Show me the data: Using data to unlock access to finance for smallholders

Published on

February 19, 2018

In 2016, our landmark report Inflection Point identified a series of enablers to help close the USD 50 billion smallholder financing gap and unlock growth in smallholder finance. To no surprise, market transparency and availability of market data were some of the most critical. To close the financing gap, providers and practitioners need to make more customer-centric decisions, understand how to build more sustainable business models, and identify the effectiveness of different smallholder solutions. Yet, without transparent markets and reliable data, stakeholders across the value chain are unable to make smart decisions on how to improve smallholder financial solutions. 

Credit: 
Inflection Point

Since the publication of this study, we’ve seen improvement in market data transparency, creating opportunity to unlock access to finance for smallholders. While this improvement is significant, particularly around transparency for demand-side and impact data, there is a notable gap in data transparency for supply-side needs.

  1. Supply-side data is crucial for providers to better understand the competitive landscape and features of effective business models. With granular-level data, providers can understand what competitors are doing to serve smallholder farmers, understand a product’s value proposition, and identify which solutions have proved financially sustainable and how. However, there are three critical challenges providers face in regards to supply-side data: (1) there is a limited number of efforts aggregating data on market actors, (2) those that are aggregating data, often fail to provide enough granularity for it to be valuable and (3) providers themselves are often unwilling to share data publicly on their business model given competitive market risks
  2. Demand side data is fundamental to understanding an actor’s target client and developing customer-centric products. To effectively provide financial solutions for smallholders, providers must gather and analyze data to understand who their target customer is and how to better serve them. For example, CGAP’s Smallholder National Survey data helps providers understand how to segment smallholders and build solutions that address the needs of each segment. Organizations like CGAP are doing an exceptional job at making demand-side data available, however, there needs to be a more concerted effort around making the data usable for a given audience.
  3. Impact data is critical for providers to assess effective interventions in terms of farmer impact. For instance, evaluation studies by J-PAL and IPA allow providers to understand which smallholder financial products have the greatest impact on farmer livelihoods.  Research institutions and think-tanks tend to play a heavy role in gathering and sharing impact related data, however, smaller on-the-ground organizations often lack the resources to implement impact measurement activities at scale, particularly rigorous impact evaluations. Additionally, few organizations are aggregating and collecting sector-wide evidence to compare impact evidence across different institution types. 


EMERGING DATABASES TO LOOK OUT FOR

Although each type of market data has its challenges, organizations are beginning to take matters into their own hands by making more and better data accessible for improved market transparency. 

SUPPLY-SIDE DATA
  • The MIX and One Acre Fund’s Smallholder Finance Product Explorer aims to help financial service providers (FSPs) design better products by accessing operationally useful information on smallholder finance products. Launched in January 2018 and with support from the RAF Learning Lab, One Acre Fund and the MIX released the beta version of the Product Explorer, leveraging data entries from 29 FSPs across several markets. The Product Explorer gathers data on the pricing and structure of a financial product, as well as add-on services such as links to the value-chain, bundled training services, and measures of impact on farmer yield and livelihoods. Going forward, the Product Explorer will expand its content by integrating the Lab’s FSP database and leveraging MIX’s extensive network of MFIs.
  • Digital Service Provider (DSP) Knowledge Platform, a forthcoming database incubated by the Mastercard Foundation RAF Learning Lab, will roll out for public use in mid-end 2018 and provide a central repository of DSPs currently working with FSPs to digitalize specific businesses processes. This platform will provide users access to high-quality and credible data on digital solutions and their value propositions, impact achieved to date, customer reviews, and contact information. Additionally, the database will cover six key categories of DSPs operating in sub-Saharan Africa, including: SMS communication platforms, digital data collection applications, data analytics tools, mobile money and digital payment platforms, and ICT enabled value-added services, including rural advisory and market linkages services. Users will be able to search for specific providers using over 30 different filters, download their search outcomes and submit requests for proposals to their preferred DSP directly from the platform.
DEMAND-SIDE DATA
  • CGAP’s Smallholder Household Data Hub will launch in late February 2018 on cgap.org and share 500,000 plus data points from CGAP’s nationally-representative surveys of smallholder households in Bangladesh, Côte d’Ivoire, Nigeria, Tanzania, Uganda, and Mozambique. This portal is designed to help FSPs extract insights from the national survey data, particularly around smallholders’ income and expenses, agricultural activities, use of mobile phones, financial tools, perceptions of providers, and more. While CGAP’s Data Hub will provide a centralized location for users to interact and compare data points, i2i data portal has partnered with CGAP to offer FSPs, researchers, and policymakers a deeper and more user-specific data experience. Beginning March 1, 2018, i2i’s data portal will allow users to compare and analyze CGAP’s national survey data specific to their particular interest, including filtering by smallholders’ credit source, savings fluctuation, and expense timeline. 
IMPACT DATA
  • The GIIN’s beta data portal, Navigating Impact, aims to help investors select evidence-backed strategies and adopt metrics that connect business performance with important impact driven objectives. Investment themes in the beta portal such as Smallholder Agriculture, leverages foundational research from the Lab and ISF, to help investors dig into strategies around “Improved Farm Profitability,” and “Improved Food Security,” among others. Formally launching in mid 2018, Navigating Impact will enable high quality information on the goals and expectations for impact investments, evidence to date, a core set of metrics to track performance, and curated resources to help investors.


BRINGING DATA TRANSPARENCY TO THE NEXT LEVEL

Making credible, relevant, and quality data accessible is only one piece of the puzzle. To really reap the benefits of these data sets and unlock growth in agricultural and smallholder finance, data providers need to make the data not only accessible but, most importantly, usable. For example, the Lab is working with partners to think through how to make demand-side data usable for FSPs to better design products. This might include hosting workshops with potential users to explore data use-cases, organizing data “hackathons”, publishing case studies that highlight the business case for data, and developing how-to-guides for data usage. Additionally, to catalyze these efforts in data transparency, each stakeholder has a specific role to play:    

  • FSPs and DSPs can increase market transparency and user access by partaking in relevant databases – such as the Smallholder Finance Explore. This requires engaging with the data available, building their team’s capacity, and sharing information on their solutions.
  • Funder and donors should support the development and maintenance of market databases as a public good to ensure improved market transparency is accessible for organizations at every stage; as well as data capacity building within organizations to ensure they are able to benefit from new data sets.   
  • Think tanks, researchers, practitioners can celebrate and communicate the progress of data resources to speed up uptake and usage from a variety of users. 

Data transparency and agricultural finance is on the rise and together we can take it to the next level. If you or a colleague might be interested in supporting these efforts, contact the Lab at [email protected].

About the Author(s)

Initiative for Smallholder Finance
Learning Lab Strategic Partner

ISF is an advisory group committed to transforming rural economies by delivering partnerships and investment structures that promote financial inclusion for rural enterprises and smallholder farmers. Combining industry-leading research with hands-on technical expertise, ISF develops practical, profitable, and sustainable financial solutions.

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