Matt Shakhovskoy

Matt Shakhovskoy is the Executive Director of the Initiative for Smallholder Finance, a multi-donor effort designed to demonstrate how specific products and services can expand the reach of financing for smallholder farmers. Over the past ten years Matt has worked in the areas of private equity and development advisory for a number of leading organizations including Agis Investments, Dalberg, and Deloitte. Over this time Matt has been involved in over 60 projects in 25 countries working with partners such as the Gates Foundation, the World Bank, USAID, MTN, and the G8.Matt holds a MSc in Sustainable Development from the University of London and Bachelors of Business and Economics from the University of Queensland.

Connecting with the rural poor: Inclusive agribusiness and smallholder finance

6. Apr 2017

A host of development actors in emerging markets have spent more than 60 years experimenting with approaches to provide farmers with access to financial services, now more than ever the tools and approaches exist to get it right.

Starting in the 1950s, many governments established agriculture development banks or capitalized commercial banks, both with mandates to lend to smallholders at below-market interest rates. In the 1970s, fueled by the failures of both directed credit and subsequent laissez-faire policies, microfinance institutions and some commercial banks began providing microfinance in rural areas. This approach faced challenges too, as most microfinance providers (with the exception of some in Asia) did not ultimately maintain a sustained reach to smallholders. However, a renewed drive at the beginning of the 21st century to connect farmers to financial services has ushered in a new “era of farmer finance”.

Even with these developments, however, the gap between the financial needs of smallholders and the supply of financial services is anticipated to remain significant. As outlined in a our landmark report, Inflection Point, credit provided by informal and formal financial institutions as well as value chain actors, currently meet an estimated USD 50 billion of the more than USD 200 billion smallholder finance need in the regions of sub-Saharan Africa, Latin America, and South and Southeast Asia. In addition, agricultural insurance reaches just 10% of smallholders of which fewer than 15% have access to a formal savings accounts.

Although bridging this gap is crucial for developing a more inclusive agricultural system, finance is not an end in and of itself, but often a critical enabler for businesses involved with the rural poor. With agriculture accounting for more than 70% of employment in many developing countries, most agribusinesses work with smallholders in some capacity, and by extension face questions of smallholder finance and their access to market. The landscape of what is possible is also rapidly changing as markets evolve, new partnership approaches are developing and technology is starting to address long term pain points around costs and risks with serving smallholders. 

The good news is that with over $14 billion of credit provided by private companies to smallholder farmers, much has been learned about how inclusive agribusinesses can use finance as a tool to enhance their models. These learnings stem in part from our work at the Initiative for Smallholder Finance which offers leading perspectives on topics including:

  • Working with value chain finance
  • The role and positioning of technical assistance
  • The potential of digital technology to enable successful lending
  • The emerging potential of data science
  • Structuring last-mile partnerships to enable lending
  • Managing foreign exchange risk

For more information on smallholder finance it is worth visiting the Rural and Agricultural Finance Learning Lab, which has become an impressive repository of curated content for inclusive agribusinesses and others involved in working with smallholder farmers.

After decades of attempting to provide financial services to smallholder farmers the tools, knowledge and technologies now exist for the connected agribusinesses to make it work.

  • This blog is part of a series on what’s new in inclusive agribusiness from April 2017. Hear from more contributors in part one of the series- digging into the details of inclusive business programmes around the world.  In part two contributors share how long-standing perspectives on cooperative, corporate strategies, value chain partnerships, market system change, rural livelihoods support, financing, and innovation adoption are beginning to blend, and why. 
  • Read more on key topics in inclusive agribusiness in the series of six theme papers.
  • Access over 450 resources on inclusive agribusiness on SearchInclusiveBusiness.org