Innovative Farm Input Financing: Taking Farmers Beyond the Demonstration Plot.

The cost of financing inputs required to improve crop production is a major constraint for most resource constrained smallholder farmers in sub-Saharan Africa.  Rural financing is often too costly to be afforded by farmers (typically interest rates range from 20-30% per annum).  Lack of finance prevents farmers from investing in agricultural technologies that can potentially increase productivity, for example, integrated soil fertility management (ISFM) that involves the combined use of inorganic fertilizers and organic materials, and improved seeds. In a quest to address these challenges, AGRA’s Soil Health Program in 2010, adopted a comprehensive approach to scaling up ISFM technologies called ‘Going Beyond Demos’ (GBD). GBD recognizes that demonstration of ISFM technologies while necessary may not lead to its massive uptake by smallholder farmers where access to farm inputs is hindered by the high cost of credit. This is particularly important for fertilizers that are expensive in Africa (generally US$ 600 to 800 per ton).

In order to improve access to farm inputs, the GBD initiative is using many options but five stand out: a) Out-grower contractual arrangements with schemes of commercial farms b) contractual schemes with produce buyers that finance production inputs, c) agro dealers that provide inputs based on credit arrangements, d) revolving funds managed by farmers associations or by microfinance institutions, and d) credit guarantees through banks.

Through the GBD approach, the program has scaled up the ISFM technologies to 1.7 million smallholder farmers in the 13 focal countries in Africa.   The farmers who have adopted the technologies have increased maize yields by 2-3 folds over those under farmer’s conditions that us typically under 1.5 t/ha.  Farm input financing through contractual arrangement with produce buyers was the most promising system, however, the system requires both human and financial support to bring the different actors together.