Africa’s youthful population is expected to surpass 1.5 billion in 2060 an increase of 89% according to the United Nations Department of Economic and Social Affairs (UNDESA). Each year up to 10-12 million young people seek to enter the continent’s workforce without success. Agriculture, being the backbone of Africa’s economy, presents a lot of opportunities along the value chain, yet youth shy away from the sector because in their perception it is majorly dominated by the old (aged 40 and above), labor intensive, and unprofitable. For those who have ventured into the sector, access to credit is cited as one of the major barriers to youth agripreneurship. Other barriers include: changing climatic conditions which hamper farmers planning activities, inadequate information on post-harvest handling practices, high costs of production and limited use of modern practices and technology in production.
Despite the sector contributing a higher share of GDP, the amount of agricultural loans and investments portfolio is disproportionately low according to the World Bank. With access to financial/credit services, farmers can purchase fertilizers, machinery, seeds and expand their markets leading to increased agricultural production. The youth continue to decry existing challenges in securing finance from formal financial institutions due to stringent rules, lack of collateral security and preference to short-term lending yet agriculture investments have long gestation periods. For financial institutions to lend agripreneurs, they should at least have proof of regular income, good financial skills and have an up to date records of their enterprise, potential to scale and risk mitigation for unforeseen calamities.
Today, many initiatives by different stakeholders exist to promote youth agripreneurship. Formal financial institutions too have dedicated departments to support agriculture coupled with derisking lending tools. Other initiatives include: alternative credit scoring tools to assess credit worthiness of a farmer, Business to Business (B2B) sessions for agripreneurs to pitch their business to potential investors and some funders prefer to lend key equipment’s such as solar driers or tractors to farmer cooperatives while allowing them to repay in installments.
Some of the programs supporting youth agripreneurship in Africa include: Enable Youth Program by the Africa Development Bank (AfDB) which offers incubation support for youth led enterprises in Africa and the GoGettaz Agripreneur Prize Competition by Generation Africa which supports young agripreneurs who are transforming Africa’s food system. Shortlisted applicants also get an opportunity to attend the annual Africa’s Food Systems Forum (AGRF) summit, a platform for different stakeholders to share knowledge, learnings, offer solutions to current challenges in the food system while forging a way forward on issues identified.
These GoGettaz have been on the forefront with leading innovations that promote financial inclusion amongst farmers.
Umojalands Systems – Zimbabwe
In rural areas, farming is the main source of livelihoods for many families however in the wake of increasing economic challenges coupled with impacts of climate change and covid 19, majority of families face challenges in financing their agricultural activities.
Most rural households do not have bank accounts with formal financial institutions. The World Bank estimates 66% of Sub-Saharan Africa population is unbanked due limited number of branches, long distances to reach banks, high cost of borrowing and long waiting time to receive services.
To cushion farmers from unforeseen activities, Tafadzwanashe Gavi developed Umojalands systems that connects farmers to farmlands, out-grower schemes & financiers using the Farmer Digital Identity.
The Farmer Digital Identity enables profiling of rural farmers by capturing key information from their agricultural activities and automatically generates a credit score rating based on the information received that will assist financiers determine whether they are eligible for credit.
Other products under Umojalands system helping farmers improve they yields include: Agronomy Box which utilizes satellite data and machine learning to give recommendations to farmers on how they can increase their production and farmland exchange marketplace which connects underutilized farmland with farmers with enough capital, infrastructure and knowledge are improving the food system in Zimbabwe.
Crop2Cash – Nigeria
Did you know there are technologies which help determine a farmer’s credit score despite them not having traditional collateral security items such as title deeds, logbooks required to secure finance from formal financial institutions. One of these technologies is Crop2Cash developed by Michael Ogundare that enables farmers to create a digital financial profile to determine their credit score for lending. Financial institutions are also able to validate information captured by simply logging onto Crop2Cash, find groups of vetted farmers and fund them.
The startup has partnered with some financial service providers with an aim to understand their internal credit processes and risk management methods to develop easier and safer ways for them to lend to farmers using technology. Agricultural service providers are also able to provide their services to farmers.
Using a GSM phone, farmers can request loans, seeds, mechanization, insurance and other agricultural services in their local languages via SMS and receive guidance on sustainable production practices.
Phema Agri – Tanzania
Phema Agri is a digital agriculture platform developed by Daniella Kwayu that connects investors looking to grow their money in the agriculture sector by supporting smallholder farmers who are in search for working capital solutions.
It’s crowdfunding platform connects de-risked, vetted, trained and market farmers looking for financing from investors. In return farmers share their profits with investors.
In order to provide a convenient and easy to use investment platform in agriculture, Phema Agri’s crowdfunding platform is linked directly to bank payments and mobile network operators (Tigo Pesa) for ease of transactions. They also train farmers on good farming practices that will help them increase their yields, linkages to markets (pre-negotiated off-taking contracts) to underpin the investment, access to agri-insurance products and support in-terms of monitoring to grow their agri-enterprises.
“In Tanzania, smallholder farmers are scattered making it costly to hire extension services to train and monitor them in preparation for securing funding from investments. This is the biggest challenge we face when helping farmers secure finance, ” says Kwayu.
Take advantage of these financial digital tools and scale up your agribusiness!