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.