If the challenge is getting hundreds of thousands of farmer organizations access to finance, then what could a systemic solution actually look like?

May 11, 2021

This article was written by Lucas Simons, CEO of SCOPEinsight. 

Let me ask you a question: Why haven't we solved the access to finance challenge by now?

We have a serious challenge at our hands; farmers and farmer organizations need access to affordable finance to become more productive, more sustainable, more resilient, and produce the food we need to feed our growing population. The future need is staggering. Estimates reveal that feeding 8.2 billion people in 2030 would require raising overall food production by approximately 50% by 2030 (Food and Agriculture Organization [FAO], 2010). Furthermore, African countries are far from meeting their sustainable development goal target to end malnutrition by 2030 (Osgood-Zimmerman et al., 2018).

If the challenge is so significant and urgent, then why haven't we solved the access to finance challenge for agribusinesses by now? Let's examine this a bit.

In a recent query, development practitioners were asked: Is access to finance THE main barrier to agricultural enterprise growth? A whopping 79% of them responded, "Yes" (AGRA, 2021). So, it is not a lack of awareness that stops us.

Meanwhile, we have spent billions of dollars on agricultural development projects throughout the world in the last decades. Total ODA (overseas development assistance) disbursements for agriculture have risen over 156% since 2002, standing at USD 10.2 billion in 2018 (Ceres2030, 2020). So it also is not a lack of resources and funding that seems to be the problem.

Is it that we are still clueless about what is needed to get farmer organizations Banked? Do we need more pilots, more projects, more funding?

Or is our way of working actually a large part of the problem that keeps us spinning our wheels while not moving forward?

We cannot project ourselves out of this; we need a different way of thinking!

This short article argues that you cannot solve a complex problem like access to finance for hundreds of thousands of farmer organizations with fragmented pilots, projects, and programs. In fact, complex problems have never been solved by this type of approach, and we all know this to be true. What we need is an opposite way of thinking and working. If you want to solve a problem, then, and as Franklin Covey writes in 'From Good to Great' (Collins, 2001), "We need to start with the end in mind". We must have a vision of what we need to have in place to solve the problem and get the results we want. To do that, we need to ask ourselves three powerful questions: 1) If we want to solve this challenge, what would a systemic solution actually look like?, 2) What are the components or elements of a functioning systemic solution?, and 3) How do we get there, and who needs to do what? We can then start working towards that solution and stop with well-intended, fragmented, unrelated projects that do not contribute to that vision. That is how we build systems that will enable scalable solutions. 

What are the components of successful systemic solutions?

If we want to build systemic solutions, we can distinguish four core principles that we need to consider. The core four principles of successful systemic solutions are:

  1. Mission agreement: There is a clear and agreed idea between actors what we are trying to accomplish and what success looks like, and how to get there.
  2. Standardization of approaches and metrics: There is agreement on what needs to be done and how we do things. Standardization creates efficiency and scalability, and it ensures interoperability and smooth communication between different actors.
  3. Separation of roles and responsibilities: Within the system, different actors do different things. It is not one organization that tries to do it all.
  4. Continuous improvement: The system manages continuous improvement of the performance of both the individual actors and the system as a whole.

Let's look at an example to see if we can see these four principles in real life. Take the example of the Educational system. We know and realize that any national educational system leaves much to be desired, but we hope you would agree it does many things right and has reasonable success. Every year millions of students enter the educational system, get an education, graduate, and find a job. In turn, an educated workforce benefits the entire economy.

We can see the four principles at work here.

  1. Mission agreement: There is an agreement on the labor market needs and expects graduates to get a job when they graduate.
  2. Standardization of approaches and metrics: We agreed on the basic curricula, e.g., what do we mean with Mathematics, Language, Geography, History. And there is an understanding and agreement on the specific metrics to assess each student's performance that allows graduation from one level to the next.
  3. Separation of roles and responsibilities: We work with qualified teachers who must have a degree and experience to be qualified. The teachers are not the ones making the exams or doing the job interviews.
  4. Continues improvement: Based on the tests, exams, and benchmarks, the performance of students and schools are monitored and checked, and based on that, course correction takes place both on both levels.

So how can we get hundreds of thousands of farmer organizations to access finance?

Let's apply the same logic to the challenge of enabling hundreds of thousands of Farmer organizations access to finance. Let's look at what is already in place to build that systemic solution and determine what needs to be done to make this systemic solution operational.

At SCOPEinsight (est 2010), we see it as our mission to help build this systemic solution to enable access to finance for thousands of farmer organizations. Over the past 11 years, we have worked on these four core principles with partners. Now it's time to move beyond the project phase and start putting the different components together, igniting the interoperability between the different actors and building a scalable, effective, and efficient systemic solution.

So, what are we doing, and what are the next steps?

  • Mission agreement: In the last years, there has been a realization that a bankable Farmer organization is first and foremost a professionally managed Farmer organization. This is a huge step forward. But what is a professional Farmer organization? Thanks to AMEA and the NEN-ISO organization, we know the answer to that as we have a global agreement on what skills determine a professional farmer organization. This agreement is now an official ISO-IWA29 guideline document (Find the IWA29 here). Let's use and build on this definition rather than start afresh.
  • Standardization of approaches and metrics: Also, here, progress is being made. More and more organizations realize that it makes sense to agree on how we measure the performance of Farmer organizations, agree on what is good Technical Assistance and what the suitable instruments are for that. Here is what we have been able to do:
    • Based on the IWA29 guidelines, SCOPEinsight has developed standardized assessment tools to measure the level of professional farmer organizations. SCOPEinsight works with dozens of partners, and together we have executed thousands of assessments in more than 30 countries and sectors. The data helps assess and segment farmer organizations, guide technical assistance, monitor performance, and set benchmarks. Let us use and build on these assessment tools and data sets and not start afresh.
    • IFC and SCOPEinsight have for years now a unique partnership where we work together. In this partnership, we build a very effective curriculum to help farmer organizations become more professional. This curriculum is based on the SCOPEinsight assessments and reports. Other capacity-building curricula are being assessed and accredited by AMEA, so we know which are the better TA tools out there that are fit for purpose to help advance the professionalization of Farmer organizations. Let's use and build on these tools and not start afresh.
    • SCOPEinsight and the Center for Financial Inclusion, with the support of AGRA, in consultation with almost 100 financial institutions and stakeholders, have recently completed a process where there was an agreement of what metrics would help lenders best in the pre-due-diligence phase. These metrics are known as "the bankability metrics". Let's use and build on these common bankability metrics and not start afresh. 
  • Separation of roles and responsibilities: This is a crucial part, and frankly, this is also the biggest challenge in our sector. Working together like a team where it is clear who does what - who plays offense and who plays defense, and who is the goalkeeper - is still not easy. Driven by donor money, we see everyone trying to solve it by themselves, trying to do it differently than others, reinventing the wheel and starting afresh, going for short-term results, and working in a project-driven way. It has been our founding vision not to follow that path. We have a unique role in the development ecosystem, and we cannot be successful if we do not collaborate with others. Our role and added value is to be the best in developing the assessment tools and managing the business intelligence data that comes out of these assessments. We leave the capacity building to others who excel at that and who use our data. The result is that we work with over 50 capacity building partners globally. We also do not invest directly in farmer organizations. Instead, we partner with different financial institutions that can use our data to invest. We also do not work on the convening of the value chains. Others are better at that. We partner with them, and they use our data to optimize their work. We refer to and use the ISO-IWA29 standard and have initiated and founded AMEA and are an accredited tool by them. In short, with our standardized tools, data, metrics, and benchmarks, we can align the different actors, so we work towards the same goal, and we ensure interoperability between them.
  • Continuous improvement: Continues improvement of both the individual actors' performance and the system is only possible when commons metrics and performance data are used. SCOPEinsight has the benchmarks to track and compare the performance of individual farmer organizations and capacity-building programs and even compare sectors and countries to each other. When different actors start using this data and benchmarks, we can collectively manage the systemic solutions and collectively course adjust when needed.

What are the implications for you when we work more systemically?

Why we need to work more in a systemic way to address the access to finance problem is indeed the 10.2 billion dollar question. Changing the way we work from projects to a systemic solution will determine for a large part how effective we will eventually be in solving the complex issues and having a structural impact versus continuing doing more fragmented projects. In addition, there are clear benefits for each actor if we would start to work more systemically. Here are a few of them:

  • Donors can maximize their investments by creating greater impact, work in a market-driven way, and having natural exit moments for their programs.
  • Technical assistance providers can better target their support and give precisely the support that is needed. They can measure their impact and compare their performance with others.
  • Lenders can see their pipeline increase, lower transaction costs, lower risks, and make lending decisions in agriculture in a quicker and more informed way.
  • Companies benefit from having more reliable business partners with higher quantity and quality produce. Furthermore, the transparency into the supply chain reduces risks.
  • National governments are helped by ecosystem solutions like this to assess the cooperative landscape, build scalable and efficient graduation programs, align efforts, compare performance and progress, and build roadmaps towards modernized rural economies.
  • Farmer organizations are the most important stakeholder of all. They finally get the ecosystem support structure they need to advance their professionalism, become resilient, self-sufficient, and have access to finance and markets.

Are you interested in making a structural impact by working systemically?  We would love to discuss the above solutions with you and how they can benefit YOUR organization. Contact [email protected] to schedule a call, and let's start making a real impact today!