Facilitating Smallholder Farmers’ Market Access
In the OIC Member Countries
121
BOX 6: VISIBLE IMPACTS OF MOBILE TECHNOLOGY ON KNOWLEDGE AND INFORMATION
FOR UGANDA’S FARMERS
Over the past three years, Grameen Foundation has reached over one million rural Ugandans by
building a network of 1,100 "Community Knowledge Workers," local community members
enabled by technology to deliver relevant and actionable agricultural information. Community
Knowledge Workers use their mobile phones to provide farmers with agricultural tips and advice,
weather forecasts, market prices, an input supplier directory, and detailed farming information on
crops and livestock.
The impact of this approach is visible in the strong adoption of new agricultural practices in the
more than 20,000 villages reached by Community Knowledge Workers. As farmers gradually shift
from subsistence to forms of commercial agriculture, their demand increases for better markets,
more inputs of better quality, and financial services tailored to their cash flows. A system such as
this one, building on village social networks and information supplied through mobile technology,
may be in the best position to help farmers meet those demands.
Source: Authors, based on World Bank 2012c.
Improve access to agricultural finance
Improving access to finance will go a long way in linking smallholder farmers to markets.
Access to finance enables smallholders to invest in new technologies and purchase better
inputs to improve productivity and raise their incomes. Access to finance is also critical for
input providers and processors, who occupy key positions in the value chains that link
smallholder farmers to markets. Despite the rapid development of financial services, a
majority of smallholders still have no access to them. On average, across OIC member
countries only 7 percent of the rural population had received a loan from a formal
financial institution in 2011 (see Annex Table 1.27). The barriers to access, and
innovations designed to overcome them, are detailed here.
BARRIERS TO ACCESS
Smallholders’ access to agricultural finance is limited because this type of finance has
higher transaction costs and risks. Producers are often widely dispersed, and financial
service providers are reluctant to install permanent facilities in areas with low population
densities and poor infrastructure. The seasonality and high covariance of rural production
activities increase the risk of lending to farmers. Limitations on the types or availability of
collateral for loans (farmers may lack title to their land, land values may be low) and a
suboptimal policy and regulatory environment for the financial sector can also reduce
access to agricultural finance.195 Lacking any formal channel for obtaining credit, many
smallholders can only resort to borrowing from informal sources (family, friends, or
moneylenders), some of which typically charge high interest rates and have limited
potential to expand.
195 World Bank (2008); IFC (2012).