27 Mar 2014
ISF Advisors

The third in the ISF briefing note series, this briefing note takes stock of the existing landscape of smallholder impact and risk measurement and devises tools and suggestions to align these efforts for greater future impact. Additionally, this post includes a universal theory of change for smallholder finance, smallholder impact literature review, and an interactive Prezi map of the current smallholder impact and risk assesment tools. 

Impact and risk metrics play an important role in efforts by investors, technical assistance providers, certification bodies, and corporations to close the over $400 billion gap between demand for and supply of finance to smallholder farmers.

Metrics can help demonstrate industry impact, improve operating efficiency, and foster collaboration on industry infrastructure to grow the market. A well-implemented metrics strategy can also help to mitigate reputational risks arising from unintended effects on farmers and their families, communities, or ecosystems.

But the current landscape of...

18 Dec 2013
ISF Advisors

This briefing is the second in a series by the Initiative for Smallholder Finance. Read this note to explore what is required for a healthy, competitive smallholder banking sector, and investment opportunities for public and commercial funders seeking to support smallholders.

Local bank lending fails to meet 97% of smallholder demand for financing. To support growth for smallholder farmers, banks must lend at affordable rates, design financial products more appropriately for farmers, and improve accessibility of financial institutions to smallholders. Banks serving rural and agricultural clients could evolve in a more competitive direction marked by greater product and service innovation. In order to make strides towards closing this gap in financing, public and commercial investors can allocate capital to the banks and financial institutions that have the capabilities to grow and innovate.

 

This briefing’s analysis begins with an overview of the characteristics and capabilities of banks that are well positioned to serve smallholder farmers. Next, the briefing breaks banks into four archetypes, including an assessment of how effectively each archetype serves smallholders. This document also assesses each archetype on its attractiveness to public or commercial investors.

24 Oct 2013
ISF Advisors

The first briefing note in a series from the Initiative for Smallholder Finance provides an overview of the market size and scope of local bank lending to smallholder farmers.

 

Local bank lending – which should be a main avenue for smallholder financial access – is estimated at $9 billion and meets only 3% of overall demand. This is a small figure and meets less than 3% of the estimated total smallholder financing demand, which is $300 billion excluding China and $450 billion globally. Furthermore, this amount is dwarfed by the $230 billion in total bank lending to the agricultural sector.

In addition to revealing new data on local lending to smallholders, this research assesses the types of financing products offered to smallholder farmers and explores the barriers to provision.

Currently, global development donors have tried to incentivize bank lending to smallholders by focusing on guarantees, but those have not been sufficient to stimulate lending. This briefing note argues why banks need investment funds and technical assistance to build their smallholder banking capabilities and better serve rural and agricultural clients.