The Equity Group Foundation (EGF) has reached out to and trained almost 1.5 million women and youth in financial education. How important is the financial education of young and female farmers for the growth of the agricultural sector?
EGF offers financial literacy training for farmers with the aim of improving farmers’ capability in terms of knowledge, skills, attitude and behaviour towards financial and money management. Young farmers are empowered to become better managers of the income earned from their farming activities.
The financial education programme covers four modules – budgeting, savings, debt management and financial services. To increase reach, especially of the youth, the financial literacy content has also been successfully converted into a mobile-user format. The farmers can now access this content through their mobile phones. The content is displayed in terms of tips, questions, answers and financial education.
Financial literacy training among women and youth has resulted in a transition from subsistence to commercial farming. EGF’s agriculture pillar has field staff trained in agronomy related subjects who train farmers on good agricultural practices and this has resulted in better crop performance and thus improved incomes. Additionally, increased incomes have contributed to the good performance of loan repayments, as farmers are already trained on debt management.
ICTs and mobile banking are revolutionising the way in which agri-finance is delivered. Which new innovative initiatives do you feel have the most potential to make an impact?
ICTs and mobile banking channels have revolutionised money transfer and payments, with customers having greater control and freedom to manage their bank accounts. Equity Bank customers are now embracing the new ideology that, ‘Banking is something you do, not a place you go to’, which is an exciting phenomenon for rural farmers who, until recently, had to travel long distances to access financial services.
Equity Bank has led the pack in ICTs and mobile banking, as it strives to deepen the financial inclusion agenda. The bank has recently introduced new digital platforms such as Equitel, a mobile banking solution which allows customers to access banking and telecom services from voice, data and SMS. The Eazzy Banking App, a revolutionary platform, helps customers manage their money and track their financial goals. The digital banking products are developed with a focus on enhancing accessibility, convenience and affordability of financial services.
With the self-service digital platforms, farmers are able to undertake various bank transactions, such as transfer of money, payment of bills, access of credit etc. within the comfort of their homes. Through the Eazzy Banking App or Equitel, the bank can quantify farmers’ creditworthiness through credit scoring thus enabling risk-based pricing of loans to them.
Through the EazzyChama digital platform, women and youth farmers have also been encouraged to be part of groups or associations. EazzyChama is a digital book-keeping tool for groups, commonly known as ‘chamas’ in Kenya. Through these groups, they are better able to mobilise their earnings and combine them to be able to qualify for higher loans. Group members can also guarantee each other so that they can access financing even without conventional collateral. The EazzyChama platform enables the farmers in the group to be able to monitor contributions to the group, how much money is in their group account, how many loans they are servicing and any withdrawals from their group account.
The representation of women in agribusiness is still quite poor. How can innovative financing mechanisms better support women entrepreneurs?
The bank has encouraged women entrepreneurs to engage in agribusiness activities, by working closely with other partners to offer market linkages. For example, the bank has worked with partners such as the World Food Programme’s Purchase for Progress initiative, East Africa Breweries Ltd (linking sorghum farmers), and Frigoken Ltd (linkages for horticulture producers).
Equity Bank has also adopted innovative financing partnerships to implement projects that focus on women empowerment. For example, we have partnered with GROOTS Kenya to finance rural women who engage in agribusiness activities. The main component of the project is to build the business capacity of rural women and facilitate market linkages. The programme targets 3,400 rural women in Nakuru and Kitui counties. The loan repayments in this project have been very good and the project has also continued to register great success in transforming the lives and livelihoods of the rural women. As a result, the World Bank has given GROOTS the highest ranking in terms of impactful projects.
Equity Bank is also currently implementing a project called the Kenya Cereal Enhancement Programme (KCEP), which is a strategic public-private partnership between the Government of Kenya, the European Union, the International Fund for Agricultural Development and Equity Bank. Equity’s role is to provide an e-voucher platform that enables farmers to access inputs from selected agro-dealers. Farmers are issued with ATM cards that have an e-wallet which hosts several components, for example a wallet for seeds, fertilisers, equipment, etc. Agro-dealers are also issued with customised point of sale (POS) devices; the farmers swipe their cards at the provided POS to acquire various farm inputs. Once a farmer swipes the ATM card at an agro-dealer’s POS, all transactions are processed online and in real time. To date, close to half a billion shillings (€4.3 million) has been disbursed to over 27,000 project beneficiaries (58% of farmers served are women). Farmers enrolled in KCEP are also trained on financial education; to date 63% of total farmers trained have been women.
There is still reluctance within the private sector to invest in agribusiness due to its perceived higher risk when compared to other industries. How can policymakers and financial institutions act to reverse this cultural attitude?
The vast majority of African farmers have historically been excluded from access to financial services. Mainstream financiers tend to shy away from lending to the agricultural sector because of associated risks including reliance on rain-fed agriculture, low uptake of modern technologies, commodity price fluctuations and challenges in accessing markets. Equity Bank, working with other like-minded stakeholders, has been at the forefront in confronting these challenges through the adoption of innovative financial products that ‘de-risk’ the sector. The bank has adopted a value chain financing concept, which has been noted to reduce costs, de-risk and increase overall efficiency of agricultural value chains.
The bank also helps farmers to mitigate price risks by provision of warehouse receipt financing, being the first financial institution to implement it in Kenya. In addition, the bank, through the Equity Insurance Agency, offers agriculture insurance packages to farmers, enabling them to mitigate various agricultural risks at affordable rates. Index-linked livestock or crop insurance are some of the products that can help de-risk the sector by managing common systemic shocks that affect all farmers at some point.
Governments could also minimise risks in agriculture by increasing investment and incentives for smallholders to invest in irrigation, equipment and other technologies to mechanise and modernise agriculture activities and reduce over reliance on rain-fed agriculture, which makes farming unpredictable and risky for financiers. Investment in rural infrastructure, for example, feeder roads and local storage structures, would also minimise losses incurred due to food wastage/spoilage. However, many African governments are still struggling to meet the Maputo Declaration of allocating at least 10% of their national budget to agriculture every year.
5) As the largest commercial bank in Africa, Equity Bank has successfully led the way in providing financial services to smallholder farmers. What has the company learnt from this process that could help to bridge the remaining gap between farmers and financiers?
Emanating from its humble beginnings with customers and branches in rural areas, Equity has remained true to the objective of supporting farmers through financial intermediation. This has been achieved by innovatively developing financial interventions and training programmes that support smallholder farmers to become players in an inclusive financial system.
The bank offers financial services through a regional branch network of over 170 branches in Kenya, reaching out to farmers in rural towns. Equity Bank also operates in Democratic Republic of Congo, Rwanda, South Sudan, Tanzania and Uganda. The extensive branch network is supported by over 29,000 agent outlets; the agents operate in rural areas and this has been extremely helpful to farmers as they are able to access financial services at their locality, saving time and money. Equity Bank’s new digital platforms have further enhanced accessibility, convenience and affordability of financial services.
Equity Bank is also a market leader in agriculture financing in Kenya. The bank has a fully-fledged agriculture/agribusiness department headed by a general manager with over 200 staff fully trained in agriculture who manage farmer relationships. The pool of agriculture staff offers training to farmers and advises them on how to undertake farming as profitable businesses. The agriculture department strives to understand the needs of it varied clients in agriculture and livestock value chains and thereby provide relevant and timely solutions to meet their specific needs. For example, credit facilities offered to farmers have a loan period and repayment schedule that is tailored to fit cash flow projections based on production cycle, enabling farmers to borrow and repay loans successfully.
Rural finance is more than credit provision; the bank therefore offers farmers a wide range of other financial support interventions. Equity Bank has invested heavily in IT infrastructure to avail various payment solutions and saving products. The bank has a friendly remittance account for farmers; the account has no ledger fees, no minimum opening or operating balance, hence it is affordable to operate. Through our Hapo Hapo service, farmers can even open a new account using their phone.