The document proposes a new lending model for smallholder farmers that utilizes alternative data sources like farming practices and community transactions for credit assessments. It suggests repayment schedules tied to milestones in agricultural value chains and disbursing loans in tranches for specific farming inputs and activities. Key aspects include using biometric identification, disbursing loans as e-vouchers for intended purchases, and facilitating repayments through mobile money with reminders and gamification.

1. The Context
Problem Statement
Lack of Credit for
Smallholders
Extreme lack of information
on potential borrowers
available to lenders is chief
among varied causes of the
enormous gap between the
supply and demand
Outcome
MFIs Willingness to Lend is
Low
Lack of data to assess
creditworthiness creates
risks for MFIs especially
given the larger size of loans
required in agricultural
context.
Process
Re-engineering
Traditional MFI model not
adapted to smallholders
Difficulties in transplanting
it to agriculture.
Redefinition needed
especially for: credit
assessment, disbursement &
repayments

2. Proposition
Rethinking the lending model for
smallholder farmers
A lending model utilizing
community-level transactions &
farming practices for
creditworthiness assessment;
repayment schedules better suited
to milestones in ag value-chains; and
disbursements tied to inputs &
activities pre-identified by applicant.

3. Loan
Application
Credit
Assessment
Disbursement
Decision
Loan
Disbursement
Repayments
Loans restricted to &
defined in terms of
needed agri-inputs &
activities ranging from
seeds, farm labour, to
market transport.
Applicants
fingerprinted during
application process;
biometric identification
cannot be lost,
forgotten, stolen or
faked
Alternative datasources:
1) Digitize existing VSL
and FSA data 2) Historic
harvest data
Augment with exhibited
farming practices
1) Assess adherence to
best practice farming and
crop diversification that
maximizes yield potential
2) Completion of
reputable stakeholder
farming training
Assessment of
utilization points, e.g.
farms, to ensure that
requested
ag-financing is
commensurate to
utilization capacity.
Assessment that
capacity is at
commercialization
levels
Tranche disbursement
corresponding with
applicant’s value chain
milestones. e.g. 60% at
planting season start,
etc
Disbursement as
e-vouchers ensures that
spend is limited to self
defined inputs &
activities
Repayment via mobile
money
SMS reminders & digital
nudges
Gamification with social
graph to replicate social
influence and pressure
in digital context
Interest-only payment
during farming season
and principal payment
during market season