Lessons learned: Digital financial services for smallholder households

This note by IFAD is focusing on how digital financial services (DFSs) are meeting the financial needs of smallholder households. The authors offer examples of smallholder-specific DFSs as well as mainstream ones, highlighting the implications in each case for smallholder farmers and their households. Agricultural value added services (VASs) are included in this synthesis because they can serve as an entry point to financial inclusion and have the potential to improve the financial capability and farming productivity of smallholder farmers. A major quandary in developing DFSs for smallholder farmers is that the successful uptake of services depends largely on multiple, interconnected elements – technical infrastructure, regulations, distribution networks – that enable digital financial products to be widely used. With an enabling environment in place, a digital ecosystem for smallholders can be created in which a variety of participants in the agriculture sector connect with smallholder farmers through digital tools. However, significant challenges remain to a more extensive, scalable supply of digital financial offerings for smallholder farmers. It is possible that some of these will be addressed organically by continued growth and innovation in the technology. For instance, network coverage will likely increase over time in rural areas. But without an intentional and coordinated approach, innovations might not reach or benefit smallholder farmers directly, especially subsistence farmers.