Increasing smallholder farmers’ access to financial and insurance services would ensure improved food security and increased incomes. Smallholder farmers need access to financial services to generate income from their agricultural enterprises, build assets, and manage risks.
Most smallholder farmers are unable to reach their potential due to difficulty in accessing financial products and services such as savings, insurance, and remittances that enable them to deal with crop failure, high cost of inputs among other challenges.
However, financial institutions cite lack of proper farmer records as a major constraint when evaluating farmers’ viability for credit.
Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to sections of disadvantaged and low-income segments of society, in contrast to financial exclusion where those services are not available or affordable.
In Meru County, Kenya, Sokopepe, a social enterprise supporting the agricultural sector in Kenya by offering market information and farm records management services is taking an initiative to address the constraints by unlocking financial markets for smallholder farmers through partnerships.
The social enterprise through its Farm records management Information System (FARMIS) is keen to lay emphasis on building financial literacy for smallholder farmers as well as their financial capabilities. This is a critical investment as smallholder farmers are able to make informed decisions regarding financial products and services.
FARMIS provides a platform that enables farmers effectively store records and financial institutions can review farmers’ performance over a period to help them make an informed decision about the farmer’s capabilities to manage credit.
Through the innovation, farmers are able to track all their agribusiness enterprises, schedule different farm events and track all the expenses incurred. In addition, mobile financial services payments for produce have improved financial stability and security for the farmers.
Financial inclusion is a powerful tool for achieving the Sustainable Development Goals and helping to ensure more banked farmers.
According to the 2016 Financial Access Household Survey, mobile money platforms have boosted the Country’s financial inclusion.
However, women still have lower access to formal prudentially regulated services such as banks (35% for women compared to 50% for men). The report notes that a third of Kenyan adults report agriculture as their main source of income.
Sokopepe hopes to leverage on existing relationships within the value chains to ensure farmers access financial services sustainably while the financially excluded enjoy new possibilities.
Over the next few years, financial inclusion will continue to be a key element of Sokopepe’s commitment to increase incomes of smallholder farmers involved in agricultural production activities.