In partnership with the Government of Sierra Leone Ministry of Agriculture and funded by the European Union through the Boosting Agriculture and Food Security (BAFS) project, 609 smallholder households were interviewed across five value chains: rice, cocoa, cashew and poultry and vegetable. In this blog, Julius Matovu, BAFS and Keyzom, UNCDF talk about some early insights from the DFS Assessment of Smallholder Farmers. The results of the Assessment will be launched on August 15, 2018 in Freetown.

As an outcome of a workshop hosted by the Government of Sierra Leone in partnership with the Better Than Cash Alliance and MM4P, a DFS Task Force for Smallholders was created to deliver on the promise of DFS for smallholders who make up 70% of the country’s population. These smallholders’ distance from brick-and-mortar branches and risk profile have traditionally excluded them from access to formal financial services. As a first step in this direction, a DFS assessment for smallholder farmers was carried out across key value chains to identify intervention points that can lead to the greatest improvement in the lives of the smallholders. Relatively little is known about the financial services needs of the Sierra Leone agriculture sector, and the first step in reaching these clients successfully is to better understand their needs, preferences, aspirations and behaviours.

This DFS assessment adopted a value chain approach which scrutinised all the key nodes of the value chain - from land ownership, input supply, production, post-harvest, transportation, processing to produce marketing stages, with the goal of understanding the different interactions of farming life. This information helped to uncover the challenges, important use cases and opportunities for digitization. The assessment also put in consideration a regionalisation lens to ensure that all agricultural areas/ regions of the country were covered and well represented.

The main agricultural enterprises of focus were Cashew, Cocoa, Rice, Poultry and Vegetables – all enterprises of national importance where they contribute approximately 50% of the country’s GDP and have more established structures such as farmer groups or cooperatives. However, along the data collection journey, we found interesting enterprises that overlapped with the originally selected five. These new enterprises were: cassava, groundnut, and palm oil; and these by default have also been crops considered for this study.

A number unique insights emerged from this assessment as a result of interacting with key actors in the agricultural sector both on the supply side and the demand side.

1. Farming activities largely unstructured and mainly subsistence in nature

Using the value chain approach, which scrutinizes all important nodes of the agricultural chain to identify and understand the various interactions associated with farming life, we found that in all the five value chains selected, the farming activities performed are still largely unstructured and are subsistence in nature. That is to say, farmers are not able to organise their production and add significant value to their produce so they attract competitive prices or target better markets. In addition, there is little or no access to formal support for farmers from the Government to enable them to attain this goal. That being the case, during our data collection journey, we saw evidence of not only limited agricultural productivity but also limited access to important agricultural extension services, to agricultural financing as well as to new technologies particularly mobile technology. For example, out of the 609 households surveyed, over 60% of the participants cited inadequate supply of agricultural inputs in addition to insufficient funds as key hindrances to cultivating the crop of their choice. 40% of these participants admitted that they don’t own a phone because they can’t afford it.

Consequently, such subsistence and unstructured enterprises are perceived as unattractive and costly ventures by potential service suppliers such as irrigation equipment providers, input dealers and banks. More importantly, service providers are concerned about the high costs and risks associated with extending such services to disaggregated farmer segments. For instance, from our discussions with financial service providers, the biggest concern was finding a viable business case to serve this disaggregated market segment despite the keen interest demonstrated by other parties in attracting and serving this market segment.

2. Financial inflows revolve around the farming calendar and affect everyone

Our collated data shows that the farming calendar is characterized by good and bad times. The good times coincide with harvest when there is food to eat and sell and incomes generally rise, usually the period between December and April. The bad times, usually occurring from June to September, are characterized by heavy and destructive downpours. Such rain showers destroy crops and create food shortages so that farmers have to depend on purchases from the market.

A key realization is that these two occurrences affect the entire farming community throughout the regions we visited. For instance, many of the produce vendors and traders we engaged noted that during the wet season it is hard for them to find produce to sell as there is no crop cultivation going on in the villages and many farmers experience a dip in their incomes. Similarly, this is the time farmers rely on external networks to access credit to buy food. For instance, a number of shop shopkeepers in the different villages we visited noted that the June rain season is the time they mostly sell goods on credit.

3. Groups are important catalysts in enhancing the rural dweller’s self-esteem and represent a potential lever in this DFS assessment

In the farming communities, there exists farmer groups (also referred to as Agricultural Business Centres or ABCs) which are influential agents in the community. In addition to helping farmers with extension services and working as aggregation centres for produce, many have evolved into informal financial centres (Osusus’) that many farmers rely on, particularly for savings and credit. ABCs help farmers accumulate small amounts into lump sums that they can then use to meet household needs. We found that the farmers we engaged with were usually members of at least one or two village groups. It is noteworthy that this group concept is applied almost in every aspect of farming life including planting, joint purchase of inputs to social functions such as weddings or funerals. During our data collection journey, we garnered insights into operations of these groups and how members of these groups would respond to potential efforts aimed at digitizing group operations. We found that a potential opportunity for digitisation could involve automating group financial transactions to enable safety, transparency and increase overall attractiveness to larger and formal financial service providers. We fronted this idea to some farmers we engaged who seemed to appreciate the value of the system once they grasped the idea.

4. There is limited knowledge of mobile money but there are advanced use scenarios

Familiarity with Mobile Money services varied from community to community. In general, there was limited knowledge on Mobile Money’s usage across the board. However, we encountered a few farmers who already use mobile money services in fairly advanced and innovative ways. For example, we met an “Osusu” - collector in Kambia District who receives the daily saving collections from his customers via mobile money and manages funds from the phone. Likewise, we found a couple of market women vendors who possessed more than one mobile wallet from different providers. These women had bifurcated the use and goal for each of the accounts. For instance, one of the ladies disclosed that she keeps her business income on one SIM card and money for daily expenses and emergencies on another SIM. This is a clear sign that complex digital habits can be developed, and also have the potential for further exploration, at village level.

5. Many farmers are savvy financial planners

Aware of the seasonal nature of their primary occupation, many farmers engaged in the cultivation of more than one crop in a given season or practice intercropping to ensure consistent income flows throughout the year. Many are also engaged in other occupations ranging from carpentry, to “okada” (motorcycle taxi) or trading to supplement their income from farming. Furthermore, we found that as a way to smooth the erratic income cycles, some farmers preferred to keep little money as cash on-hand and moved the rest to savings groups. Similarly, those that are registered on mobile money tend to transfer it into their wallets for safe keeping. Farmers also noted that they develop financial discipline when saving and many of them outlined this as one of the main reasons they join groups particularly because these groups force them to contribute or set aside money for savings regularly. Another evidence of the smallholder farmer’s financial lies in the fact that many cultivate different crops with different goals and aspirations in mind: for instance, when they grow long term crops like palm oil, cocoa or cashew, they devote the proceeds to their children’s education whereas short term crops like vegetables or poultry are grown to meet regular household demands or emergencies.

6. Basic infrastructure crucial to a digitized ecosystem

In all the regions we visited, there was an acute need for improved infrastructure such as roads and reliable sources of power. Except for the district portals/ towns, all villages we visited had roads that were in poor condition and very limited to no alternate sources of electricity with the exception of kerosene and fire wood for lighting and cooking respectively. This lack of access to basic infrastructure such as good, motorable roads bars farmers from connecting to better markets or accessing farming support in a timely manner. Similarly, the absence of electricity limits the productivity of farmers and the quality of their produce because for example they are unable to add value to their crops using processing plants and machinery like their companions in the urban areas. This makes the provision of these basic amenities of prime importance to the development of agricultural productivity and to boosting food security.

When it comes to access to financial services, smallholder farmers in Sierra Leone face similar challenges as the 475 million smallholder farmers across the globe. Digital financial services can play an important role in overcoming this problem. On August 15, 2018, the key findings of the DFS Assessment will be shared with stakeholders to influence policy, regulations and investments in private sector and financial technology solutions to improve access to finance, know-how and information for smallholder households. We are confident that quantitative data into the lives of smallholders will go a long way in bringing the potential of DFS closer to those who need it the most.