The aim of the Smallholder Finance Product Explorer is to be a central repository of product profiles to enable (1) financial service providers (FSPs) to design client-centric products for smallholder farmers in developing countries, (2) funders to increase investment in smallholder finance, and (3) both FSPs and funders to deploy better products that improve farmer outcomes. The program builds on previous work, including RAF Learning Lab’s Smallholder Financial Solutions dataset and One Acre Fund’s existing knowledge base on farmer finance products. Ultimately, the Product Explorer intended to contribute to industry efforts to bridge the estimated $200 billion financing gap for smallholder farmers.
Achieving this goal requires a long-term commitment, so developing a sustainable solution was critical. We began by convening a working group made up of sector actors and experts to agree on a taxonomy. We then explored the availability of data from FSPs and collected an initial critical mass of product profile data. Early testing with FSPs confirmed their willingness and ability to contribute data, as well as the value of receiving market data in return to aid in their product development processes. We launched the Product Explorer in January 2018 after operationalizing the tools and processes and subsequently collected and validated 69 profiles of smallholder financial solutions offered by 34 FSPs in 13 countries.
Analysis of this dataset has advanced our understanding of the sector and provided a few key insights:
(1) FSPs face two main limitations when developing and deploying financial products for smallholder farmers: availability of appropriately skilled and experienced staff; availability of appropriately structured capital. (2) FSPs are already using an array of delivery channels and market linkages to acquire and retain clients, deliver products and collect repayments or savings. (3) However, FSPs need to capitalize on these channels and linkages to deliver the full spectrum of financial tools required by smallholder farmers to address their agricultural and household needs, including current, savings and mobile money accounts and insurance products.
After one and a half years of operation, thousands of visits to the Smallholder Financial Product Explorer, and subsequent testing of the value to funders and FSPs to assess the sustainability of the solution, we’ve learned four key lessons:
(1) For FSPs, it is expensive and time-consuming to test and refine new products, and the Smallholder Finance Product Explorer is one of the rare sources of market research to learn about existing products. (2) Funders working through FSPs focus on company-level information for investment decisions and consider their existing networks, information sources and deal processes sufficient. While product profile information is viewed as valuable by investors, it does not have an impact on their investment decision-making process. (3) FSPs would value additional services tailored to their needs like e-learning modules, but would expect substantially more detail, including sample documentation, which proved difficult to deliver on. (4) FSPs used the product profiles as an initial research resource at the beginning of their product development process and to identify potential organizations to collaborate with. However, they would require more detailed and contextual product level data, absent from the Product Explorer, to completely replace their internal research and dependency on external consultants.
As a result, the type of information and level of detail that FSPs require to make the Product Explorer sufficiently valuable and effective would require an impractical level of data collection and complexity to provide as an ongoing data service.
So what happens to all of the valuable lessons and data garnered from this work? MIX and One Acre Fund have collated all of the taxonomy, dataset, and insights in a Reference Collection hosted by the RAF Learning Lab to ensure the knowledge and artefacts from this program are available for others in the ecosystem to learn from and build upon. Additionally, we will incorporate lessons learned - specifically, funder demand for an agri-business dataset - into MIX’s upcoming agri-SME directory initiative.
We’d like to thank our working group, funders, and partners for their support, input, and guidance throughout. Additionally, we’d like to extend our sincere thanks to the FSPs who have contributed data and participated in research efforts to help build better products for their smallholder clients. The financing gap in smallholder finance remains significant and philanthropic projects continue to be required to support efficient and effective product development for FSPs.