Bundling development services with agricultural finance

Agriculture is the largest economic sector in most African countries and remains the best opportunity for economic growth and poverty alleviation on the continent. Yet, sadly, the sector has been in decline over the past 40 years, and poor farmers have largely remained poor. This failure is due to many factors, including collapsed agricultural development banks, corruption, inadequate infrastructure, and poor soils and seeds. It has also occurred because smallholder farmers lack access to critical information, market facilitation, and financial intermediation services. This brief reviews the DrumNet Project and its approach to improving farmers’ access to finance in Kenya. The project has found that financing small-scale farmers is challenging given the cost and risk associated with serving rural, relatively isolated clients. Lending becomes increasingly feasible, however, in a supply-chain approach in which farmers are connected to a formal network of buyers, retailers, and financiers.