and, more broadly, to distill lessons for SCF in smallholder finance, and document the key lessons encountered when piloting and implementing an automated procurement system alongside Invoice Discounting (ID) financing solutions for selected staple food value chains.

It is important to note that supply chain finance has rarely been tested with smallholders in loose value chains. As a result, a key lesson for AGRA is that due to the unstructured nature of the food crop markets and the dominance of cash-based transactions, the demand for supply chain financing solution is low in staple food value chains.

Unfortunately, just a few commercial banks offer bank supply chain finance products. Yet, the ones that do, tend to focus on larger buyers. Banks view working with SMEs as a challenge due to the absence of adequate information on which to base credit decisions, lack of collateral and high transaction costs.

Read the full case study here

With a poverty headcount ratio of ~44%, Northern Ghana is one of the poorest regions in the country, with low levels of private sector development and bank branch presence.

However, an initiative between ASI, a Ghanaian NGO, and AGRA’s Financial Inclusion for Smallholder Farmers in Africa Program (FISFAP), to experiment on the use of digital wallets in this part of Ghana has proven that use of mobile money can make delivery of financial services to farmers much cheaper and less risky.

At the start of the project, ASI set out to work with a range of agribusinesses – seed suppliers, produce buyers and input-output traders to address the risks associated with agriculture payments.

The core issues faced by smallholder farmers were delayed payments, costs and risks associated with carrying cash and high administrative costs of cash management at the agribusiness level.

Tanager launched an ambitious partnership with two major service providers, Vodaphone and Bharti Airtel. The two partners addressed these key issues by developing the capacity of agribusinesses in integrating with and managing digital payments solutions, introducing farmers to mobile wallets, and facilitating an ecosystem of agents for cash in and cash out.

The development of the model used by ASI continued with the engagement of Farmerline, a local partner and third-party mobile platform provider assisting agribusinesses to process and track payments through their mobile phone wallets.

As a result, smallholder farmers see clear value in the product with payment lags of three months getting substantially reduced to a matter of days if not hours.

This work was initially operationalized with the Global Agricultural Development Company (GADCO) in the rice value chain. With proof of concept, the technology now extends to three different crops (paddy rice, maize, soya beans) and seeds such as maize, millets, groundnut and cowpeas among five agribusiness partners.

By the end of the pilot period, ASI facilitated mobile payments for approximately 800 smallholder farmers with a total value of US$900,000. However, among the lessons that emerged are the need for continuous training on basic cellphone functionalities, such as SMS messaging, pin codes and how to initiate a balance inquiry, as well as basic financial literacy such as the concept of savings as new subscribers are enrolled.

Additionally, although the project identified and actively managed 12 agents, liquidity was an ongoing concern and required on the ground coordination.

Building on these lessons in 2016, AGRA funded the expansion of this initiative to Northern Ghana. As a result, the expanded project had six agribusiness partners that are largely out-grower schemes. They reached approximately 10,640 smallholders as of September, 2018.

The breakdown of farmers trained and enrolled on mobile payment comprises 1,072 for Agriaccess, 2,506 for Agritrade, 923 for Masara, 4,681 for Savanna, 503 for Shinkaafa and 955 for Heritage Seeds.

ASI identified Farmerline Ghana, a third-party mobile money platform provider to assist agribusinesses to process and track payments to farmers irrespective of the network.

At the farmer level, interoperability could have been an issue. In the previous pilot Tigo Cash had provided an interoperable voucher code functionality that could accommodate farmers with non-Tigo Cash wallets. In May 2018, the Bank of Ghana launched the Mobile Money Interoperability System, enabling farmers to transact across networks.

More importantly, the presence of established buyers in the region meant that farmers had a strong incentive to sign on and test mobile payments. Similarly, agribusinesses are starting to see the benefits of digitizing payments.

Digitizing value chain payments provides significant benefits for farmers and agribusinesses. These benefits include registration of farmers for mobile money services, improved business to person payments and access to mobile money-based savings accounts.

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