Smallholder Farmers and Financial Institutions
I laid the foundation of the smallholder farmer bond here. It is the culture of how small holder farmers handle financial transactions. This is a continuation of further my understanding of financial services and smallholder farmers.
Smallholder farmers have low, irregular incomes that are uncertain and in many cases, tied to the agricultural seasons. In most cases, formal financial institutions are scarcely accessible and as a result rural households use informal financial services like mpesa. So far, use of informal financial services has catered to their needs but cannot be sustained because they do not fully cope with the shock and risks factors affecting yield and revenue such as weather fluctuations and produce price volatility.
For smallholder farmers to actively participate in poverty reduction, access to adequate financial services is vital. To be able to create and sustain such a culture that allows smallholder farmers to have sustainable financial habits there needs to be training for them to understand financial services and planning resulting in a well-functioning sustainable financial system that is accessible and responsive just for them. This will not only enable smallholder farmers to manage risk but also reduce their vulnerability and seize economic opportunities.
The implementation of this sustainable financial ecosystem coupled with training will permit them to make informed decisions on their income flow and working capital to finance their agricultural business. In addition the ecosystem will help protect smallholder farmers against the effects day to day business risks and they will better placed to make informed financial decisions in regard to their farms and life.