Sub-Saharan Africa is witnessing a digital revolution in the agricultural finance landscape. The digitalisation of agricultural financing is seen as a pivotal strategy to enhance financial inclusion. This initiative is particularly targeting rural smallholder farmers who are entrapped in extreme poverty. However, the process has been hindered by the limited capability of financial institutions (FIs) to integrate rural areas, which are often perceived as costly and risky.
Pan-African Community of Practice (CoP): A Solution to the Challenge
The pan-African Community of Practice (CoP) has emerged as a crucial support system in this scenario. It is fostering cross-country learning and facilitating the exchange of best practices among FIs. This initiative is a part of the global project ‘Promotion of agricultural finance for agri-based enterprises in rural areas’ (GP AgFin). The German Federal Ministry for International Cooperation and Development (BMZ) backs the project.
The project collaborates with over 80 FIs from nine African countries, aiming to create sustainable business models and customized financial services for agricultural enterprises and middle and small enterprises (MSMEs). A regional conference led to the formation of an exchange platform. Subsequent virtual meetings and webinars have been instrumental in facilitating ongoing training and knowledge sharing.
Goal of CoP: Expedite Digitalisation Process
The CoP’s objective is to expedite the digitalisation process, making it more cost-effective and targeted. The Lom� Declaration, signed by CoP representatives in October 2023, outlines the vision and mission of the group, committing to the digitalisation roadmap. The CoP, as of now, includes over 90 representatives from nine African countries. They are collectively working towards digitalising agricultural finance and combating poverty and hunger in rural areas.
Impact of Digital Technologies in Agriculture
Digital technologies have been found to increase rural consumption diversity and agricultural productivity. They empower rural women in decision-making and off-farm work participation, boost rural income growth through smartphone-based agricultural extension services, and increase the probability of rural households’ access to credit. Moreover, digital financial inclusion reduces farmers’ vulnerability to poverty, and e-commerce adoption increases sales prices and marketing costs, contributing to higher gross returns.
However, barriers to the implementation of digital technologies in rural areas persist, such as a lack of infrastructure and inadequate digital skills. Strategies to promote digital literacy and skills among rural residents are proposed to overcome these barriers. The initiative of the CoP and its ongoing efforts are a significant step towards achieving this goal.