Agriculture remains the primary source of formal and informal employment in many low-and middle-income countries (LMICs), especially for those residing in rural areas. However, the sector often faces a chronic and pervasive lack of access to suitable financial services, which can impede farmers’ ability to increase productivity, earn higher incomes, diversify their livelihoods, and achieve greater resilience. This gap in access is particularly severe among smallholder farmers—those that cultivate parcels of land that consist of less than two hectares— representing approximately 2 billion people worldwide.

The long distance from urban bank locations has historically served as a primary deterrence for poorer rural farmers in terms of accessing formal banking services, while incumbent financial institutions that rely on traditional delivery models have faced their own set of challenges working in the agricultural market. These providers can face high operational costs accessing farmers, lack the tools and expertise necessary to quantify the risk of lending to this market segment, and often do not have products and services tailored to the needs of farmers in terms of design, accessibility, and affordability. According to one estimate, only one percent of commercial bank lending in Africa flows to the agricultural sector.1 Emerging digital financial service (DFS) models hold the potential to mitigate some of these constraints and unlock access to finance in the agriculture sector, providing an opportunity for developing countries to reduce poverty and food insecurity and build resilience and sustainability.

This briefing note provides an overview of emerging DFS operating models and delivery channels and their relevance to programming supported by USAID’s Bureau for Resilience and Food Security (RFS).