Rethinking funding

Peasant farmers tend to fail due to bank credit limits. But investment could help them generate a sustainable income. This has given rise to an intense discussion about potential digital solutions.

Ich bin ein Alternativtext
Berlin: Global Forum for Food and Agriculture GFFA 2019. Photo: Thomas Trutscheln/BMEL/photothek

By Anna Sophia Rainer

Anna Sophia Rainer has been Africa Advisor for the German Agribusiness Alliance, an initiative of leading associations and companies in the agricultural and food industries, since 2018. In this function she is seconded to the Afrika-Verein der deutschen Wirtschaft where she is responsible for all topics relating to agriculture and the food industry. Previously, she worked for the Afrika-Verein as a project officer for northern and western Africa. Ms. Rainer studied African Science in Leipzig, Naples and Dar Es Saalam and spent some time in Uganda and China during her studies.
 
All contributions

German-African Business Association

GIZ

The Global Forum for Food and Agriculture is an international conference for political food and agricultural issues that takes place every year in Berlin with one main focus being discussed over three days and about 2,000 international visitors from the worlds of politics, business, science and civil society. The banner of this year's conference was "Agriculture digital – Intelligent solutions for the agriculture of tomorrow". Against this backdrop, the Africa association of German commerce realised, together with the German Agribusiness Alliance, an expert panel on "Digitalising and financing: new possibilities for African farmers".

 

Agriculture employs 65% of the workforce in Africa and contributes towards a third of the gross domestic product of the continent. So far however, the achievements of the sector have been lagging behind what is possible. Grain yields in Africa for example are far behind the global average. There is no access to agricultural supplies such as high-quality seeds, machinery and irrigation systems.

 

Modernisation is too expensive for many subsistence farmers, and the younger generation in particular is moving to the cities to find work. Investment in the agricultural sector is deemed to be one of the most efficient and effective methods of combating poverty and safeguarding food. A modern agricultural sector also represents a profitable business opportunity. It is estimated that the demand for food is set to rise by 70% by 2050 (((in which region?))). To meet this demand, investments totalling at least USD200 bn per year are required. Access to credit and appropriate financial resources remain the biggest hurdles for small-scale farmers however. Depending on the statistics used, less than 1% - 4% of bank credit in Africa finds its way into agriculture, and less than 15% of lenders in Africa offer services for agricultural companies and smallholders.

 

Intelligent, digital solutions can help to provide access to financial services for smallholders in rural areas.

 

But the need for financing is huge. Just in the part of Africa south of the Sahara, investments totalling approximately USD 11 bn are required every year to attain the required expansion of agricultural production in the region.

 

Intelligent, digital solutions can help to provide access to financial services for smallholders in rural areas. Large global corporates and local start-ups are driving forward the digitisation of African agriculture by introducing payment services, credit platforms and digital insurance by means of mobile phones and drones.

 

Ich bin ein Alternativtext
Global Forum for Food and Agriculture GFFA 2019 in Berlin. Photo: Thomas Trutschel/BMEL/photothek

The following issues were discussed together with a panel of experts, made up of Martin Fregene, Director for Agriculture and Agroindustry at the African Development Bank, Peris Bosire, CEO of Farm Drive, Sanjeev Kumar Asthana, Chair of the Agriculture Skill Council of India, and Moses Acquah, Technology Company Builder from GreenTec Capital:

  • How can digital financing solutions contribute towards making the agricultural sector more attractive to young people?
  • How can intelligent financing improve the risk awareness that is associated with the sector through attractive returns?
  • How can Big Data contribute towards tailored financing products for agricultural companies?
  • How can digitisation represent a precise and cost-effective method for assessing the agricultural credit risk?
  • How can digital transactions increase the capacities of farmers and returns on investments?

 

The discussion showed that it is virtually impossible for smallholders to satisfy the creditworthiness conditions. On the one hand, banks have difficulties in assessing properly the credit risk of smallholders. On the other, the checking overhead for the small amounts of credit requested is normally too high for the banks.

 

Digital solutions are helpful here, as shown by the example of Farm Drive in Kenya. Peris Bosire and Rita Kimani started the company after studying IT. Because they both come from farmer families, they often experienced their parents' lack of money when they were in need of seeds or fertiliser. Their solution: Farmers can apply for credit using their mobiles. Farm Drive uses the details entered to check the creditworthiness, and a farmer receives credit to the value of 5 to 500 Dollars from mpesa (a digital mobile bank) that can be used to purchase seeds or fertiliser for example. By 2024, the two Kenyan women want to reach out this way to three million smallholders in Kenya.

 

Digital micro-credit is also available from Farmcrowdy in Nigeria. Using Farmcrowdy, smartphone owners across the world can invest in Nigerian smallholders. FarmCrowdy offers various sponsoring packages, for example an investor can, for about €225, help a Nigerian farmer to acquire 5,000 acres of cropland for maize. The amount also includes insurance, inputs such as seeds and fertiliser, and enough money left for workers and a profit. Of the profit made, the farmer and sponsor receive 40% each and 20% goes to Farmcrowdy. Even if the charges seem a lot, the conditions are better than offers from regular banks. Farmcrowdy is also backed by Hessian investment firm GreenTec Capital. The company assists African businesspeople in building up a strong and sustainable exposure by providing an approach tailored to developing countries. As an investor, GreenTec Capital creates the financial prerequisites for successful market entry, and offers inexperienced companies technical support in active company organisation. As an "impact investor", GreenTec Capital takes into account when selecting start-ups to support their impact and as well as their potential to become market leader in their specialist sectors.

 

Better utilisation of agriculture potential could offer work to some of the 350 million young people who are to come onto the job market by 2035 in sub-Saharan Africa alone.

 

The economic potential of the agricultural sector is also a key issue for the African Development Bank (AfDB). As part of their Feed Africa strategy, the bank is looking to invest 24 billion Dollars in agriculture and agribusiness over the next 10 years. The flagship "Technologies for African Agricultural Transformation" program, valued at 700 million Dollars, will assume a key role here. This should mean agricultural technologies become scalable, from which millions of farmers in Africa will profit; the ICT sector will also assume a key role here. First and foremost, the agricultural sector must be made attractive to disillusioned youths, whose numbers continue to grow and who are often unemployed, by offering modern jobs with good training. Better utilisation of agriculture potential could offer work to some of the 350 million young people who are to come onto the job market by 2035 in sub-Saharan Africa alone.

 

Sanjeev Asthana, Chair of the Agriculture Skill Council of India, was also able to agree with the previous speaker. As one of the world's leading producers of livestock, cereals, cotton and sugar cane, India has specialist expertise that can be transferred to similar climatic conditions in Africa. This pertains to mechanisation, insurance and seeds for example. June 2018 saw India present a national strategy paper on artificial intelligence. One main focus here is agriculture. The aim is to increase agricultural production using artificial intelligence. Of India's 120 million farmers, over 30 million are already using a smartphone and are active on digital markets. India is training many Africans by holding technical and practical instruction in India, with the focuses lying on agriculture and ICT.

 

In conclusion, all presenters agreed that digital applications can simplify access to financing for African smallholders.

 

Back to overview

Similar articles

"Pandemic increases violence against women"

Interview with Léa Rouanet

African countries still face huge gender gaps in terms of access to work and capital. What are the consequences of Corona for women in Africa? Jan Rübel interviewed Léa Rouanet on lockdowns and gender-based violence. The economist works at the Africa Gender Innovation Lab of the World Bank.

Read more

(c) Welthungerhilfe

5 questions to S. Fan: Where are the new roads?

Interview with Shenggen Fan

Shortly before ending his position as Director General of the International Food Policy Research Institute (IFPR) Dr. Shenggen Fan talks about the reforms and new modes of operation needed to achieve global food security in the coming decade.

Read more

'It has never been more possible'

Interview with Carin Smaller (Ceres2030)

Over a period of two years, the Ceres2030 team spent researching answers to the questions of how much it will how much it will cost to realize SDG 2 and where that money should be spent most effectively. IISD Senior Advisor and Ceres2030 Co-director Carin Smaller about small farmers, machine learning and women empowerment.

Read more

Support for sustainable start-ups

Companies in Africa that need financing between $20,000 and $200,000 find relatively few investors, as this sector is too large for microcredit and too small for institutional investors. This creates a "gap in the middle" where companies have limited options. A project of the World Resource Institute provides a remedy with the Landaccelerator 2020.

A World Resources Institute project

Read more

"Agricultural research unties the Gordian knot"

Interview with World Bank Vice President Voegele

The CGIAR agricultural research organization is systematically repositioning itself. We spoke with Juergen Voegele, Vice President for Sustainable Development at the World Bank, about progress to date - and discuss what needs to be done collectively to stop global hunger in ten years.

Read more

Video: 4 Questions to Claudia Makdristo

A video clip by Seedstars

Startups are booming in African agriculture. What are the current trend and challenges – and can other regions benefit from innovative approaches? A Video-Interview with Claudia Makadristo, Regional Manager of Seedstars  

Read more

(c) Katapult/GIZ

The digitised farmyard

An interactive graphic Jan Rübel

Lots of apps are entering the market, but what really makes sense? For African agriculture, some of it seems like a gimmick, some like a real step forward. So this is what a smallholder farm in Africa could look like today - with the help of smartphones, internet and electricity. 

Read more

Africa's digital disruption

Graphics

What Africa is experiencing in the course of digitisation is a disruption. Here three steps are taken in one, there you remain. In any case, the changes are enormous and bring some surprises. A graphic walk.

Read more

Building our food systems back better

A contribution by Jes Weigelt and Alexander Müller

What is required to make food systems provide sufficient, healthy food while not harming the planet? How should food security be maintained given the threat posed by climate change? Our authors look at some aspects of tomorrow’s food systems against the backdrop of the corona crisis.

Read more

(c) Klara Palatova/WFP

A global signpost: What way is the market, please?

A contribution by the World Food Programme

There is a clear global task: We need to feed nine billion people by 2050. We, the people of Earth, must produce more food and waste less. That is the top priority of the UN World Food Programme (WFP), too - the description of a challenge.

Read more

Africa's face of agriculture is female

A contribution by Beatrice Gakuba (AWAN-AFRIKA)

Africa has a huge opportunity to make agriculture its economic driver. However, the potential for this is far from being made exhaustive use of, one reason being that women face considerable difficulties in their economic activities. The organisation AWAN Afrika seeks to change this state of affairs.

Read more

Gender equality: Essential for food and nutrition security

A contribution by Carsta Neuenroth (BfdW)

The majority of producers in developing countries are women. Although they contribute significantly to the food security of their families, they remain chronically disadvantaged in male-dominated agriculture in terms of access to land, credit, technology and education.

Read more

Not waiting for a savior

An article by Lidet Tadesse

While Africa is the least affected region by Covid-19 so far, the number of confirmed cases and deaths on the continent is quickly rising. Despite the challenges many African countries continue to face, the African response to the coronavirus pandemic displays innovation and ingenuity.

Read more

A partnership to fight hunger

A contribution by GAFSP

The Global Agriculture and Food Security Program (GAFSP) was launched by the G20 countries in 2010 in response to the 2008-09 food price crisis to increase both public and private investment in agriculture. An overview of the programme's approach, results and impact.

Read more

Hier steht eine Bildbeschreibung

Statement from GAFSP Co-Chairs: GAFSP and COVID-19 Pandemic

A contribution by GAFSP

COVID-19 has unprecedented effects on the world. As always, the most vulnerable are the hardest hit, both at home and - especially - abroad. A joint appeal by the German Federal Ministry for Economic Development and Cooperation (BMZ) and the Department for International Development (DFID).

Read more

“They said: You can do it”

A contribution by Bread for the World

As President of the IABM cooperative in Muhanga, Alphonsine Mukankusi is not simply focused on the figures. She has learned how to deal with people and how to take on responsibility. At the same time, her work helps her to come to terms with the past

 

Read more

What do you expect from this Pre Summit, Mr. Haddad?

Interview with Lawrence Haddad (GAIN)

Nutrition experts from all over the world are coming together in Rome. They are not only distilling 2000 ideas to improve food systems - they are also preparing for the big UN summit in New York in September. An interview. 

Read more

Mr. Campari, how do we create sustainable food systems?

Interview with Joao Campari (WWF)

Journalist Jan Rübel spoke with Joao Campari ahead of the UNFSS Pre-Summit. The Chair of Action Track 3 highlights key challenges in transforming existing food systems towards sustainable production and shares his expectations for the Summit.

Read more

UNFSS Pre-Summit: What did it achieve?

Interview with Martina Fleckenstein (WWF), Michael Kühn (WHH) and Christel Weller-Molongua (GIZ)

After the summit means pre-summit: It was the first time that the United Nations held a summit on food systems. Martina Fleckenstein, Michael Kühn and Christel Weller-Molongua reviewed the situation in this joint interview.

Read more

Investing in Healthy Soils: Curse or Blessing?

A Contribution by WWF

How investing in healthy soils provides incentives for more sustainable agriculture even as it demonstrates the need for far reaching changes in the agrisector.

Read more

Successful Blueprints for African Agriculture

A Contribution by GIZ

At the 8th German-African Agribusiness Forum (GAAF) representatives from business and politics discussed successful investment models to improve living conditions in Africa.

Read more

Together towards Sustainable Development: Private Sector Cooperation

A Multimedia-Toolbox by GIZ

Achieving the Sustainable Development Goals through responsible investments in the agri-food sector of emerging countries.

Read more

"Human capital will play a pivotal role in the transformation of African economies"

A contribution by Ben Leyka

The potential the African food sector holds is still far too strongly associated with the continent’s natural resources, Ben Leyka maintains. He seeks to change this with the African Agri Council.

Read more

5 Questions for Jann Lay: What is Corona doing to the economy?

Interview with Jann Lay (GIGA)

The Corona pandemic is hitting economies around the world very hard - but developments in African countries are quite diverse. There are different speeds, resiliences and vulnerabilities. What are the reasons for this? Apl. Prof. Jann Lay of the GIGA Institute provides answers.

Read more

CompensACTION aims to reward farmers for climate performance

A Contribution of the Initiative

The CompensACTION Initiative for food security and a healthy planet, launched by the German Federal Ministry for Economic Cooperation and Development (BMZ) in 2022, is gaining momentum. It aims to financially compensate smallholder farmers for their contribution to preserving ecosystems. Initial successes have been achieved in Ethiopia, Lesotho and Brazil.

Read more

Innovative donor approaches and sustainable finance – A Review of UNFSS+2

A contribution by the Global Donor Platform for Rural Development

Two years following the UN Food Systems Summit, the Global Donor Platform for Rural Development and the Shamba Centre for Food & Climate hosted an official side event at the UNFSS+2. The event explored how public donors can increase the impact of their investments.

Read more

Agricultural Financing – from a broader Perspective

A Contribution by GIZ

In Sub-Saharan Africa, not all financial institutions (FIs) have access to knowledge about how to implement processes to enhance rural financial inclusion. The pan-African Community of Practice (CoP) plays a pivotal role in supporting these institutions along this transformative journey.

Read more

Agriculture is more than Culture or Tradition

A Contribution by Simeon Kambalame

How can agriculture engage more young people in rural areas? Advocacy and education campaigns can play an important role here. Simeon Kambalame, Timveni Child and Youth Media Organisation, has launched such a campaign in Malawi.

Read more

© GIZ

Ideas on the ground: Local solutions for global challenges

Interview with Sebastian Lesch (BMZ)

A world without hunger and with sufficient healthy food as well as climate-friendly agriculture can only be achieved if ideas are transformed into innovations and ultimately also applied - a conversation with BMZ Head of Division Sebastian Lesch on the Innovation Challenge programme of the new Agricultural Innovation Fund.

Read more

Turning many into one: CGIAR network restructures

A contribution by Jan Rübel

International agricultural research is responding to new challenges: Their advisory group is undergoing a fundamental reform process and unites knowledge, partnerships and physical assets into OneCGIAR.

Read more

(c) Joerg Boethling/GIZ

What it takes now

A contribution by Heike Baumüller

Artificial intelligence, big data and blockchain are the hottest topics of our time. The digital transformation of the African agricultural sector is ready for take-off. What will it take for the future of technology to hit the ground running?

Read more

(c) Joerg Boethling/GIZ

"We are not Uber for tractors"

Interview with Jehiel Oliver

Jehiel Oliver was a successful consultant. One day, he quit his job in investment banking to become a social entrepreneur. His mission: tractors for Africa. Rental tractors. What gave him that idea? Find out in his interview with Jan Rübel.

Read more

KLAUS WOHLMANN / GIZ

Wanted: German investment in African agriculture

Interview with Stefan Liebing

Stefan Liebing is chairman of the Africa Association of German Business. The manager calls for a better structure of African farms. Jan Rübel asked him about small farmers, the opportunities for German start-ups and a new fund.

Read more

Sandisiwe Dlamini and the chilli pepper business

A portrait by Jan Rübel

By processing chilli peppers, Black Mamba wants to give something back to the rural population. In a short portrait, Sandisiwe Dlamini, Food Safety Officer, reveals how.

Read more

How a Nigerian fintech wants to secure 1 billion US dollars for farms

An Interview with Blessing Mene

Small farmers often have a hard time getting financing. An app in Nigeria wants to change that: Founder Blessing Mene about what his app offers - and about the opportunities and limitations of agricultural financing.

Read more

Mozambique: How informal workers find jobs through an app

A Contribution by Leonie March

There are only about 1 million jobs in the East African country. The majority of the population works in the informal sector, and it can be difficult for them to find customers. Biscate offers a digital solution - without the need for internet, data or smartphones.

Read more

The Answer is Healthy Soil

A Conversation with Nina Mannheimer

The Berlin start-up Klim is forging an alliance between farmers and companies. The aim is to use regenerative farming to remove CO2 from the atmosphere and sequester it as carbon in the soil. An interview with Nina Mannheimer.

Read more

Coconuts, Digitalization and the Future

An Interview with Ebun Feludu

Female founder Ebun Feludu wants to bring the coconut value chain to Nigeria with her start-up Kokari. In this interview, she explains why she envisions every coconut palm tree bearing its own name in the future and how digitalization can contribute to this.

Read more

Answers from the youth: "Leave or stay? That depends on it!"

GIZ study; conducted by Geopoll

Does Africa's youth want to live in the city or in the country? Which career path seems particularly attractive? And how optimistic are the young people about the future? Young adults from rural areas answered these questions by SMS.

Read more

(c) Privat

How much private investment is the agricultural sector able to bear?

By Pedro Morazán

Small farmers in developing countries must modernise their farming methods, but poorly understood reforms could exacerbate poverty instead of alleviating it.

Read more

Uli Reinhardt/Zeitenspiegel

Enough of being poor

By Marcellin Boguy

In western Africa a new middle class is emerging. Their consumer behaviour is determining the demand for products – home-produced and imported goods, on the internet or at the village market. The people of Ivory Coast in particular are looking to the future with optimism.

Read more

Africa's rapid economic transformation

A report by T. S. Jayne, A. Adelaja and R. Mkandawire

Thirty years ago, Africa was synonymous with war, famine and poverty. That narrative is clearly outdated. African living standards are rising remarkably fast. Our authors are convinced that improving education and entrepreneurship will ensure irreversible progress in the region even as it confronts COVID-19.

Read more

(c) Foto Privat

Story: In Blocked Chains We Trust

A contribution by Solomon King Benge

It is 2080. We are on a farm somewhere in Africa. Everything is digital. The blockchain is an omnipotent point of reference, and the farm is flourishing. But then, everything goes wrong. A dystopian short story, written exclusively for SEWOH.

Read more

Video diaries in the days of Corona: Voices from the ground

A contribution by Sarah D´haen & Alexander Müller, Louisa Nelle, Bruno St. Jaques, Sarah Kirangu-Wissler and Matteo Lattanzi (TMG)

Young farmers’ insights on the effects of the COVID-19 pandemic on food systems in Sub-Saharan Africa @CovidFoodFuture and video diaries from Nairobi’s informal settlements.

Read more

(c) Christoph Pueschner/Zeitenspiegel

From start to finish: a vision of interconnectivity

A contribution by Tanja Reith

At the moment, the agricultural industries of African countries exist in relative isolation. Imagine peasant farmers digitally connected to the value chains of the global food industry. How could this happen? A guidebook.

Read more

Frank Schultze / Agentur_ZS

Visions in agriculture

Video by Frank Schultze and Jan Rübel

At the beginning of December 2018, AGRA's board of directors met in Berlin. The "Alliance for a Green Revolution in Africa" ​​panel discussed the next steps in their policy of modernizing agriculture. How to go on in the next ten years? One question - many answers from experts.

Read more

Karel Prinsloo/Arete/Rockefeller Foundation/AGRA

"Nutrition is a human right"

Interview with Joe DeVries (AGRA)

Joe DeVries is a breeder – and Vice President of AGRA (Alliance for a Green Revolution in Africa). What are the chances and risks of a ’green revolution‘ in Africa? A discourse between Jan Rübel and him about productivity, needs, and paternalism.

Read more

Silicon Valley for Africa’s agricultural start-ups

A contribution by Michel Bernhardt (GIZ)

The project “Scaling digital agriculture innovations through start-ups” (SAIS) supports Africans going into business in the agricultural and food sector in scaling their digital innovations and thus reaching out to a larger number of users.

Read more

Innovations for a secure food supply

A contribution by German Agribusiness Alliance

The COVID 19 pandemic is hitting developing and emerging countries and their poorest populations particularly hard. It is important to take countermeasures at an early stage. Companies in the German agricultural sector want to make their contribution to ensuring the availability of urgently needed operating resources.

Read more

(c) Christoph Pueschner/Zeitenspiegel

Can this end world hunger?

A report by Stig Tanzmann

Time to dig deeper: We can only benefit from technical progress if we have a solid legal framework for everybody. But so far, none is in sight - in many countries. Instead, international corporations grow ever more powerful.

Read more

(c) Michael Bruentrup/DIE

News from the starting block: Changeover

A contribution by Michael Brüntrup (DIE)

The region of Sub-Saharan Africa is on the decisive verge of a great development boost in farming: it could skip entire generations of technological development. But how? About possible roles and potentials of digital services.

Read more

Joerg Boethling/GIZ

"The Green Revolution reaches its limits"

Interview with Stig Tanzmann (BfdW)

Stig Tanzmann is a farmer and adviser on agricultural issues at ‘Bread for the World’. Jan Rübel interviewed him about his reservations about AGRA's strategy.

Read more

Frank Schultze / Agentur_ZS

The communicator

A contribution by Jan Rübel

What do electrical engineering, telecommunications and agriculture have in common? They arouse the passion of Strive Masiyiwa: Thirty years ago, he started an electrical installation company with $75, later riding the telecommunications wave as a pioneer. Today he is committed to transforming African agriculture.

Read more

A new attempt at Africa's industrialization?

A contribution by Helmut Asche

Afrika is about ready. There are promising approaches for a sustainable industrialization. However, the path poses challenges to the continent.

Read more

(c) Christoph Mohr/GIZ

Microinsurance against climate change

A contribution by Claudia Voß

Climate change is destroying development progress in many places. The clever interaction of digitalisation and the insurance industry protects affected small farmers.

Read more

Empowering farmers to control their own data

A contribution by GIZ

A new study on the digitalisation of agriculture puts farmers back at the centre of their own sector, identifies market gaps and gives recommendations on how to support relevant actors.

Read more

Cotton of the Future

A Contribution by GIZ

VR glasses are hardly a conventional tool in agriculture: for the past three years, they have been used in rural areas of Burkina Faso and Cameroon as a training tool for sustainable cotton cultivation.

Read more