IDH Farmfit provides new incentives for financial service providers to step into agricultural finance

Unlocking the USD 200 billion smallholder finance market

The Mastercard Foundation Rural and Agricultural Finance Learning Lab (the Lab) and IDH Sustainable Trade Initiative (IDH) have joined forces in IDH Farmfit. Their partnership creates access to reliable data on the profitability of financial institutions’ smallholder finance activities. Through better data and more transparent markets, investors and funders, including the IDH Farmfit Fund, are better equipped to mobilize private capital, and unlock the USD 200 billion smallholder finance market.

With over three quarters of the world’s poor relying on agriculture for a source of income, economic growth in agriculture is up to 11 times as effective at reducing poverty compared to other sectors. This growth can take root if smallholders gain access to financial services – such as credit, insurance, and savings – to invest in their farms, increasing their productivity and ultimately improving their livelihoods. But to achieve this economic growth and enable access to financial services, private capital will need to be mobilized at scale.

While Africa’s rapidly growing population and a new generation of technologies has awakened emerging investors, many financial institutions are still struggling to develop a smallholder portfolio and provide the suitable financial products. For financial institutions to improve their business models they need data and capital. But for investors to effectively drive that capital, they need proof points that show a risky investment in smallholders can translate into meaningful financial returns and impact.  In response to this demand, IDH and the Lab have partnered to create visibility on the risks and expected returns of engaging with smallholders, by building data and a supporting network for financial service providers (FSPs).

This new approach uses insights that IDH Farmfit has collected through analyzing over 40 value chain business models across commodity sectors and geographies. Originally developed by IDH to analyze the efficiency and effectiveness of agribusiness’ delivery of finance, inputs, and training to smallholders – the service delivery model (SDM) methodology has now been adapted and applied to financial service providers.

The methodology has been tweaked and piloted with three financial service providers (FSP) in Africa; ECLOF in Kenya, Opportunity Savings and Loans in Ghana, and Advans in Cote D’Ivoire. In each case, the profitability for the FSP, the value chain partners, and the farmer was analyzed. The insights developed through these case studies help FSPs holistically assess how they operate, and identify the key ingredients that contribute to serving smallholder profitably at scale.

The FSP SDM assessment involves three key levels of analysis:

  • Business case for financial institution: An assessment of the profitability of financial institutions’ smallholder finance portfolio. Including the extent to which the financial institution relies on donor funding, and what sustainability would look like without this support.

  • Profitability of farmers served: An assessment of the extent to which farmers are able to generate positive returns from their loan and improve their livelihoods.

  • Business case for value chain actors (e.g. off takers, training providers): An assessment of non-financial service providers that engage with smallholders and collaborate with the FSPs, and the extent to which these value chain actors are benefiting from the partnership.

The results of these first pilots have brought promising results. For ECLOF in Kenya it has brought transparency to key revenue and cost drivers. Quantifying returns across the value chain also proved to be a breakthrough.

“The service delivery model analysis has been critical in informing how to best engage with farmers, cooperatives and funders.” Mary Munyuri, CEO of ECLOF Kenya

Mary and her team are now able to better understand the key profitability levers for their smallholder portfolio, enabling more informed investment decisions. The farmer profitability assessment has allowed ECLOF Kenya to quantitatively prove their customer value proposition and better target their marketing efforts. Finally, understanding the economics of their value chain partners, has enabled Mary to reshape negotiations with them as ECLOF scales up. Ultimately, the SDM analysis will help ECLOF share the costs and risks of serving smallholders with its partners, and quantify their profitability and impact for their investors.

“Private capital can play a catalytic role in piloting and supporting new financial businesses that serve smallholders. But just as in other early stage and developing sectors, lack of market and business level data means there is little visibility on the risks and expected returns of private capital. We’re working to change this, and we believe this partnership with IDH’s Farmfit and the SDM methodology for FSPs is the missing piece of the puzzle.”Clara Colina, Program Manager, Mastercard Foundation RAF Learning Lab


Over the next twelve months, the Lab and IDH are working together to improve the SDM approach to better analyze smallholder FSP business models and develop additional case studies. As more data is collected, Farmfit will share aggregated insights on sector-level trends, key success factors, and common pitfalls in smallholder service delivery, including finance.

Farmfit is a growing marketplace for service providers with smallholder farmers as clients. It offers data, insights, and de-risking finance to businesses and banks, feeding the demand for viable business models that deliver finance and other services to smallholder farmers. Farmfit has three key components: Farmfit Intelligence, which helps all stakeholders that engage with smallholders get access to data on the returns of smallholder business models, and benchmarks individual business model performance against peers. Farmfit Business Support, which helps businesses and banks use these insights to better design smallholder business models, that can be scaled through the Farmfit Fund. The 30 M EUR Farmfit Business Support facility and Farmfit Intelligence center are funded by DFID and the Bill and Melinda Gates Foundation. The 100 M EUR Farmfit Fund is initially funded by four leading companies–Jacobs DE, Mondelez, Unilever and Rabobank—and the Dutch government, with additional de-risking guarantees from the US government.

Interested in learning more?

Get in touch if you’re a FSP interested in knowing more about engaging on a service delivery model assessment.

Iris van der Velden, Director of Learning and Innovation at IDH

Clara Colina, Manager, Mastercard Foundation RAF Learning Lab

Stay tuned for more knowledge sharing on specific case studies from on FSPs!


About the Mastercard Foundation Rural and Agricultural Finance Learning Lab

The Mastercard Foundation Rural and Agricultural Finance (RAF) Learning Lab (the Lab), is an initiative of the Mastercard Foundation’s financial inclusion portfolio, implemented jointly by the Global Development Incubator and Dalberg Advisors. As a knowledge sharing platform, the Lab aims to foster learning and collaboration among Foundation partners as well as the broader RAF community, to support innovation and scalability of financial services for rural customers and smallholder farmers.