About the NTF4Ag Report

NTF4Ag: Emerging Lessons and New Frontiers brings together key results, insights, and lessons from the case studies, pilots, and cross-cutting research conducted by MEDA and its partners from 2017-2020 – with the overall goal of learning and documenting experiences of non-traditional finance for catalyzing smallholder agricultural innovation adoption. The report is framed around INNOVATE’s four learning themes along with key takeaways and supporting evidence from the ten research projects in the MEDA INNOVATE portfolio. The report concludes with potential opportunities for further learning, research, and action by different actors in the smallholder finance landscape and ecosystem.

We invite you to explore the summarized version of the report below. You can learn more about the findings and lessons from the research portfolio in the full length interactive PDF report.

Non-Traditional Finance

Non-traditional finance (NTF) can be an effective vehicle to incentivize smallholder farmers to adopt large-scale innovations. Generally, NTF includes products, services and/or delivery channels that go beyond standard lending and saving to actively engage with smallholder farmers, private investors, and entrepreneurs, offering a broader range of bundled services (financial and non-financial). 

Agricultural Innovation

Agricultural innovation includes (but are not limited to) changes and transformations in production and cultivation, post-production/cultivation handling and processing, use of improved inputs and technologies, adoption of ICT, new business practices and models, supply chain transactions and efficiency, inclusion and equitable opportunities, shifts in societal, gender or community norms, and revenue generation for market actors.

Research Portfolio Snapshot

The INNOVATE research portfolio (page 8) includes 10 projects conducted by partners in 3 target regions. MEDA supported the selected partners to implement pilots or case studies, depending on the scope of the research question and overall hypothesis identified in their application. Of the 10 research projects, there were 4 in East and Southern Africa; 3 in South America; and 3 in South Asia. The projects were conducted by diverse organizations including finance companies, consulting firms, international NGOs, and research organizations.

Learning Agenda and Themes

The MEDA INNOVATE learning agenda was formed continuously throughout the project while focused on the overall research goal and key research questions related to the adopting agricultural innovations through non-traditional finance.

Research Goal

To understand and learn about different products, services, non-traditional finance models, and the role that NTF plays in women and men smallholder farmers adopting agricultural innovations in Eastern and Southern Africa, South Asia, and South America. 

Research Questions

  • Awareness: How do women and men learn about non-traditional finance and agricultural innovations available to them?
  • Access: Do women and men have equal access to NTF and agricultural innovations?
  • Affordability: Can women and men smallholders afford non-traditional financing options and agricultural innovations available to them?
  • Value: Do women and men smallholders perceive available financing and agricultural innovations as valuable and desirable?

Learning Theme 1: Customer Centricity

Customer centricity, at its core, puts the customer at the center of all business decisions, processes and actions. The goal of customer centricity is assuring the success of one’s customer and creating positive customer experiences. For INNOVATE, customer centricity as a key theme enabled MEDA and its partners to adjust activities and overall orientation to remember to ask ourselves: “Who is the customer? What do they need? What do they value? What can they afford? What influences decision-making and behavior? What are the key drivers of adopting new products or services?”

Takeaway 1

Adopt a learning mindset to know your customer needs, challenges, motivations and aspirations

Takeaway 2

Experimentation is a simple yet powerful way to generate useful smallholder customer insights

Takeaway 3

Customer centricity is a journey, not a destination

Learning Theme 2: Smallholder Products & Services

The second learning theme relates to Smallholder Products and Services and the question, “What do smallholder farmers value and what are they willing to pay for?” For those working at the intersection of agriculture and finance, we know that smallholder farmers are extremely cash-flow sensitive and that most loan products are not designed to align with smallholder client needs and circumstances. The few banks and financial service providers that have successfully developed appropriate and affordable products or services for farmers, have done so through a mix of product, distribution, and collateral customizations – all of which begin with a fundamental understanding of smallholder clients want and need.

Businesses and NGOs alike face the challenge of finding the right product-market fit: the degree to which a product satisfies a strong market demand. This is even more difficult to do for smallholder farmer customers. Irregular cash flow, crop seasonality and price sensitivity must be considered to align and design the right product or service to meet smallholders’ needs. The following takeaways are relevant to actors from the INNOVATE project and the smallholder finance landscape in general.

Takeaway 1

Design and align products and services according to smallholder cash flow and willingness to pay

Takeaway 2

Credit alone is not enough – quality inputs, information, services and trusted relationships are critical and valuable for farmers

Takeaway 3

Appreciate the business case from the farmer's perspective, because markets and net revenue matters

Learning Theme 3: Smallholder Household Decision-Making

The third learning theme builds on the previous one on smallholder products and services, but incorporates how decisions are made at the household level. Family units are dynamic, complex, and diverse – there are various factors (such as social norms, power dynamics, and market realities) which impact how smallholder households make decisions, especially along competing household and farm business needs. MEDA INNOVATE is particularly focused on decision-making regarding the adoption of and investment in agricultural innovations.

Takeaway 1

Decisions by smallholder farmers are not solely driven by revenue growth; saving time and/or money are key, especially for women

Takeaway 2

Family dynamics influence the adoption of agricultural innovation within farming households, along with financial and time-related factors

Takeaway 3

Value perception and trust, along with an understanding of social norms and insights into women's roles and realities, can enable the ag-finance sector to better serve women and families as customers

Learning Theme 4: Policy & Regulatory Transformation

This final learning theme on policy and regulatory transformation focuses on the opportunities for governments to pursue inclusive and innovative policies for agricultural finance, with an emphasis on smallholder farmer populations. Even if there’s an existing ecosystem of actors supplying products and services to smallholder farmers, the enabling environment (including policies and regulation) must be supportive to advance finance and innovation targeted for rural households. 

Below are helpful definitions provided by Dalberg and the Rural and Agricultural Finance Learning Lab:

  • The enabling environment is determined by the regulatory, financial, knowledge, and digital infrastructure in any given smallholder finance context
  • The ecosystem is composed of actors providing financial and non-financial services to smallholder farmers – and is embedded within the enabling environment

MEDA builds on these two domains with the understanding that smallholder agricultural households function in a series of interconnected ‘systems’ (see diagram) radiating from the household unit – to agricultural market systems, community and social domains, and infrastructure and policy (or, the enabling environment).

Takeaway 1

Coordinate and streamline efforts between the enabling environment and Ag finance ecosystem actors to achieve effective collateral reforms

Takeaway 2

Building resilience to climate change for smallholder farmers requires policy, programs, and partnerships to spur innovation for appropriate financial products, risk mechanisms and an inclusive nationwide climate agenda

What's Next?

This NTF4Ag report demonstrates that there is potential for non-traditional finance in the smallholder finance landscape. NTF is not meant to replace traditional financial and banking services, but serve as a complement and tool to fill current gaps.

Below are some of the actions that can be prioritized and undertaken now, and opportunities for further research among the diverse actors working on smallholder agricultural development and financial inclusion, as these two agendas go hand in hand.

For implementing development organizations and the private sector:

  • Use segmentation methods to uncover not only demographic data, but also behavioral data and insights among the clients you serve
  • Identify and assess adoption-related factors of financial services and agricultural innovation for different women and men smallholder farming segments

For policymakers and regulators:

  • Assess the current policy framework and regulation that hinders or has unintended consequences of financial exclusion for smallholder farmers – especially regarding collateral requirements
  • Incentivize financial service providers to test, innovate and develop products and services that will reach new or unfamiliar customer segments

For donors and funders:

  • Coordinate with and learn from other donors and funders where priorities in the smallholder finance landscape overlap, especially in similar regions and country contexts where such lessons can roll up into policy recommendations for country governments and inform future funding priorities
  • Compare different funding models and mechanisms most effective for contributing to development research, demonstrating value for money, and generating impact for smallholder farming families

This report was compiled and designed to inspire readers not only to learn from the 10 research cases and MEDA’s cross-cutting research and analysis of these projects, but also to enable readers to re-think how programs and policies are implemented and how products and services are designed and delivered. With a decade left to achieve the 2030 Agenda for Sustainable Development, assuring the viability and resilience of small farmers worldwide is crucial to meeting the SDGs. With the right combination of leveraging innovative tools, technology, capital, policies and collaborative partnerships – national and global efforts are on track for supporting smallholder farmers to achieve dignified, stable and secure livelihoods within agriculture and beyond, for the well-being of themselves, their families and rural communities worldwide.

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