Access to adequate financing is often identified as one of the key inhibitors to achieving long-term sustainability for Africa’s agricultural practitioners, particularly smallholder and subsistence-level farmers who typically must resort to borrowing from community members or pooling resources in order to make ends meet
“There is a real need to unlock financing for small-holder farmers to give them access to mechanisation and other technologies but there is no use in helping them buy a tractor and then they don’t have money to buy seed and fertiliser,” said Antois van der Westhuizen, managing director of John Deere Financial in Johannesburg. “Africa’s farmers require a holistic financing solution that focuses on the entire agricultural value chain,” he added.
According to Westhuizen, this is partly why the traditional reliance on grant funding from government sources or NGOs has been too limited in scope. Relying on commercial banks to solve the problem also has its limitations.
According to Westhuizen, unlike South Africa, in other countries on the continent, smallholder farmers account for between 70 per cent and 80 per cent of agricultural output, which is often insufficient to meet their country’s nutrition requirements. This results in countries having to import food from abroad, often from heavily subsidised markets like the European Union, which makes it difficult for domestic farmers to compete on price.
This results in a situation in Africa, which is home to roughly 60 per cent of the world’s available arable land but is still regarded as a food insecure continent. This is partly due to lack of access to mechanised solutions such as irrigation equipment meaning as much as 90 per cent of the smallholder farmers on the continent still rely on rain to water their crops. Improved farming techniques, access to better seeds and other mechanised equipment could further boost agricultural yields.
Role of technology
John Deere estimates that there are approximately 122mn electronic banking accounts in Africa, mainly hosted by mobile phone operators or home-grown payments and transfer solutions like Kenya’s M-Pesa. The electronic payment and receipt records of these accounts can be leveraged to harvest valuable client information which can then be used to create more accurate risk profiles of smallholder farmers by analysing their cash flow management, repayment histories and spending habits.
The integration of digital technology into agriculture represents a major opportunity for Africa. Guarantee schemes such as those provided by USAID can further incentivise commercial lenders to provide financing to smallholder farmers. A project between USAID and Ghana’s Feed the Future programme helped improve the livelihoods of 113,000 smallholder farmers by boosting the productivity of rice, maize, and soy cultivation thanks to the provision of such guarantees.
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