This is the third post in a series about real life case studies to demonstrate how companies can successfully develop and use business models that gain traction in smallholder markets. Last week we looked at embedded rural advisory services. This week, we discuss how consumer finance can be provided effectively and profitably to smallholders.

Smallholder farmers often lack access to finance, limiting their ability to invest in inputs and services that increase productivity. Innovative consumer financing includes a range of financial solutions tailored to the unique needs of agriculture, such as accounting for crop cycles and seasonal cash flows. These solutions expand credit access and limit a lender’s financial risk. Feed the Future Partnering for Innovation, a USAID-funded program, supports a number of innovative financial institutions that are bringing better banking services to smallholders, such as Opportunity Bank in Mozambique and Malawi and Musoni in Kenya.

From the Real World

In Mozambique and Malawi, Opportunity Bank, with support from the financial NGO Opportunity International, provides financial products to smallholder farmers who normally lack the access to savings or collateral required for loans by traditional banks. Opportunity Bank tailored its loan products to account for crop cycles and defrayed risk through group loans that hold farmers accountable for each other during repayment of the loan. Loans can be used for purchasing inputs, transport, or mechanization services. Through this model, the bank benefits by developing an underserved market while farmers acquire the financing they need to increase yield and take advantage of market opportunities.


In Kenya, Musoni is a cashless, paperless microfinance institution committed to serving rural smallholders. With support from Grameen Foundation, Musoni developed the Kilimo Booster loan, a product tailored specifically for smallholders that offers flexible terms and a customizable grace period based on a farmer’s seasonal cash flow.  In addition, Kilimo Booster is designed for the farmer’s convenience. Loan officers visit clients at their farms, approved loans are dispersed within three days of applying, and everything – from application to repayment – happens through a client’s mobile money account. This is a major shift from how traditional banks work with smallholder clients, and is made possible by Musoni’s tablet-based mobile application software that streamlines the application and loan management process.

Lessons Learned

Through these partnerships, Partnering for Innovation can summarize several important factors that can help financial institutions enter smallholder markets. First, mobile technology can be an important solution to reduce high transaction costs while maintaining loyalty and retention through interactions. Second, financial institutions will be more successful if they work with other key stakeholders to further their reach and help mitigate risk. These include working with extension agents to provide technical and financial training and with offtakers such as traders, brokers, and food processors to ensure farmers get fair value and timely payment for their commodities. Third, financial institutions targeting rural farmers must build the capacity of field staff to better understand agriculture and the technical and business challenges that face smallholder farmers, collectives, and associations. Finally, any financial institution working with smallholders must build internal commitment to these clients for the long term from the senior management level down to field operators. It is important that shareholders and financial backers support this vision and are willing to take on higher risks and lower returns to generate social impact and develop an emerging market.