Nigeria’s leading commodities exchange player, AFEX, advocated for digital financial inclusion for African smallholder farmers.
AFEX disclosed this at a side-event at the 2021 African Green Revolution Forum (AGRF), hosted in partnership with Smallholder and Agri-SME Finance and Investment Network (SAFIN), themed: “Digital Financial Services for Agriculture”, focused on adopting digital financial services for agriculture in Africa.
AFEX Financial Market vice president, Oluwafunto Olasemo, during the panel session, said it is important to integrate digital financial solutions for smallholder farmers because “70 per cent of global food production comes from local farmers, and so, it is important to create digital financial services to ensure that smallholder farmers have a bountiful harvest and they live above their means.”
Olasemo said smallholder farmers are first customers, adding that everything a Digital Financial Service customer needs must be extended to them.
The financial market expert said the adaptation of these products would help boost the sector’s productivity.
Also, at a separate panel session focused on upgrading agricultural value chains for improved competitiveness and inclusivity, AFEX CEO Ayodeji Balogun said the financing gap for agri-SMEs is in the “missing middle”.
Balogun said the factors hampering Africa’s rural and market potential are a mix between financing and infrastructural deficits.
“The infrastructural deficits majorly speak to the availability of adequate and affordable storage for farmers among others,” he said, adding that “limited finance also affects the value chain from a demand and supply perspective. Farmers and agribusiness are less likely to obtain financing for their operations compared to players in other sectors.”
Citing Nigeria as a case study of the financial gap in the sector, Balogun said domestic credit to the agriculture sector in the country was about 5.2 per cent of the total credit in 2020.
“Possible reasons for the minimal allocation of credit to the sector in Nigeria may range from the high-risk nature of the sector, information asymmetric in determining the creditworthiness of the Agri-sme, and the non-suitability of conventional financing instruments,” he added.
Balogun, however, mentioned that AFEX is helping to bridge the gap, or more like providing solutions to derisk this sector by providing the necessary data and making available clearer context of the industry to potential financiers.
AFEX, known for its vision to make Africa self-reliant in food, has over 200,000 farmers and 100 agri-business registered on its Exchange and has significantly reduced the level of market fragmentation in several states of operation while creating shared prosperity for all stakeholders.
The Exchange, through its technologies – WorkBench and ComX – is helping track and store relevant data for players in the space to make better-informed decisions. It has also effectively implemented a working formula that creates the avenue for farmers’ pre-production financing, AgriBusiness working capital financing, through innovative products listed on its Exchange.