Investments in this strategy aim to improve options for smallholder financing and savings products by addressing farmer liquidity constraints and other factors limiting their ability to engage with traditional financial products. The sections below include an overview of the strategy for achieving desired goals, supporting evidence, core metrics that help measure performance toward goals, and a curated list of resources to support collecting, reporting on, and using data for decision-making.


Dimensions of Impact: WHAT

Investors interested in deploying this strategy should consider the scale of the addressable problem, what positive outcomes might be, and how important the change would be to the people (or planet) experiencing it.

Key questions in this dimension include:

What is the problem the investment is trying to address? For the people experiencing the problem, how important is this change?

Smallholder farmers in emerging-market countries often lack access to financing options that suit their needs and constraints. As the global population increases alongside pressure on the agricultural sector to produce sufficient food, smallholders will be critical in helping to fill international demand for agricultural commodities. However, smallholder farms frequently produce low yields and low-quality crops, in part because they lack access to tailored financial products (1). Improved financing and savings options that address smallholder farmers’ constraints and liquidity needs can help in the following ways:

  • Both savings and financing products can increase production by allowing farmers to purchase higher-quality inputs and adopt longer-term, non-survival methods of agronomy.
  • Financing can allow smallholders to diversify their product offerings to include more resilient and/or complementary crops that may reduce risk.
  • Credit can help farmers store partial or whole harvests to withstand drops in price, earning steadier, less volatile income for their products.
  • Savings products can increase smallholder resilience and food security in between harvests and during financial shocks.
  • By consistently selling their products at higher prices, smallholders contribute to stronger, more diverse markets and reduce upstream risk for buyers and other actors in the value chain.
  • A combination of these factors can help build a stronger local and international economy, while greater agricultural productivity from smallholders can help increase food security and community resilience.

What is the scale of the problem?

The current estimate of global demand for smallholder agricultural finance is roughly USD 200 billion, with only USD 50 billion in current supply (1). While impact-driven lenders, local lenders, and local government services engaged in this space have disbursed over USD 350 million, they currently meet 2% of global demand.


Dimensions of Impact: WHO

Investors interested in deploying this strategy should consider whom they want to target, as almost every strategy has a host of potential beneficiaries. While some investors may target women of color living in a particular rural area, others may set targets more broadly, e.g., women. Investors interested in targeting particular populations should focus on strategies that have been shown to benefit those populations.

Key questions in this dimension include:

Who/What is helped through this strategy?

Low-Income, Farm-Dependent Households: Over two billion of the world’s poorest individuals live in households that depend on agriculture for income and nutrition (1). Low-income smallholders lack the financial liquidity to purchase or implement higher-quality inputs and methods or access training that can dramatically improve yields.

Farmers with Low Financial Literacy: In emerging markets, credit is expensive and its access can have complex requirements, often preventing farmers with little financial literacy (and often little formal education) from using their land as collateral. Without loans or other credit, most smallholders are restricted to low-quality inputs and methods, resulting in low yields.

Rural Communities: Rural communities, which are most often engaged with smallholder agriculture, typically have fewer tailored options for financing and access to credit. Creating opportunities in these communities to access financing that responds to available collateral can allow seasonal repayment schemes, and may be accessed in remote locations could increase farmer productivity and wellbeing. Financing can also help rural smallholders to access larger, less volatile markets.

Natural Resources: Smallholders manage 80% of the farmland in sub-Saharan Africa and Asia (2). With credit constraints restricting the quality of inputs and methods, smallholders often resort to short-term solutions—slash-and-burn agriculture, intensive monoculture, and illegal logging—that degrade the natural resources and ecosystems they cultivate. Easing credit constraints can reduce reliance on such methods, improving farmers’ ability to sustainably manage the ecosystems around them.

What are the geographic attributes of those who benefit?

Most of the world’s 450 million smallholder farmers live in Asia, with smaller numbers in Africa, Latin America, and the Middle East and North Africa. Most are in rural locations, though some are also peri-urban or urban (14).


Dimensions of Impact: CONTRIBUTION

Investors considering investing in a company or portfolio aligned with this strategy should consider whether the effect they want to have compares to what is likely to happen anyway. Is the investment's contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How much and Who?

Key questions in this dimension include:

Is the investment’s contribution ‘likely better’ or ‘likely worse’ than what is likely to occur anyway across What, How Much and Who?

For this strategy, investments that successfully close the market gap for financing among beneficiaries who are hard-to-reach or who currently lack financing and savings options that meet their collateral, seasonal, and repayment needs will likely drive much better outcomes than what would likely occur without investment. The extent to which this strategy can improve smallholder farmers’ options for financing and savings depends on the investee business and the products they are bringing to market.

How Much

Dimensions of Impact: HOW MUCH

Investors deploying capital into investments aligned with this strategy should think about how significant the investment's effect might be. What is likely to be the change's breadth, depth, and duration?

Key questions in this dimension include:

How many can receive the outcome through this strategy?

Among the approximately 450 million smallholder farms worldwide, the agricultural and non-agricultural financing needs of the roughly 270 million smallholder farmers in Latin America, sub-Saharan Africa, and South and Southeast Asia are estimated to exceed USD 200 billion (1). Within this 270 million, different types of smallholders need different levels of financing, which can have implications on the reach of investments in this strategy. For example: 

  • Commercial smallholders in tight value chains typically require approximately USD 1,500 in short-term financing and USD 1,500 – 2,000 in long-term financing amortized over multiple years. This group represents 7% of total smallholder farmers.
  • Commercial smallholders in loose value chains (33% of total smallholder farmers) typically require approximately USD 500 in short-term capital and a similar amount in long-term capital.*
  • Noncommercial smallholders (60% of total smallholder farmers) could benefit from access to carefully designed credit products (typical need estimated around USD 100).

* Lower needs are driven by smaller plot sizes, as well as more limited capital requirements for staple crops versus cash crops (e.g., crop renovation is relevant primarily for cash crops such as cocoa, coffee, or palm oil). 

How much change can beneficiaries experience through this strategy?

The amount of change that beneficiaries derive from this strategy depends on the product delivered and the extent to which it can effectively meet the credit or savings needs of smallholders. With full access to appropriate credit, especially if implemented alongside technical assistance or other supportive services, increased access to financing can have significant positive outcomes, such as the following examples:

- One Acre Fund reports typical crop yield increases between 50% and 100% for farmers who take out loans and receive related trainings (3).

  • A 2009 study of group-liability loans to Kenyan smallholder farmers found that participation increased household incomes by USD 200–260 over a single production period, or USD 478–641 per year (4).
  • In 2009, a randomized study in Kenya found that access to interest-offering savings products increased not only long-term assets (an increase of USD 75, 3.5 years after the experiment) but also productivity and business capital (by USD 33 per month) (5).

Illustrative Investment

While VF AzerCredit works in both the urban and rural areas of Azerbaijan, they primarily provide loans to micro and small rural entrepreneurs and the self-employed poor, covering remote areas which are often considered not bankable (6). VF AzerCredit currently serves more than 80,000 active clients, including internally displaced persons (IDPs), through 47 branches operating mostly in rural areas. Through VF AzerCredit’s services, microentrepreneurs have been able to increase investment in their farms.

Draw on Evidence

This mapped evidence shows what outcomes and impacts this strategy can have, based on academic and field research.

Finding Missing Markets (and a disturbing epilogue): Evidence from an Export Crop Adoption and Marketing Intervention in Kenya

Ashraf, N., Giné, X., & Karlan, D. (2009). Finding missing markets (and a disturbing epilogue): Evidence from an export crop adoption and marketing intervention in Kenya. American Journal of Agricultural Economics, 91(4), 973- 990.

Selling low and buying high: An arbitrage puzzle in Kenyan villages

Burke, Marshall. “Selling low and buying high: An arbitrage puzzle in Kenyan villages.” In Working Paper. 2014.

10 Facts About Hunger

WFP. “10 Facts About Hunger.” 2015.

Evaluating seasonal food storage and credit programs in east Indonesia

Basu, Karna, and Maisy Wong. “Evaluating seasonal food storage and credit programs in east Indonesia.” Journal of Development Economics 115 (2015): 200-216.

Saving for a (Not So) Rainy Day: A Randomized Evaluation of Savings Groups in Mali

Beaman, Lori, Dean Karlan, and Bram Thuysbaert. Saving for a (not so) rainy day: A randomized evaluation of savings groups in mali. No. w20600. National Bureau of Economic Research, 2014.

Is Microfinance Achieving Its Goal Among Smallholder Farmers in Africa? Empirical Evidence from Kenya Using Propensity Score Matching

George, O. (2009). Is Micro-finance achieving its goal among smallholder farmers in Africa? Empirical evidence from Kenya using propensity score matching. Paper submitted for Visual presentation at the XXVII International Conference of Agricultural Economists, 16-22 August 2009, Beijing, China.

The Persistent Power of Behavioral Change: Long-Run Impacts of Temporary Savings Subsidies for the Poor

Schaner, S. (2015). The persistent power of behavioral change: Long-run impacts of temporary savings subsidies for the poor. Documento de trabajo. Dartmouth College: Hanover, NH

Effectiveness of Innovation Grants to Smallholder Agricultural Producers: An Explorative Systematic Review

Ton, G., M. L. Rau, K. de Grip, and L. W. A. Klerkx. Effectiveness of Innovation Grants on Smallholder Agricultural Producers: protocol for an explorative systematic review. EPPI-Centre, Social Science Research Unit, Institute of Education, University of London, 2011.

Impact of Microfinance on Smallholder Farm Productivity in Tanzania: The Case of Iramba District

Girabi, Frank; Mwakaje, A. E. . (2013). Impact of microfinance on smallholder farm productivity in Tanzania: The case of Iramba district. Asian Economic and Financial Review, 3(2), 227–242.

Seasonal Credit Constraints and Agricultural Labor Supply: Evidence from Zambia 

Fink, G., Jack, B. K., & Masiye, F. (2014). Seasonal credit constraints and agricultural labor supply: Evidence from Zambia (No. w20218). National Bureau of Economic Research.

Self-selection into Credit Markets: Evidence from Agriculture in Mali

Beaman, Lori, Dean Karlan, Bram Thuysbaert, and Christopher Udry. Self-selection into credit markets: Evidence from agriculture in mali. No. w20387. National Bureau of Economic Research, 2014.

Inflection Point: Unlocking Growth in the Era of Farmer Finance

Carroll, T., A. Stern, D. Zook, R. Funes, A. Rastegar, and Y. Lien. “Catalyzing Smallholder Agricultural Finance (Sept. 2012). Dalberg Global Development Advisors.” (2012).

Agricultural Decisions After Relaxing Credit and Risk Constraints.

Karlan, D., Osei, R. D., Osei-Akoto, I., & Udry, C. (2012). Agricultural decisions after relaxing credit and risk constraints. The Quarterly Journal of Economics, 129 (2): 597–652.

Savings and Subsidies, Separately and Together: Decomposing Effects of a Bundled Anti-Poverty Program

Carter, Michael R., Rachid Laajaj, and Dean Yang. “Savings and Subsidies, Separately and Together: Decomposing Effects of a Bundled Anti-Poverty Program.” (2015).

Evidence on the Impact of Rural and Agricultural Finance on Clients in Sub-Saharan Africa: a Literature Review

Clark, Chris, Katie Panhorst Harris, Pierre Biscaye, Mary Kay Gugerty, & C. Leigh Anderson.“Evidence on the Impact of Rural and Agricultural Finance on Clients in Sub-Saharan Africa: a Literature Review.” EPAR Brief No. 307 / Learning Lab Technical Report No. 2 (November 2015).

A Randomized Impact Evaluation of Village Savings and Loans Associations and Family-Based Interventions in Burundi

Annan, Jeannie, Tom Bundervoet, Juliette Seban, and Jaime Costigan. “A randomized impact evaluation of village savings and loans associations and family-based interventions in Burundi.” New York: International Rescue Committee (2013).

A Review of Existing Organisational Forms of Smallholder Farmers ’ Associations and their Contractual Relationships with other Market Participants in the East and Southern African ACP Region

Poole, N., & de Frece, A. (2010). A Review of Existing Organisational Forms of Smallholder Farmers ’ Associations and their Contractual Relationships with other Market Participants in the East and Southern African ACP Region. All ACP Agricultural Commodities Programme Paper Series – No.11 (Food and Agriculture Organization of the United Nations), (11).

Nigeria PrOpCom Project Completion Report

UK Aid. Nigeria PrOpCom Project Completion Report. 2011.

Catalyzing Smallholder Agricultural Finance

Carroll, T., A. Stern, D. Zook, R. Funes, A. Rastegar, and Y. Lien. “Catalyzing Smallholder Agricultural Finance (Sept. 2012). Dalberg Global Development Advisors.” (2012).

Comparison of three modes of increasing benefits to farmers within agroforestry tree products market chains in Cameroon

Charly, Facheux, Amos Gyau, Diane Russell, Divine Foundjem-Tita, Charlie Mbosso, Steven Franzel, and Zac Tchoundjeu. “Comparison of three modes of improving benefits to farmers within agroforestry product market chains in Cameroon.” African Journal of Agricultural Research 7, no. 15 (2012): 2336-2343.

Input Subsidies to Improve Smallholder Maize Productivity in Malawi: Toward an African Green Revolution

Denning, Glenn, Patrick Kabambe, Pedro Sanchez, Alia Malik, Rafael Flor, Rebbie Harawa, Phelire Nkhoma et al. “Input subsidies to improve smallholder maize productivity in Malawi: Toward an African Green Revolution.” PLoS biology 7, no. 1 (2009): e1000023.

Comprehensive Impact Report

One Acre Fund. “Comprehensive Impact Report.” September 2016.

Each resource is assigned a rating of rigor according to the NESTA Standards of Evidence.

Define Metrics

Core Metrics

This starter set of core metrics — chosen from the IRIS catalog with the input of impact investors who work in this area — indicate performance toward objectives within this strategy. They can help with setting targets, tracking performance, and managing toward success.

Additional Metrics

While the above core metrics provide a starter set of measurements that can show outcomes of a portfolio targeted toward this goal, the additional metrics below — or others from the IRIS catalog — can provide more nuance and depth to understanding your impact.