CGAP V Completion Report FY14-FY18
FINANCIAL INNOVATION FOR
SMALLHOLDER FAMILIES
The Financial Innovation for Smallholder Families
Initiative is working to facilitate the development of
new financial solutions and provider practices that
meet the needs of smallholder families. To achieve
this objective, the Initiative aims to provide key
stakeholders with a more holistic understanding of
the financial services needs of smallholder families
and collaborate with a wide range of providers to
design and launch financial solutions, particularly
technology-enabled ones.
CGAP V Completion Report | Financial Innovation for Smallholder Families 2
1. Description of Initiative’s Theory of Change
The CGAP V Strategy identified a knowledge gap on the financial lives of smallholder families, who
constitute one of the largest financially excluded segments living below $2-per-day. This gap results from
the fact that smallholders had historically been the exclusive focus of agricultural development initiatives
that tended to concentrate on smallholders’ farming needs, generating only anecdotal evidence of
their non-agricultural livelihoods. At the same time, the financial sector traditionally has had very little
exposure to—and knowledge on—rural communities, the agricultural sector, and smallholder families
overall. This context meant that there was a lack of evidence to shape a holistic understanding of how
the diverse livelihoods pursued by smallholder families shape their overall financial needs.
To collect evidence on smallholders’ financial lives, CGAP’s Financial Innovation for Smallholder Families
Initiative carried out empirical research in several countries in Africa and Asia. With this evidence, CGAP
has been developing insights that are helping financial providers to have a more holistic understanding
of smallholder financial needs and to develop practices and financial products and services that respond
to smallholders’ needs. The initiative’s theory of change and its assumptions are visualized below.
Theory of Change: Financial Innovation for Smallholder Families Initiative
Knowledge gap of Conduct empirical Foundational Key stakeholders have a New financial Smallholder
financial lives of research research more holistic understanding products and families
smallholders leads (Financial diaries, publications of the financial services service-provider receive a
to inadequate national surveys, needs of smallholder practices can wider range
financial products smallholder landscape Knowledge families, and FSPs have an effectively meet of financial
and services study, business model dissemination enhanced understanding of the needs of services that
tailored to performance, branchless (learning and how to design and launch smallholder meet their
smallholder needs. banking models) sharing events, tailored financial products. families. needs.
presentations)
There is a CGAP is able The first step in effective product The first step in effective
knowledge to leverage its design is developing a detailed product design is
gap of the influence amongst understanding of the intended client developing a detailed
financial lives MNOs and MFIs to segment and their specific needs, understanding of the
ASSUMPTIONS of smallholder translate evidence preferences, and behaviors, provided intended client segment
families that, from research through the initiative’s outputs. and their specific needs,
if filled, will into solutions that preferences, and behaviors.
serve to foster more effectively Models of successful smallholder-
innovative serve smallholder focused products are transferrable Models of successful
services. households. to different contexts and can find smallholder-focused
traction among diverse stakeholders. products are transferrable
to different contexts.
CGAP V Completion Report | Financial Innovation for Smallholder Families 3
2. Evolution of the Initiative during CGAP V
In its first year (FY14), the initiative focused on building foundational evidence on smallholders’ financial
needs and behaviors through the launch of financial diaries in sample communities in Tanzania,
Mozambique, and Pakistan. Financial diaries captured daily financial transactions by each household
member in the sample during a year, affording deep insights into smallholder financial behavior and
attitudes, although these are not necessarily generalizable beyond the household sample.
Subsequently, in FY15 and FY16, the initiative launched nationally representative surveys of smallholder
families in Tanzania, Mozambique, Uganda, Côte d’Ivoire, Bangladesh, and Nigeria. These surveys
complemented the financial diaries by providing generalizable country-level trends in smallholder
livelihoods, use of formal and informal finance, use of mobile phones and money, and risk management
strategies.
While these research-intensive activities were being implemented during FY15, a few field collaborations
with partner financial service providers (FSPs) began to apply preliminary insights to the design and
launch of digital financial services for smallholders. These collaborations took place in Senegal (input
layaway), Zimbabwe (savings for school), and Cambodia (savings accounts and remittances).
During FY17-18, CGAP sought to develop nine additional partnerships with FSPs to translate demand-
side insights into financial solutions. To this end, in FY18 the Initiative established engagements with
private sector actors and market facilitators in Mozambique, Uganda, Tanzania, Ghana, Côte d’Ivoire,
and Nigeria, with CGAP providing technical support on the design of financial products and services
targeting smallholders. Products under development include improved savings, payments, credit, and
insurance delivered in combination with non-financial services such as agricultural extension, market
information, and educational content. For more information on partnerships with FSPs, see box 2.
Similarly since FY17, CGAP began to share deeper insights from both demand-side research and
collaborations with FSPs more broadly, through publications, webinars, and participation in industry
events.
FY14 FY15 FY16 FY17 FY18
Identify
Build foundational research Share insights
challenge and
and evidence base and findings
opportunity
Demonstration projects
with partners
CGAP V Completion Report | Financial Innovation for Smallholder Families
Financial Innovation for Smallholder Families Initiative Results Framework
Interim Endline Endline Comments
Interim actual Comments on target actual on actual
target June interim actual June June against
Outcomes Indicator number and title Baseline June FY16 FY16 against target FY18 FY18 target
Five-year Outcome 3.0 3.0.1 # of new financial 0 n/a n/a n/a 5 9 Exceeded:
products and service- Based on
New Financial Products and
provider practices aimed at independent
Service-Provider Practices
better serving smallholder evaluation.
that Effectively Meet the
families launched by
Needs of Smallholder
financial service providers
Families
3.0.2 # of CGAP-supported n/a n/a n/a n/a 4 5 Exceeded:
financial service providers providers providers Based on
substantially increasing with with 30% independent
their number of smallholder a 30% increase evaluation.
clients increase
3.0.3 # of smallholder clients n/a n/a n/a n/a 60% 95% Exceeded:
(of CGAP-supported financial Based on
service providers) who independent
perceive that new products evaluation.
or practices effectively meet
their financial needs
Supporting Outcome 3.1 3.1.1 # of stakeholders n/a 15 28 Exceeded n/a n/a n/a
Key stakeholders who have a more holistic
have a more holistic understanding of the
understanding of the financial services needs of
financial services needs of smallholder families
smallholder families
Supporting Outcome 3.2 3.2.1 # of CGAP- n/a 3 3 Achieved n/a n/a n/a
Financial service providers supported financial
have an enhanced service providers with
understanding of how to enhanced understanding of
design and launch financial smallholder product design
products (particularly and launch
technology-enabled
products) which more
effectively meet the needs
of smallholder families
4
CGAP V Completion Report | Financial Innovation for Smallholder Families 5
3. Achievements against the CGAP V Results Framework
Five-year Overall Outcome: New financial products and service-provider
practices that effectively meet the needs of smallholder families.
Over the course of CGAP V, the Smallholder Initiative contributed to the emergence of new financial
products and services and provider practices that more effectively meet the needs of smallholder
families. The initiative accomplished this goal through a two-pronged approach of building the evidence
base on smallholder demand for financial services while designing and testing innovative products and
services with FSPs.
Towards the end of FY18, CGAP commissioned an independent evaluation by BLE Solutions to assess
results obtained. BLE solutions interviewed six direct FSP partners (i.e. FSPs receiving direct support
from CGAP), three indirect FSP partners, and three indirect partners who were facilitators, for a total
of 12 partner organizations. Interviews aimed to assess how much these partners improved their
understanding of smallholder needs and the new products and practices they could develop. In addition,
BLE interviewed a sample of 67 smallholder farmers who were clients of two partner providers to assess
how well their financial needs were being met. It should be noted that the sample of partners and
smallholders is not necessarily representative, and their participation was largely influenced by their
availability to participate in interviews.
The first indicator used to assess the five-year outcome above was the number of new financial
products and service provider practices aimed at better serving smallholder families launched by
FSPs and attributable in some way to CGAP’s work. The independent evaluation concluded that the
initiative’s direct and indirect influence led to the launch of nine products or service-provider practices
by 12 direct FSP partners (see box 2), which exceeds the FY18 results framework target of five. The
products or practices developed for smallholders involved an input layaway plan, satellite-based yield
index insurance, digital input financing toolkit, village vendor agent networks, alternative credit scoring
for farmers, SMS-based farmer financial education program, digital agriculture payments, savings for
school, and digital remittances.
CGAP’s means of influence were through technical assistance to partner FSPs to support the design and
launch of new products or practices. CGAP also influenced the launch of new products and practices
through the creation and dissemination of knowledge products and hosting convening or training events
targeting FSPs, policy makers, and development agencies.
The second indicator used to assess this outcome is the number of CGAP-supported financial service
providers substantially increasing (by 30% or more) their number of smallholder clients. To measure this
indicator, CGAP requested the 12 FSPs it supported directly to report on the total number of smallholder
customers at the beginning of their collaboration with CGAP and as of the end of CGAP V, 30 June 2018.
The difference between these two numbers was used to determine if these providers substantially
increased their number of smallholder customers. Based on these calculations, we find that five partner
providers achieved a 30% or higher increase in their smallholder clientele base. This exceeds the FY18
Results Framework target of four providers. These five providers are Positive International Limited (PIL;
Tanzania), Pula (Nigeria), Econet (Zimbabwe), MyAgro (Senegal), and Mukwano (Uganda).
The third indicator used to measure progress towards the initiative’s Five-year Outcome is the percentage
of smallholder clients (of CGAP-supported financial service providers) who perceive that new products or
practices effectively meet their financial needs. To measure this indicator, BLE Solutions conducted four
CGAP V Completion Report | Financial Innovation for Smallholder Families 6
focus group discussions with 67 smallholder customers of two CGAP partner providers: Econet Wireless
in Zimbabwe and PIL in Tanzania.1
Overall, the evaluation determined that 95% of customers across the two providers perceive that the
new products launched by CGAP partner providers effectively met their needs. This exceeds the FY18
target of 60%.
CGAP exceeded all the targets set for the three indicators. Collaboration with other key stakeholders
also contributed to these positive results. As an example, by merging financial resources and technical
knowledge with other CGAP teams like DFF, the collaboration with Pula in Nigeria was possible, given the
complexity in the joint analysis of satellite and farm yield data required and the relatively higher costs to
provide the type of support needed. Another example is the collaboration with facilitators like the Alliance
for a Green Revolution in Africa (AGRA), which was instrumental in identifying a local partner like PIL in
Tanzania with innovative ideas and deep local knowledge, and then leveraging financial resources and
technical know-how with CGAP to implement agronomic and financial activities required. These types
of collaborations enabled the initiative to make more cost-effective use of its resources and leverage
different kinds of expertise.
Although by the time of the evaluation five out of the 12 partner FSPs (see box 2) had already achieved a
30% or more increase in smallholder clients, this does not necessarily mean the other seven will not be
able to achieve this goal in the future. In some cases, partner FSPs like JFS in Mozambique experienced
significant delays due to changes in leadership and slow coordination processes with other local partners
like banks and facilitators like FSD Mozambique. In other cases, such as with Olam (Côte d’Ivoire and
Ghana) and Syngenta (Tanzania), collaboration with CGAP only began in the middle of FY18. Despite the
short time frame, important lessons were learned. However, the implementation of CGAP-supported
processes is still ongoing and partners’ smallholder clientele base may increase substantially in the near
future. CGAP will continue to monitor their progress.
Supporting Outcome: Key stakeholders have a more holistic understanding of
the financial services needs of smallholder families.
The Financial Innovation for Smallholder Initiative has contributed to an enhanced understanding of
smallholder demand for financial services among key industry stakeholders. In FY16,2 CGAP found that
at least 28 stakeholders reported having a more holistic understanding of the financial services needs
of smallholder families. These results were obtained using surveys of participants attending a key CGAP
convening in 2015 (see box 1).
While the Initiative’s Results Framework does not include targets for this indicator beyond FY16, the
independent evaluation by BLE Solutions indicated that further progress had been made by FY18 in
increasing stakeholder understanding of the financial needs of smallholders.
1. These two providers were chosen because of their availability to help organize focus groups, with other CGAP
partners expressing regret at not being able to participate due to conflicting obligations during the evaluation
process.
2. The two Supporting Outcomes for the Financial Innovation for Smallholder Initiative only have FY16 targets
in the Results Framework due to the theory of change being sequenced, i.e. to achieve the overall Five-year
Outcome “key stakeholders need to have a more holistic understanding of the financial services needs of
smallholder families” (supporting outcome 3.1) and “FSPs need to have an enhanced understanding of how to
design and launch financial products (particularly technology-enabled products) which more effectively meets
the needs of smallholder families” (supporting outcome 3.2).
CGAP V Completion Report | Financial Innovation for Smallholder Families 7
Box 1.
Organizations that participated in CGAP’s smallholder families convening in 2015 that reported in
follow-up surveys a more holistic understanding of smallholder financial needs:
• Advans • FSD Mozambique • myAgro
• Amret Microfinance Bank • FSD Tanzania • One Acre Fund
• BFA • GIZ • Opportunity International
• Bill & Melinda Gates • GSMA • Rabobank
Foundation • IFAD • RAF Learning Lab
• Boulder Institute of • IFC • The MIX
Microfinance • Initiative for Smallholder • USAID
• CENFRI Finance • Vodafone
• Dalberg • Mastercard Foundation • World Bank
• Econet • Mercy Corps
• FAO • MicroCred
BLE reports that “the efficacy of the initiative [to improve the understanding of smallholder families] is
perceived in the approach the team took in convening workshops that allowed organizations to network
with and learn from others, and also in observing smallholder families first, before prescribing specific
products and services.”
Other methods used by CGAP to advance stakeholder understanding of smallholder financial needs
included publications, knowledge events like webinars, trainings and technical presentations and the
launch of CGAP’s Smallholder Data Hub in March 2018 (see section 4 for a full list of publications).
Supporting Outcome: Financial service providers have an enhanced
understanding of how to design and launch financial products (particularly
technology-enabled products) which more effectively meets the needs of
smallholder families.
The indicator used to monitor progress towards this outcome is the number of CGAP-supported
financial service providers with enhanced understanding of smallholder product design and launch.
By the FY16 Results Framework reporting, the Initiative had been providing support to three FSPs (out
of a target of four for the whole of CGAP V). These were Econet Wireless (Zimabwe), myAgro (Senegal),
and Amret Microfinance (Cambodia). In the subsequent two years of CGAP V, the Initiative provided
design and pilot support to an additional nine FSPs: Pula (Nigeria), JFS and a Private Commercial Bank3
(Mozambique), PIL and Syngenta (Tanzania), Mkuano, Pride and Kyagalanyi Coffee Limited (Uganda),
and Olam (Côte d’Ivoire and Ghana). See box 2 for more details.
The independent evaluation found qualitative evidence that these providers enhanced their
understanding of how to design and launch smallholder financial products. From interviews
conducted by BLE solutions, partner FSPs report that CGAP’s support provided access to local
smallholder information not available elsewhere, which was critical to design their services. In addition,
CGAP’s advice and training resources helped to develop partner staff’s capacity and were reported to
have contributed to the increase in smallholder clientele and service satisfaction from smallholders
reported earlier.
3. For confidentiality reasons, the partner does not want to be named.
CGAP V Completion Report | Financial Innovation for Smallholder Families 8
Some relevant partner quotes that illustrate their learning experiences are shown below.
“We have worked with quite “We appreciated that CGAP…[was] “[There is] very low
a few donor programs. level-headed through the project. Even usage of financial
From our experience, we though the first two studies did not services by rural
work with organizations show results, we were able to regroup populations because
that can add value to and continue adapting the project. banks force them
business. [CGAP] seemed You do not see this a lot. I cannot to change their lives
to understand what we emphasize this enough, but this is rare to use the products;
were doing, they could add for partners to be so understanding CGAP helped us to
something, they could put and to allow us to fail and learn from change the product to
something on the table.” our failures. The reality is you will fail, their lives.”
but only by failure do you learn.”
Box 2. Digital finance providers directly supported by CGAP’s Smallholder Initiative:
Econet Wireless (Zimabwe). Partner type: MNO. PIL (Tanzania). Partner type: Input provider.
Developed a digital savings product that would fit Designed a client-centric messaging and product
smallholder’s cashflows and enable them to save delivery strategy as well as a client on-boarding
towards children’s school fees at the start of the app to deploy an input layaway product.
school year. This product would be part of a suite
of smallholder products developed by Econet. Syngenta (Tanzania). Partner type: Input
provider. Designed a collaboration strategy
myAgro (Senegal). Partner type: Input provider. In between Syngenta and a local Credit and Savings
the context of an existing input layaway product, cooperative, to develop a digital credit scoring
the support provided enhanced product delivery system and a shared agent network to serve
by brokering new partnerships with local vendors smallholders.
to act as agents and improving the client on-
boarding experience. Mukwano (Uganda). Partner type: Buyer of
smallholder produce. Developed an SMS-based
Amret Microfinance (Cambodia). Partner type: communication campaign to deliver agronomic,
MFI. Designed an app-based digital savings and market and payment information to smallholders
remittances product for smallholders and their in a way that ensures greater smallholder access
relatives living in cities or out of the country. to markets and a better experience receiving crop
payments.
Pula (Nigeria). Partner type: Insurance company.
Reduced the cost of providing agricultural Pride (Uganda). Parter type: MFI. Developed a
insurance by applying satellite data to improve digital credit scoring model for agricultural loans
prediction of client losses while reducing the targeting smallholders.
frequency with which insurers need to visit
communities. Kyagalanyi Coffee Limited (Uganda). Partner type:
Buyer of smallholder produce. Quantified the
JFS (Mozambique). Partner type: Buyer of value proposition smallholders face when offered
smallholder produce. Measured the market size to digitize agricultural payments they received, to
and defined financial services most needed by identify pain points in the user experience. This
smallholders for JFS and a partner Bank to provide. helped KCL improve its offer.
From the assessment, input credit and agricultural
payment products were designed for smallholders. Olam (Côte d’Ivoire and Ghana). Partner type:
Buyer of smallholder produce. Identified new
Private Commercial Bank (Mozambique). Partner digital finance products that MNOs collaborating
type: Bank. Identified changes in internal processes with Olam can offer to complement and enhance
for the bank to offer bulk digital payments made the value proposition of digital agricultural
by agribusinesses to smallholders. payments received by smallholders.
CGAP V Completion Report | Financial Innovation for Smallholder Families 9
4. Overall Assessment of Achievement on Deliverables during CGAP V
The Smallholder Initiative has met its planned deliverables for CGAP. These deliverables can be broadly
classified into three main categories: 1) Building the Evidence Base, 2) Provider Collaborations, and 3)
Other Knowledge Products.
Building the Evidence Base: From its beginning, the Smallholder Initiative focused on collecting data
on smallholder demand for financial services and disseminating this evidence to key stakeholders
through publications, events and a new Smallholder Data Hub hosted on cgap.org. Key achievements
include:
• Completion of Smallholder Financial Diaries in Tanzania, Mozambique and Pakistan and the
dissemination of findings through a Focus Note and Perspectives piece, an interactive data
visualization, presentations at multiple events, and in-depth data analysis presented in Briefs on
smallholder segmentation, youth savings behavior, and characteristics of women smallholders.
• Completion of Smallholder National Household Surveys in Tanzania, Mozambique, Uganda, Côte
d’Ivoire, Nigeria, and Bangladesh. Working papers and slide decks are available documenting
the results of each survey, along with data sets and user guides hosted on the World Bank’s
Microdata Library. The survey results are also presented on an interactive Data Hub that allows
users to conduct their own analysis on the data and create easy-to-download charts and tables.
Provider Collaborations: Over the course of CGAP V, the Smallholder Initiative has undertaken a total
of 12 provider collaborations in nine countries (see box 2). Each collaboration involved supporting
partners to conduct research aimed at designing new products, services, or practices that more
effectively meet the needs of smallholder families. These design engagements in turn resulted in 12
pilots that were launched or will be launched in the coming months, including new digital payments,
savings, insurance, and credit products.
Other Knowledge Products: The Smallholder Initiative released a range of knowledge products
aimed at providing guidance to service providers, policy makers, regulators and development
agencies on how they can help to advance smallholder financial inclusion. Guidance relates to
how these stakeholders can better segment the smallholder market; foster collaboration between
providers in different industries to feasibly serve smallholders; emerging approaches to offer digital
savings, insurance, payments and credit services; an exploration of blockchain applications to
agricultural finance; and exploration of women smallholder financial needs.
The below provides a list of publications produced by the Financial Innovation for Smallholder
Families Initiative during CGAP V:
• Smallholder Families Data Hub
• National Surveys of Smallholder Households
• Mozambique: Paper: English / Portuguese | Data | User guide: English / Portuguese |
Summary slide deck: English / Portuguese
• Uganda: Paper | Data and user guide | Summary slide deck
• Tanzania: Paper | Data and user guide | Summary slide deck
• Côte d’Ivoire: Paper: English / French | Data | User guide: English / French |
Summary slide deck: English / French
• Bangladesh: Paper | Data and user guide | Summary slide deck
• Nigeria: Paper | Data and user guide | Summary slide deck
CGAP V Completion Report | Financial Innovation for Smallholder Families 10
• Smallholder Diaries with selected Farming Families in Mozambique, Tanzania and Pakistan
• Full paper and Executive summary
• Interactive data visualization
• Data: Mozambique | Tanzania | Pakistan
• Video
• Advancing Financial Inclusion for Smallholder Households in Mozambique: English / Portuguese
• Smallholder Households: Understanding Demand, Driving Innovation
• Female Smallholders in the Financial Inclusion Agenda
• Exploring Blockchain Applications in Agricultural Finance
• Digitizing Value Chain Finance for Smallholder Farmers
• Using Satellite Data to Scale Smallholder Agricultural Insurance (in press)
• Designing Digital Financial Services for Smallholder Families: Lessons from Zimbabwe, Senegal,
Rwanda, and Cambodia
• Segmentation of Smallholder Households: Meeting the Range of Financial Needs in Agricultural
Families
Select blogs and webinars:
• Understanding the Financial Needs of Female Smallholders
• Digitizing Bulk Payments in Agriculture
• Illuminated by Data: New Tools to Develop Financial Solutions for Smallholder Families
• 5 Insights into Credit Scoring for Smallholders
• More than Human ATMs: The Potential of Empowered Agents
• Digital Innovations in Smallholder Agricultural Insurance
• Cultivating Opportunities for Women in Agriculture
5. Issues
To meet its objectives for CGAP V, the Smallholder Initiative worked closely with other teams within
CGAP, with external facilitators such as the FSDs, AGRA, and UNCDF, and a range of FSPs with different
business models and varying degrees of capacity and scale. This collaborative approach required great
efforts to minimize coordination risks. Nurturing close relationships with our partners through frequent
communication and field visits has been key to successfully anticipating and mitigating challenges.
The finalization of nationally representative surveys was delayed by about six months relative to what
was originally planned mainly due to the decision to add two more countries (Nigeria and Bangladesh)
to the list stipulated at the start of CGAP V. This extended the time required to complete all surveys
CGAP V Completion Report | Financial Innovation for Smallholder Families 11
and conduct cross-country comparisons. However, knowledge products were produced and shared
frequently as each country survey was concluded.
When working with FSPs, lack of capacity and unforeseen changes in their organizations can lead to
delays and disruption of activities — with consequences for CGAP’s ability to deliver on its workplan.
As the collaborations evolved, the initiative adapted accordingly, and in some cases, chose to exit the
partnership to minimize lost time and resources. An example of this was our collaboration with the
Kenyan company FarmDrive to conduct work in Uganda. FarmDrive had a leadership change and seemed
to have overcommitted beyond its implementing capacity by agreeing to work with several other donors
and facilitators at the same time.
Political developments also affected the Initiative’s work. For example, recent political developments
in Zimbabwe limited the scope of the Save for School pilot. Still, CGAP and its in-country partners have
continued to push ahead, with successful pilots launched in Zimbabwe and in other countries.
6. Insights and Lessons Learned from Implementation
CGAP’s research reveals that smallholders have a stronger, more diverse demand for financial services
than most providers realize — especially for savings and insurance. This makes them potential clients
for many types of providers, including those who may not currently consider smallholders a target
segment. Our research also questions common assumptions about what smallholders are looking for
in financial services, showing how we can use more comprehensive data to deepen our understanding
of smallholders’ financial lives. We find that the products most valued by smallholders are flexible,
familiar, and tangible. To deliver these products more effectively, FSPs would benefit from partnering
with agribusinesses, mobile network operators, and other actors that have extensive networks in the
rural areas where smallholders often live.
A more detailed explanation of insights and lessons learned is presented below.
Smallholder families are diverse. So are their financial needs. Product design collaborations with
FSPs underscored the diversity of smallholder families. While most smallholders identify strongly with
agriculture, their cash flows point to the importance of a range of income sources and expenses beyond
the farm. For example, income from casual labor and remittances is vital to smoothing consumption
between harvests, while expenses like school fees for children can sometimes take precedence over
investments in agriculture.
Smallholders value savings and insurance products that help them achieve specific goals. But the
right support is key to ensure their use of these products. One of the more surprising findings was how
much smallholders value financial products that allow them to keep their money safely set aside and to
manage risks. Savings can help plan for the future, cope with risk, and invest in livelihoods. Insurance
helps plan for shocks that imply greater losses related to health problems, death of a family member,
or harvest failures. Savings and insurance are especially important for smallholders who may not have
access to or qualify for a loan or may be reluctant to take on debt. Client support is required to ensure
savings and insurance products are associated to concrete goals and can be conveniently accessed.
CGAP V Completion Report | Financial Innovation for Smallholder Families 12
When digitizing payments, first validate your assumptions about the customer value proposition.
Many efforts to digitize bulk payments in agricultural value chains focus on the potential cost savings
for those agribusinesses that buy produce from smallholders, and assume smallholders benefit from
the safety and convenience of these digital payments. But often overlooked are the significant costs
digitization can impose on smallholders in the absence of a well-established digital ecosystem that
allows them to pay for the goods and services they need using their electronic income. The lack of these
digital ecosystems forces smallholders to travel to agents to cash out, incurring significant travel and
fee costs. This underscores the need for providers to invest in developing further uses of e-money, like
digital merchant payments, which would reduce smallholders’ need to cash out. CGAP evidence suggests
providers could increase revenue by reducing their e-transfer fees from smallholders to merchants,
which would in turn significantly increase the number of transfers requested by clients.
In a risky world, smallholders value products that are flexible, familiar, and tangible. Flexible new
products allow customers to try them with little risk and quick feedback, for example by offering small,
short-term savings goals and/or eschewing penalties and fees. Familiar products leverage existing
customer behaviors to minimize the learning curve, which could include features like in-person customer
support/education and agent-facilitated transactions. Tangible products connect finance with concrete
client outcomes, like knowing a savings or credit product is specifically designed to help sending children
to school, buy an input package for crops, or save towards an asset like a cow or a truck. Describing a
generic use of products is not as effective in transmitting the value proposition. Tangible products also
provide ways for customers to feel in control of their money and can sometimes be a source of pride, for
example by providing paper-based tracking tools like a receipt, a card, or a voucher.
Data can break down barriers to financial inclusion. But good data is key. New types of data available
on smallholders’ financial and agricultural lives can reduce the cost of financial service provision and
help FSPs to better understand risk. Most providers collaborating with CGAP recognize the need to invest
in developing internal data analytics systems. But even when such systems exist, their effectiveness is
only as good as the data on which they rely. Some datasets (e.g. yields, loan repayment, or climatic data)
are of questionable quality, while others can be affected by human prejudice and could reinforce social
biases that promote exclusion (e.g. exclusion of women or youth). Therefore, FSPs should be careful
in selecting appropriate data when designing products. Our findings suggest FSPs would benefit from
partnerships with agribusinesses, MNOs, and others, who may have better data about rural clients.
7. Partnerships
Partnerships played a key role for the implementation of the Financial Innovation for Smallholder
Families Initiative. During the early days, the Advisory Committee played an important role in shaping
the detailed strategy for the demand-side research based on financial diaries and national surveys.
Members included technical experts from the World Bank, IFAD, GIZ, and UNCDF, which have a long
track record implementing large country programs supporting rural and agriculture finance.
Working with FSPs at the country level, partnerships with local facilitators and other CGAP teams like
DFF and IPE were critical to leverage know-how and resources to shape the most appropriate support
given the local environment. Collaborations with FSDTs, AGRA, and AgriFin Accelerate are illustrative
CGAP V Completion Report | Financial Innovation for Smallholder Families 13
examples, where they provided complementary knowledge of local financial markets and the capacity to
provide frequent on-the-ground communication with partner FSPs.
Towards the end of the CGAP V strategy, as we consolidated insights and lessons learned, specific requests
to share knowledge came from technical units within CGAP members. This led the Smallholder team to
prepare tailored technical presentations or trainings for GIZ, USAID, and Mastercard Foundation.
8. Next Phase for CGAP VI
The expertise and knowledge in smallholder finance developed by the team during CGAP V will be
mainstreamed across the organization in CGAP VI. This includes ongoing smallholder-related work to be
undertaken by projects such as Segments and Insights, Financial Innovation for Development, and Digital
Rails. The strong base created by CGAP’s prioritization of smallholder families in CGAP V will enable these
projects to maintain CGAP’s thought leadership in the smallholder finance space. Examples include:
• Deeper insights on the financial needs of the most vulnerable smallholder families will be explored
in the Segments and Insights project.
• Promising business models for productive asset financing aimed at bolstering smallholder livelihoods
will be explored as part of the Financial Innovation for Development project.
• Promising practices to make DFS distribution networks (e.g. agents) more inclusive will be explored
as part of the Digital Rails project — focusing on the creation of DFS access points in rural areas with
the aim of more effectively serving excluded segments such as smallholder households.