Using Digital Finance in Agriculture: New Guide Launched by USAID
May 03, 2016
USAID recently launched the Guide to the Use of Digital Financial Services in Agriculture, a step-by-step guide to help our partners support access to and use of sustainable financial services in rural areas. This Guide is the result of an ongoing effort within USAID to understand how digital financial services (DFS) can support Feed the Future initiative's goals of increasing agricultural incomes and reducing malnutrition while simultaneously building out ultra-inclusive economic infrastructure. We see at least four areas where DFS is making a vital impact by overcoming many of the challenges with traditional financial services that have left many rural communities unbanked or underbanked:
- Reducing the cost of delivering financial services outside of bank branches and urban areas, making these services (savings, credit, insurance, etc.) accessible and relevant to rural communities.
- Increasing the traceability of payments to reduce loss of funds and ensure proper accounting, which can potentially increase trust between various actors within the agricultural supply chain.
- Improving household resistance to financial shocks through savings and on-demand receipt of funds, which evidence shows helps to smooth consumption and maintain household nutrition.
- Creating new business models (for example, alternative credit scoring such as M-Shwari in Kenya which is providing very small, on-demand loans to customers based on savings behavior).
- Identifying the value-chain challenges;
- Assessing gaps and obstacles in existing services; and
- Assessing the maturity of the digital ecosystem in your area.
- Utilizing digital finance along the value chain, the most immediate and direct way to use DFS in our programs;
- Organizing implementing partners around DFS solutions, in order to aggregate demand for services by working together with USAID and other development partners;
- Implementing other technology-enabled services in conjunction with DFS, which encourages the reader to look at the broader digital ecosystem and to integrate with other services that are relevant to smallholder farmers (such as mobile-enabled extension services).
- Market Facilitation, which recognizes the role that USAID, along with our partners, can play to stimulate the broad DFS market when key constraints, such as regulation or lack of adequate consumer protection are holding back use of services in rural areas.