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The business case for digitally-enabled smallholder finance

Learning Lab & Dalberg Global Development Advisors

The Learning Lab’s second deep dive exercise is exploring the business case for smallholder finance, in particular the role of digital approaches in making it possible to profitably serve this market at scale. So far it has yielded a workshop presentation and now our first Learning Brief, “The business case for digitally-enabled smallholder finance.”  

New digital technologies and innovative business models are making it possible to provide credit to smallholder farmers (SHFs) in Africa.  As a host of digital technologies emerge along the lending value chain, a new generation of technology-enabled business approaches is bringing large segments of the population into the addressable market and doing so cost-efficiently. 

This 16-page brief looks at where and how innovations in digital technology promise to enable financial service providers (FSPs) to serve smallholders at scale. Our goal is to equip practitioners — including providers of financial services, technical assistance and capital, and B2B digital service providers (DSPs) — with insights for designing and scaling credit solutions for smallholders, by (1) increasing transparency concerning the viability of digitally-enabled models for financing smallholders and (2) laying the groundwork for further research and data gathering from FSPs that are using digital technology.

This brief draws on a new survey of 23 selected FSPs in Africa who have begun their “digital journey”, as well as extensive desk research and interviews with a cross-section of digital smallholder finance sector donors, implementers, and entrepreneurs.  It explores how FSPs are digitalizing their lending operations and early indications of the value they see, touches briefly on the customer perspective of these digital approaches, and then analyzes the challenges to going digital, providing recommendations for advancing digitalization in the sector.

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