THE DANGERS OF FINANCIAL EXCLUSION IN AGRICULTURE.
Africa, rich in agricultural resources, holds immense potential for economic growth, poverty reduction, and food security. But a pressing issue continues to hinder progress in this vital sector: financial exclusion. The exclusion of farmers from formal financial systems in Africa has far-reaching consequences that jeopardize agricultural development.
A report by EFInA states that about 35.9% of the populace in Nigeria is financially excluded, and 81% of them live in rural areas, with the predominant activity being agriculture. Its no doubt, our strategy at Agriarche of building agricultural frameworks that financially include farmers is sacrosanct to achieving Nigeria’s goal of a 95% inclusion rate by 2024.
Financial exclusion acts as an obstacle to economic growth in African agriculture. Smallholder farmers, who form the sector’s backbone, face significant challenges in accessing formal financial services such as credit, savings, and insurance. Farmers struggle to invest in modern farming techniques, high-quality inputs, and advanced technologies without these essential tools. As a result, productivity remains low, limiting the sector’s ability to contribute substantially to national GDP and economic progress.
Ensuring food security for Africa’s growing population is a major concern. The Food Agricultural Organization (FAO), reports, 19.4 million Nigerians were projected to experience acute hunger between June and August 2022. For farmers, the impact of the unending rising costs is made worse by their low capital base and inability to access funding. Still, financial exclusion poses a direct threat to achieving food security. According to World Bank, limited access to credit prevents farmers from expanding their operations, leading to reduced yields and production. The absence of affordable crop insurance leaves farmers vulnerable to the adverse impacts of climate change, pests, and diseases, food insecurity.
Financial exclusion also enhances rural poverty and widens socio-economic inequalities. Smallholder farmers face limited opportunities for upward mobility due to financial barriers. Without access to credit, they struggle to make long-term investments in farm infrastructure, land improvement, and income diversification. Consequently, rural communities remain mired in poverty, lacking access to education, healthcare, and essential services.
Access to markets is important for farmers to sell their produce at fair prices and secure stable incomes. Limited financial services hinder farmers’ capacity to transport, store, and process their crops, resulting in post-harvest losses and reduced profitability.
BRIDGING THE GAP
Bridging this gap requires a multi-faceted approach, involving governments, financial institutions, development organizations, and agricultural stakeholders. Policymakers should prioritize creating an enabling environment that promotes inclusive financial services, tailored credit solutions, and affordable insurance products. Moreover, investing in agricultural infrastructure, and technological innovation can unlock the sector’s potential and empower farmers, just like the Kasuwa app that has created financial inclusion through digitization. Smallholder farmers have access to credit facilities and there is also market availability. The app is the connecting block of all key players in the agric sector and above who have an account to receive and make payments. Thereby, contributing to the 95% financial inclusion strategy of Nigeria.
By removing the barriers to financial inclusion, Africa can have a paradigm shift in agriculture, sustaining economic growth, food security, and sustainable development across the continent. It is time to bridge the gap and build a future where no farmer is left behind.
