The reality of our continent and the importance of agriculture and rural economic activities in terms of the livelihood strategies of the majority of people in the region necessitate the focus of this theme area. In line with the FinMark Trust purpose statement the Rural Finance Theme aim to ensure inclusion of poor people in rural financial markets.

The purpose of the Rural Finance Theme is to research, socialise, support and catalyze rural finance activities towards increased access to financial services in rural areas.

This theme has the following functional areas:

  • Understanding rural finance in the region
  • Innovative approaches to rural finance: Identification and support
  • Dissemination of rural finance information
  • Creating a network of institutions and individuals that are working in this area and collaborate towards the purpose statement
  • Leveraging additional resources towards enhancing the purpose
  • Integration with other themes and the Regional Finance and Investment Programme

To this end, a policy development programme was launched in 2010 with a study to determine the status of rural and agricultural financial services in six Southern African countries: Botswana, Malawi, Mozambique, South Africa, Zambia and Zimbabwe.

As population and life expectancy increase, the demand for food has created a renewed interest in agricultural financing with more emphasis on food safety, traceability, quality standards with longer shelf life and agricultural value chains. This evolution has prompted FinMark Trust to design a long term programme on rural and agricultural finance with the objective of accelerating financial inclusion among smallholder farmers and in low-income rural communities with the following phases:

Phase One (2011-2012): During this period, evaluative studies of the status of agricultural and rural finance in six countries were completed for Botswana, Malawi, Mozambique, South Africa, Zambia and Zimbabwe together with an assessment of the impact of SaveAct’s informal savings and credit groups on economic development in low-income rural communities in South Africa, in particular on smallholder farming. Among the key findings of the former studies were that public policy on agrifinance is generally poorly coordinated and often inimical to private sector participation; that banks mostly have a poor understanding of small scale farming, are reluctant to provide credit and are unaware of approaches that are being used with success elsewhere to lend sustainably; and that the demand for credit is constrained by a range of factors, many non-financial. Recommendations for public policy and private sector practice were made to address each of the challenges identified. The assessment of the impact of SaveAct’s informal savings and credit groups on rural economic development in South Africa provided insight into the role played by informal financial institutions in serving rural and agricultural communities. The study revealed the positive role played by the groups and by state social security payments in meeting households’ consumption needs and promoting investment.

Phase 2 (2012-2013): Twelve sets of case studies were conducted of innovations and best practices in Africa, Asia and Latin America that address common agricultural and rural finance challenges in Southern Africa. In each instance consideration was given to what would be needed to apply a similar approach with success in the region.

Phase three (2013-2014): During the period, the completed six country studies culminated in workshops which were held in the respective six countries in order to disseminate the findings of Phases 1 and 2 and to consult key internal stakeholders on how best to take advantage of the findings. This period also saw the establishment of the Agricultural Development Finance Forum of South Africa (ADeFFSA) to promote the acceleration of agricultural and rural financial inclusion in South Africa.

The consultations during the above workshops pointed towards the need for an increasing focus on the supportive enabling environment for the participation of the small farmers in food security as well as their role in the agricultural value chain. Our country-specific research indicates that for a long time the economic potential of agriculture remained unutilised because (i) the uncertainty around land ownership and land tenure (ii) lack of pre and post-harvest financing (iii) the reluctance of financial institutions to finance rural farmers , citing high transaction costs and risks related to agriculture such as crop failure, diseases and market fluctuations as a justification and (iv) the lack of trust between the small and the commercial farmers that otherwise would have allowed an agricultural value chain with the small farmers participating actively at the beginning of the chain and benefitting from a solid institutional infrastructure that includes several players who can effectively support the small farmers.

To address the above constraints, FinMark Trust has engaged with several regional players who are also heavily involved in agricultural development to have a co-ordinated and harmonised approach to the sector. As a result of these engagements, an agricultural working group has been established.

The way forward – 2014 and beyond

In order to achieve the programme’s objectives, going forward FinMark Trust will focus on three key activities: advocacy and facilitation; capacity building; and research.

Advocacy and facilitation

Planning is underway for the completion of the dissemination and consultation processes which began in Phase 3 by convening a regional workshop, including all SADC countries, in collaboration with the Directorate: Food, Agriculture and Natural Resources (FANR), SADC Secretariat. The Trust will also articulate its programme with the implementation of SADC’s Regional Agricultural Policy (RAP), as part of the African Union’s Comprehensive African Agriculture Development Programme (CAADP). On-going work will continue with in-country stakeholders to build structures and processes to increase agricultural/rural financial inclusion, possibly through broadening ADeFFSA into a regional network. Further to this, FinMark Trust will facilitate the implementation of initiatives to extend the inclusion of smallholders in agricultural value chain finance (arising out of value chain research). The Trust will also facilitate the implementation of initiatives by informal financial institutions/ NGOs to increase the access of smallholders entering commercial markets to finance.

Capacity building

In collaboration with Continuing Education at the University of Pretoria and the University’s Department of Agricultural Economics, Extension and Rural Development, FinMark Trust will be sponsoring the establishment of the Certificate Programme in Agricultural and Rural Finance at the University of Pretoria in September 2014. The objective of the intensive two-week course is to provide a deeper understanding to senior and middle management in the private and public sectors in the region of what is needed to reach out to smallholder families and to serve them sustainably with an appropriate range of financial products and services. It is geared specifically to provide strategic guidance for the development of agricultural finance units serving smallholders. Participants in 2014 will be drawn from the six Southern African countries in which ‘status quo’ studies were undertaken. From 2015, it is envisaged that the course will be operated on a self-sustaining basis, possibly jointly with the World Bank.


FinMark Trust intends conducting studies of existing value chains and value chain finance involving smallholder farmers in two (or possibly three) Southern African countries and an evaluation of the potential for the development of new and/or more inclusive agricultural value chains (in the same countries). A need has also been identified for the study of the impact of informal financial institutions/NGOs on rural economic development, especially farming, in Southern Africa (building on the research on SaveAct) and an evaluation of the potential and strategy for broadening/ deepening impact, especially for smallholders entering commercial markets. If external funding is forthcoming, it is also possible that status quo assessments of SADC countries for which studies have not so far been conducted will be undertaken.