Access to finance for 12 000 small-scale farmers

Genesis Analytics was contracted by the Zimbabwe Agricultural Development Trust (ZADT) to develop and pilot financial products to help agricultural value-chain actors and smallholder farmers.

Climate change has limited smallholder farmers’ ability to adapt. Genesis proposed a climate-smart agricultural product in which private-sector financing could improve the capacity of smallholder farmers. We proposed a credit product that offers these farmers access to capital. This will enable them to access inputs, machinery and equipment to venture into production of climate-tolerant commodities.

Most smallholder farmers in Zimbabwe do not have direct access to finance from banks. They often access financial services indirectly through third parties. Most lenders have rigid terms that often do not match loans or repayments to the production and marketing cycle of the commodity being financed. The climate-smart agriculture product was designed to offer direct lending from financial institutions. This offers farmers flexible financing, tailored to seasonality and income cycles. Second, in recognition of the challenge that most smallholder farmers face, it allows titled urban properties to serve as collateral. The climate-smart agriculture facility was designed to reduce lending risks by using a credit guarantee scheme to underwrite 50% of all loans.

The ZADT commissioned Genesis to develop an inclusive financial product that could support a transition by smallholder farmers to climate-smart agriculture. The product, under the ZADT’s Credit for Agricultural Trade and Expansion (CREATE) fund, will focus on women and youth and is designed to enable smallholder farmers to build resilience against climate change.

The ZADT established the CREATE fund, accessed through financial institutions. The fund provides working capital to input suppliers and off-takers whose activities ultimately benefit smallholder farmers.

Genesis adopted a two-phase approach. In Phase 1, we conducted a value-chain analysis of the smallholder agricultural sector. Two insights emerged. The first led to the selection of the mung-bean and sesame value chains for product development and testing. Second, it identified the financing needs of smallholders in those value chains. Building on the second insight, in Phase 2 we focused on designing a financial product that would best meet the financing of sesame and mung-bean farmers.

Genesis proposed the development of a production credit facility to directly finance smallholder production. An estimated 12,000 farmers are expected to access this new credit service.