Agricultural Finance

The mobile money revolution has begun to substantially increase financial access around the world. Mobile money accounts allow people previously excluded from the formal financial sector to access savings accounts, make payments to merchants, and make person-to-person transfers, among other services. Research has shown that mobile money access can have important effects on key outcomes such as improved resilience and food security.

Recent occurrences in the global arena, such as volatile commodity and resource markets, suggest the urgent need for African countries to develop policy options that can mitigate resource constraints and their attendant consequences. The transformation and development of Africa’s agricultural sector, especially the development of functional value chains, hold huge potentials for African economies through employment creation, income generation, and improvement of household livelihoods.

By: Sara Gustafson

In the wake of the 2008 food price crisis, many policymakers and development practitioners shifted their focus toward enhancing the capacity and resilience of domestic food value chains. In West Africa, this new focus centered on rice. Since rice constitutes a leading staple food source in the region, it was hoped that increased investment in this area would increase domestic rice production and reduce reliance on imports, thus improving food security.

Providing smallholder farmers access to markets and price information is key to improving agricultural productivity and growth, along with food and nutrition security. In line with this, the Agricultural Commodity Exchange for Africa (ACE) has operated a Market Information System (MIS) and a Warehouse Receipt System (WRS) since 2011. The MIS provides farmers, traders and other market participants with access to regular updates on the prices of the commodities they trade via SMS and email, along with its online trading platforms.

In Africa south of the Sahara, lack of access to financial services and products poses a serious challenge for agricultural growth and productivity. Many smallholder farmers are cash-poor; it is common for farmers in the region to sell their crops immediately after harvest in order to meet their immediate cash needs rather than waiting for prices to go up and thus increasing their profits. This lack of available capital, coupled with the difficulty smallholders often face in accessing credit, limits their ability to invest in their farms and in other incoming generating activities.