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Southern Africa Trust |

Smallholder Farmers Access to Market Information System in Southern Africa

Food, Agriculture & Natural Resources

Smallholder agriculture is the backbone to most countries in Southern Africa - this sector holds the potential for addressing the poverty trap among the rural population. Access to finance is a major limitation in commercialisation of the agriculture sector in most countries. Smallholder farmers in these countries have been excluded from participating in the mainstream economy, firstly as result of colonial regimes that discriminated against natives who are largely smallholder farmers. Discrimination was largely with respect to native’s access to productive land, infrastructure and financial resources. Post-independence, Governments reversed such exclusion by supporting the marginalized farmers through inputs supply schemes, subsidies and controlled markets (parastatals).

During this period, the public sector, through various mechanisms, was responsible for financing smallholder agriculture. Most governments got rid of public support during the structural adjustment era. The liberalization of agricultural finances was supposed to reduce inefficiencies and waste of the public model, but it did not materialise. Finance is out of reach for most of the smallholder farmers in the region. Africa’s financial sector is still in its infancy, with only 23% of adults on the continent having a bank account. A growing number are using new alternatives to traditional banking, made possible by the rapid spread of mobile phones. The recent growth of mobile money in the form of branchless banking has allowed millions of people otherwise excluded from the formal financial system, to perform financial transactions relatively cheaply, securely and reliably, such as Kenyan based M PESA mobile banking and Eco-cash in Zimbabwe.

There is currently a move by major banks to capture the unbanked section of the rural population through provision of saving accounts, mobile banking platforms as well as un-secured loans. The gap left by banks is being filled by micro-finance institutions, as well as the informal sector, who offer accessible but expensive financial products. There is also a movement around local savings and credit groups that are establishing extensive coverage as well as innovative financial solutions. Mobile banking innovations by different players in the sector has increased supply and access to financial products by rural communities, especially smallholder farmers. Value chain financing innovations provide the best financial product for mainstreaming smallholder farmers, as it facilitates financial linkages between agribusiness and producers, shifting the need for guarantees or collateral as a pre-requisite of accessing finance.

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