The study, 'Digitalizing Value Chain Payments for Small Holder Farmers in Ethiopia' aimed to develop a comprehensive understanding of financial flows and digital payment needs of small holder farmers (SHFs) and other value chain actors. It also aimed to assess the ability of financial services providers to utilize technology to expand access to finance to value chain actors. The study focuses on three value chains: malt barley, chicken feed and vegetables. Malt barley and chicken feed value chains operate in a sellers' market, that is, a market where the demand for the crop exceeds its supply. In these markets, it is easy for SHFs to find buyers willing to offer high market prices. The vegetable value chain, in contrast, is a 'buyers' market' due to its short shelf life and the fact that it focuses on high-end markets (including the export market). In these markets SHFs face more challenges in finding buyers. Financial Service Providers (FSPs) providing credit to both sellers' markets and buyers' market value chains, need to properly weigh the risk of non-repayment due to side-selling, while in buyers' markets SHFs could struggle with not being able to sell on time and at a good price and might face challenges in servicing their debt. SHFs interviewed for the study typically have bank accounts but receive and make all payments in cash. They are not familiar with digital financial services (DFS) preferring to make transactions in cash and as a distant second alternative, using bank accounts. SHFs also report facing challenges when accessing credit to purchase high quality inputs. Most SHFs interviewed are members of organizations and cooperatives (coops) that when managed successfully, enable farmers to be more productive. While few successful coops do exist, the majority are poorly managed. To truly improve each value chain, the quality of the farmers' organizations and cooperatives needs to improve by providing them with technical assistance, management systems and technology.
Authors
- Disclosure Date
- 2024/06/04
- Disclosure Status
- Disclosed
- Doc Name
- Digitizing Value Chain Payments for Smallholder Farmers in Ethiopia
- Published in
- United States of America
- Unit Owning
- DECRG: Finance & Priv Sec Devt (DECFP)
- Version Type
- Final
- Volume No
- 1