Software developer Michael Ogundare witnessed a stark mismatch in his home country of Nigeria: the majority of local food production depended on smallholder farmers, but those farmers were unable to access financing to support food production for their local communities and other markets.
“Farmers were finding it difficult to get paid for what they were selling. We saw that if farmers were to get paid, the buyers would have to transfer the money to some random person with a bank account, who would have to cash out to distribute to the farmers,” Ogundare tells AFN.
Ogundare launched Crop2Cash to provide smallholder farmers with an on-ramp to basic financial services.
Crop2Cash offers simple financial accounts linked to an e-wallet where farmers can receive payments, make purchases and track their financial transactions. The system runs on USSD, making it accessible to farmers who don’t have a smartphone.
Eighty percent of Nigeria’s farmers are smallholders, who form the backbone of domestic food production. But living in rural areas restricts their access to traditional financial infrastructure. Indeed, as estimated 78% of Nigeria’s farmers are not registered with formal financial services.
Moreover, the financial institutions that do operate in rural areas are reluctant to bank and lend to farmers because they’re deemed high risk. But the products they offer are often extraordinarily high-interest or ill-suited for smallholders. Many commercial lenders require a high degree of collateral, which most small farmers can’t provide. They also require record-keeping and financial statements that farmers’ don’t have.
“A lot of banks shy away from lending to farmers, because they just don’t understand how to solve the problem,” says Ogundare.
Financial exclusion cripples farmers’ expansion and, importantly, their ability to adapt to climate impacts, since they need financing to purchase inputs, machinery and other technologies.
Ogundare’s designed Crop2Cash as an online marketplace where farmers could sell their produce to agro-processors and receive payments through the platform. They could also purchase inputs through the marketplace.
The company’s digital payments product is called CashCard, and its inputs and supply-chain management product is called SupplyBase.
Tracking farmers’ payments and input purchases enables Crop2Cash to begin building a formal financial profile for farmers who previously had none. This baseline financial profile can then be presented to financial institutions, along with farm information like size, crop type, location and weather pattern exposure and risk, to determine a farmer’s creditworthiness.
So far Crop2Cash has helped build financial profiles for more than 100,000 smallholders and unlocked $2.8 million in credit.
“About 60% of the farmers we serve are getting their first taste of digital services,” says Ogundare.
The company reports a 70% income increase on average for farmers using the platform.
Now the banks are coming forward, says Ogundare, and Crop2Cash is exploring lending partnerships with FMCB and others to enable broader access to credit and financial services for Nigeria’s farmers.