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Digital Financial Infrastructure Key for Empowering Smallholder Farmers in Kenya

A new study released by the Better Than Cash Alliance has revealed how agriculture nonprofit One Acre Fund and Citi Inclusive Finance have cut payment losses and collections costs by over 80 percent for smallholder farmers in Kenya by successfully digitizing loan repayments. According to the report, the move has significantly boosted transparency and efficiency, thereby driving economic opportunity and financial inclusion for thousands of farmers and their families.

By Sustainable Brands | Published 7 years ago | About a 3 minute read

A new study released by the Better Than Cash Alliance has revealed how agriculture nonprofit One Acre Fund and Citi Inclusive Finance have cut payment losses and collections costs by over 80 percent for smallholder farmers in Kenya by successfully digitizing loan repayments. According to the report, the move has significantly boosted transparency and efficiency, thereby driving economic opportunity and financial inclusion for thousands of farmers and their families.

With the support of Citi Inclusive Finance, One Acre Fund enabled farmers to easily make loan repayments via mobile money platform, reducing the uncertainty, inefficiency, insecurity and high costs that typically plague cash transactions.

The new digital financial infrastructure has also allowed One Acre Fund to reach more farmers with greater reliability and time previously spent collecting payments can now be used to provide farmers with training and educational programs that can help bolster their incomes. Farmers who participate in One Acre Fund’s programs on average earn nearly 50 percent more than peer farmers who do not.

“Mobile repayments have allowed us to increase our efficiency and provide better service to farmers,” said Mike Warmington, Director of Microfinance Partnerships at One Acre Fund. “We’re excited to be working at the forefront of this technology in the smallholder agriculture lending sector. In our experience, farmers were empowered to thrive in these communities. Clients receive immediate confirmation of payments as they happen, enabling them to better manage their businesses and family finances.”

The study also found that instances of repayment fraud decreased by 85 percent with use of the new platform and that payment processing time has decreased from two weeks to a mere two to four days; farmers now know exactly when their payments are received. Female farmers, in particular, have benefited from the financial infrastructure, with the report revealing that they now feel safer about payment deliveries.

“Citi’s footprint, track record in inclusive finance and transaction banking capabilities enable us to provide global support to leading social enterprises like One Acre Fund,” said Bob Annibale, Global Director of Citi Inclusive Finance. “Among other benefits, digitization enables efficiency and security and drives innovative and inclusive business models. Citi is proud to play a part in enabling One Acre Fund and other organizations like them to improve the livelihoods of farming communities.”

One Acre Fund is an example of the significant benefits and impact that digital payments and inclusive digital financial infrastructure can bring to agricultural value chains, contributing to a more sustainable and productive agriculture sector, a cornerstone of the UN Sustainable Development Goals. A similar model to that which was employed in Kenya could easily translate to poor farming communities in other countries and One Acre Fund is already working on plans to expand in Rwanda, Tanzania and Zambia.

“For companies and nonprofit organizations who want to work in rural Africa, this success story is a must-read,” said Oswell Kahonde, Africa Regional Lead at the Better Than Cash Alliance. “Digital payments are essential to building sustainable business models and creating long-term impact. By enabling smallholder farmers to make and receive payments digitally, we are creating transparency and accountability which translates to numerous benefits and empowers people to take control of their finances.”