Smallholder Finance Product Explorer

Transcription

1 Smallholder Finance Product Explorer Taxonomy Document January 2018

2 NOTE: Documents in this package were developed by One Acre Fund and MIX with initial support from the Rural Agricultural Finance & Learning Lab. These documents may be distributed for non-commercial purposes. This document and any reproduction should be attributed to One Acre Fund and MIX with the appropriate citation. Smallholder Finance Product Explorer January

3 TABLE OF CONTENTS Introduction 4 Product Development 5 Conclusion 15 Annexes 16 1 KEY USER PERSONAS 16 2 EXPERIMENTATION PHASE INTERVIEWS 18 3 FRAMEWORK BETA TESTERS SMALLHOLDER FINANCE WORKING GROUP MEMBERS 18 5 FIELDS & PRIORITIZATION 19 6 DEFINITIONS 23 7 GLOSSARY 28 Smallholder Finance Product Explorer January

4 INTRODUCTION Farmers make up more than 75% of the world s population living in poverty, but Financial Service Providers (FSPs) are largely focused on urban clients. It is estimated that only $50B of the $200B demand for smallholder finance is currently met by existing providers, 1 yet investment in agriculture has proven to be two to four times more effective at raising incomes among the very poor than investment in any other sector. Smallholder finance (SHF) represents the single biggest opportunity for scale and impact in financial inclusion today. To make a lasting impact on poverty, FSPs must pioneer services and explore new markets to meet the needs of smallholder farmers. However, they face resource constraints that prevent them from entering into this sector. In our conversations with FSPs, funders and other key actors in the smallholder finance sector, we have learned that knowledge sharing between FSPs and within the industry as a whole remains very limited. Without a means of collating, analysing and sharing SHF product research, it remains out of reach for time or resource-poor FSPs. We ve also learned that many funding institutions want to support the development of finance products for smallholders, but they face challenges identifying service providers with robust product offerings. There are three key types of data that can unlock market growth: demand, supply and impact. Existing initiatives have focused primarily on demand-side data, such as the i2i Facility and CGAP s Smallholder Financial Diaries microdata site. There is a growing body of impact data from research conducted by specialized institutions as well as the providers of services themselves. 2 But there remains a gap in the availability of supply-side data, and there is limited access to operationally useful information on SHF product development. The Smallholder Finance Product Explorer aims to address this barrier by providing a common, selfservice location for the market to enter and update smallholder finance product-level information. By gathering this information in one central place, and ensuring that it reaches key audiences such as FSPs and funders, we anticipate that: FSPs will learn how to design and deploy better products, that serve smallholder farmers needs; Funders will be able to identify new, innovative providers of smallholder finance, and bring much needed, better targeted funding into the sector, and; As new financial products, tailored to the needs of smallholder farmers, become more widespread, farmers will be able make better investments in their farming activities to help increase production and improve their livelihoods. The aim of the Smallholder Finance Product Explorer ( Product Explorer ) is to catalyse the development of impactful smallholder finance products across hundreds of financial service providers. It contains data that is operationally useful and practical, to inspire the creation of new products and support improvement of existing ones. This unique wealth of data will enable FSPs and funders to learn from one another much easier than ever before. The following document outlines the process that One Acre Fund, MIX and the Rural and Agricultural Finance (RAF) Learning Lab took to design and develop this resource, in close collaboration with key stakeholders in the smallholder finance sector. 1 Dalberg Global Development Advisors, Inflection Point: Unlocking growth in the era of farmer finance. April, RAF Learning Lab RAF Partner Learning Workshop Materials, Accra, November Smallholder Finance Product Explorer January

5 PRODUCT DEVELOPMENT Understanding the need for supply-side side data for product development Initial conversations with FSPs, funders and other key actors in the smallholder finance space revealed a strong interest in accessing the type of resources we proposed. It was widely agreed that a knowledge base compiling detailed and practical product-level information would provide an important and unique shortcut, overcoming the pervasive barriers of time and cost to catalyse investment in smallholder finance products. Problem statements One Acre Fund and MIX set out to develop a solution that could increase the visibility of the smallholder finance sector and lower the barriers to entry for FSPs to engage with farmers. This solution would help address two major problems that FSPs and funders are currently facing: 1. It s expensive and time-consuming to test & refine smallholder finance products, and; 2. There is a lack of good-quality market research on existing smallholder finance operations that can be adapted to one s own operations or programming. Target user personas In order to test the problem statements and refine what this solution could look like, One Acre Fund and MIX began by defining high priority target users. 3 Then, using a long list of FSPs categorized by existing agricultural products and rural footprint, we identified and reached out to representatives of each target user to conduct in-depth interviews. 4 The feedback received validated our initial assumptions about the needs of FSPs in the sector, and strengthened the case for building a Smallholder Finance Product Explorer. 3 For a more detailed description of each target user persona, see Annex 1. 4 For a list of FSPs interviewed, see Annex 2. Smallholder Finance Product Explorer January

6 Framework design and development Figure 1. Overview of framework development process Basic data framework design OBJECTIVE: To categorize a diverse set of agricultural finance products in a way that allows for comparison and benchmarking of products. PARTICIPANTS: One Acre Fund. RESULTS: Basic data framework [Figure 2]. To ensure that the Smallholder Finance Product Explorer be pragmatic and universally accessible, the following considerations guided the design and development of a data framework: Information must be easy to measure and collection methods should be low-touch, to lower barriers to sharing this information, and; The framework should focus on the common/core product features that span different countries and markets to varying degrees. The ultimate aim was to create a framework that would support providers product design efforts, while also remaining accessible and useful to a wider user base, such as funders and researchers. The first version of the Smallholder Finance Product Explorer framework is shown in Figure 2. Figure 2. Structure of basic data framework Smallholder Finance Product Explorer January

7 Field visits and data collection OBJECTIVE: To populate and test the basic data framework with an underlying data set. PARTICIPANTS: One Acre Fund RESULTS: Smallholder finance data from 30 FSPs. With initial support from the Mastercard Foundation, One Acre Fund carried out in-depth field visits with smallholder finance FSPs. Participation was voluntary, and they were asked to only share information they were comfortable with. This information was input into the basic framework to capture commonalities and differences across products. Framework expansion OBJECTIVE: To enhance the relevance and structure of the basic data framework by collaborating with other thought leaders in the smallholder finance sector. PARTICIPANTS: One Acre Fund, RAF Learning Lab, MIX. RESULTS: Expanded data framework structure. The Rural and Agricultural Finance Learning Lab s Smallholder Finance Solutions database, publicly available on their website, gathers data from case studies and reports, landscape mapping exercises and user-submitted data from donor programs, and represents a broad, global overview of existing smallholder finance solutions. Together, we merged the basic framework and the Smallholder Finance Solutions database into one comprehensive framework through which future users of the Smallholder Finance Product Explorer could understand smallholder finance products. The following figures outline the process of merging the two frameworks, to arrive at a framework made of five top-level categories, and 19 sub-categories. Smallholder Finance Product Explorer January

8 Step 1: Overlap between One Acre Fund framework and RAF Learning Lab Smallholder Finance Solutions database identified Smallholder Finance Product Explorer January

9 Step 2: Top-level categories expanded and merged Smallholder Finance Product Explorer January

10 Step 3: Additional sub-categories identified Smallholder Finance Product Explorer January

11 Step 4: Sub-categories merged Smallholder Finance Product Explorer January

12 Framework testing with working group OBJECTIVE: To agree on an objective, relevant and credible data framework structure. PARTICIPANTS: One Acre Fund, RAF Learning Lab, Smallholder Finance Working Group. RESULTS: >60 unique points of feedback; updated data framework structure made up of 110 fields across five main categories and 24 sub-categories [Figure 4]. One Acre Fund convened a Smallholder Finance Working Group, made up of FSPs, funders, researchers, and technical assistance providers in the smallholder finance sector. The goal in setting up this working group was to leverage their expertise at key milestones in the development of the Smallholder Finance Product Explorer. The initial Working Group session focused on testing and agreeing on an objective, relevant and credible framework that reflected the diversity of products being offered by various types of market actors, while also providing the ability to compare products regardless of service delivery models, geographies and client segments. 5 Discussions centred around three key topics: Do the five main categories 6 accurately describe a robust product? Strength of sub-categories coverage within each category; Strength and relative importance of underlying fields within sub-categories, to start mapping them by level of priority. The working group sessions yielded over 60 unique points of feedback. The data framework categories and sub-categories were updated accordingly, as shown in Figure 4. Figure 4. Updated data framework structure. 5 For a list of members of the Smallholder Finance Working Group members, see Annex 4. 6 Main categories: product overview and scale, value chain support, training, financial structure and pricing, and measuring impact. Smallholder Finance Product Explorer January

13 User testing OBJECTIVE: To understand the user experience and effort required to report data into the updated framework. PARTICIPANTS: One Acre Fund, MIX, FSPs. RESULTS: User feedback; completed data framework templates from seven FSPs. To test the final framework structure, we shared it with seven FSPs 7 and asked them to complete it with data from their smallholder finance product portfolio. The main objective of this exercise was to get an understanding of how much overhead is required by an FSP to complete the form. We also wanted to see if the responses would point to certain fields that may be irrelevant, or difficult to fill out. Overall, there were high levels of completion rates across all FSPs, with limited numbers of fields left blank. The gaps that did appear were an indication that FSPs were either unable or unwilling to share that information. These and other insights from the beta testing process were taken into account as we began prioritizing fields for the beta launch of the Smallholder Finance Product Explorer. Field prioritization and final framework OBJECTIVE: To organise framework fields in a way that captures most operationally important product data without placing a significant reporting burden on FSPs. PARTICIPANTS: One Acre Fund, MIX, RAF Learning Lab, Smallholder Finance Working Group. RESULTS: Final list of 67 fields to be launched. The total framework, made up of 110 fields, was organised according to levels of prioritization, to help differentiate between: 1. Information that is fundamental to understanding the key features of a product; 2. Information that is important but not required, and; 3. Information that is non-essential or most difficult to source. The Smallholder Finance Working Group was convened to test the initial prioritization, and determine whether removing one or more levels would greatly impact the value and utility of the underlying data. Based on their feedback and additional considerations included in Figure 5, the final list of fields to be launched was set. 8 7 For a list of beta testers, see Annex 3. 8 A full list of fields, their definition and prioritization level is available in Annex 5. Smallholder Finance Product Explorer January

14 Figure 5. Field prioritization decision-making process. Smallholder Finance Product Explorer January

15 CONCLUSION FSPs all over the globe, including MFIs, banks, and SACCOs, are positioned to serve the smallholder farmer segment, but face high resource constraints to develop and deploy new products for them. At the same time, funders seeking to support FSPs that lend to this market face challenges in identifying partners with robust product offerings. One Acre Fund, MIX and RAF Learning Lab have partnered to try to address some of these constraints, through the development of the Smallholder Finance Product Explorer. The Product Explorer has started out with a base of entries from nearly 40 FSPs, providing data on over 80 different products. We are leveraging MIX's extensive network of MFIs to source additional content, but have built a framework to also cater for non-traditional FSPs due to their growing role in smallholder finance. To this end, we are also working with the RAF Learning Lab to integrate their financial service providers database into the Product Explorer. The impact of this directory relies on data contributions from FSPs, and there are a number of reasons to contribute: 1. To promote their product and organization, and be featured among some of the largest and most innovative providers of smallholder finance in the world; 2. To increase visibility to funders and investors, a key user segment of the directory, and; 3. To gain early access to detailed operational information from other FSPs. Ultimately, by offering a product directory, tools and templates from which FSPs and funders can learn, we believe we can catalyse the development of SHF products across thousands of FSPs and support the efficient allocation of funding to the most innovative and impactful products. Smallholder Finance Product Explorer January

16 ANNEXES 1 KEY USER PERSONAS One Acre Fund and MIX developed the following user personas - profiles of potential users of the database service, including their background context, needs, capabilities, and constraints: Smallholder Finance Product Explorer January

17 Smallholder Finance Product Explorer January

18 2 EXPERIMENTATION PHASE INTERVIEWS 1. ECLOF 2. AKAM 3. Vision Fund 4. Grameen Foundation 5. Kashf 6. MicroLoan Foundation 7. 1 st Valley Bank 8. ASUSA SA 9. ASHI 10. CEVI 11. Proximity Finance 12. BRAC Uganda 13. Juhudi Kilimo 14. BINA ARTHA 3 FRAMEWORK BETA TESTERS 1. 1 st Valley Bank 2. CEVI 3. Proximity 4. ASKI 5. Agora Microfinance Zambia 6. Wasasa 7. ASHI 4 - SMALLHOLDER FINANCE WORKING GROUP MEMBERS 1. Jason Wendle RAF Learning Lab 2. Juan Guardado Grameen Foundation 3. Jamie Anderson CGAP 4. John Magnay & Tim Strong Opportunity International 5. Richard Reynolds Vision Fund 6. Tanmay Chetan Agora Microfinance 7. Simon Winter TechnoServe 8. Elliott Collins Kiva 9. Brian Milder Root Capital Smallholder Finance Product Explorer January

19 5 SMALLHOLDER FINANCE PRODUCT EXPLORER FIELDS & PRIORITIZATION Category Sub-category Field Priority Level Product Overview & Scale Description of Solution Total Clientele Number of Product Clients Product Portfolio Key Players / Partnership Structure Farmer and Value Chain Categories Client Segment Channels Product name 1 Summary of product 1 Country 1 Total clients bracket 1 Number of total clients 3 Product clients bracket 1 Number of product clients 1 Percent of total clients that are product clients 1 Average loan size per client 1 Product portfolio bracket 1 Product portfolio 1 FSP: Type of provider of financial product or service 1 FSP: Name of provider of financial product or service 1 If different than FSP, Last mile partner 3 If different than FSP, Training partner 3 If different than FSP, Complementary services partner 3 Funder: Support for finance provider 3 Commodity 1 Client type (target customer) 3 Risk assessment and mitigation strategies 3 Use of alternative data and data analytics for loan assessment 2 Target client by plot size 2 Target client by income 2 Has the product a focus on gender? 2 Percent of product clients that are female 1 Description of client 2 Client acquisition channel 3 Disbursement, repayment and/ or savings channels 3 19

20 Financial Structure & Pricing Credit Product and Repayment Structure Credit Pricing and Transparency Insurance Product Features Savings Product Features Payment Product Features Number of branches or customer service points 3 Number of field agents 3 Number of agriculture-specific field agents 3 Digitized customer relationship management 1 Digitized customer registration 1 Loan or product structure is flexible 1 Repayment structure is flexible 1 Loan or product term covers growing season 1 Grace period offered 1 Group or individual loan 1 Object of the loan 3 Product uses declining balance interest rate 3 Fees charged < 2% of loan amount 3 Collateral or compulsory deposit required 3 Product has fees or penalties for early repayment (incl. failure to grant interest rebates) APR 2 Average Loan processing time (days) 2 If flat rate, why? 2 Is APR or other transparent pricing communicated to clients? 2 Type of insurance product 2 Total insurance coverage in the last 12 months 2 Total pay-outs to clients in last 12 months 2 Average premium per client in last 12 months 2 Minimum deposit requirement 3 Withdrawal cost 3 Total deposit amount 3 Type of saving product 3 Average deposit size 2 Average transaction size 2 Total transactions amount

21 Value Chain Support Training Pricing and Transparency for Other Products Type of transactional product 2 Payment structure suits smallholder farmer cash flow 3 Transaction fees 3 Pricing is transparently communicated to the client 3 Operational Self Sufficiency OSS brackets 3 Product Level Sustainability Pre-harvest support Post-harvest Support: Storage/ Management Post-harvest Support: Market Linkages Training Structure Commercial sustainability of the product 3 Annualized repayment rate of the product 2 Inputs, assets, services are readily available 1 Inputs, assets, services are available at time demanded by client 1 Inputs, assets, services available within reasonable distance of client 1 Inputs, assets, services are of good quality 1 FSP involvement 3 Type of Inputs offered 2 Who pays for service 3 Informal management services provided 1 Formal programs in place for post-harvest management 1 If Yes to above, do over 50% of clients use service/ program 1 FSP involvement 3 Where storage takes place 3 Who pays for service 3 Informal linkages exist between clients and buyers/producers 1 Formal linkages exist between clients and buyers/producers 1 Guaranteed market opportunities exist for clients 1 If Yes to above, do over 50% of clients use service/ program 1 FSP involvement 3 Who pays for service 3 Agricultural training available to clients 1 Agricultural training available to clients using formal curriculum 1 Multiple agricultural trainings delivered during product cycle 1 Organization does quality checks on trainings 1 Training cost 2 21

22 Measuring Impact Who pays for service 3 Delivery party and mechanism 3 Training or tools are mobile-based 3 Financial literacy training takes places (Yes, No) 2 Classroom/theoretical training offered by administering party 1 Training Accessibility Training engages clients in participatory learning with additional materials 1 Training is offered in a convenient location for clients 1 Regular measurement of farmer yields takes place 1 Formal measurement with strong control group 1 Measurement of Farmer Yields RCT, or other academic quality work, done to verify results 1 Method of data collection 3 Frequency of measurement 3 Who pays for service 3 Impact on Farmer Yields Impact on farmer yields brackets 3 Measurement of change to profit / income or poverty reduction takes place 1 Using methodical process over time to measure change 1 Showing positive progress 3 Measurement of Livelihood Impact Independent study of impact done 3 What type of poverty measurement metric is used 2 If applicable, what is the quantified impact figure of that metric? 2 Who pays for service 3 22

23 6 DEFINITIONS Field Total clients bracket Definition The number of clients who have accessed any of the financial institution's services; i.e., loan, deposit, insurance account or other relationship in the last 12-month period, or at last available year-end. Definition source Product clients bracket Total number of clients accessing this product in last 12 months, or at last available year-end. Product portfolio bracket FSP: Type of provider of financial product or service Annualized figure showing total amount lent or disbursed over a 12-month period, or at last available year-end. This includes current, delinquent, and renegotiated loans over that period of time, but not loans that have been written off. Type of organisation as registered with local authority. If different than FSP, Last mile partner Type of organisation acting as primary interface with farmers (to deliver finance). Dalberg If different than FSP, Training partner Type of organisation providing training/tools to farmers. Adapted from MIX Dalberg If different than FSP, Complementary services partner Type of provider delivering additional, non-financial services to farmers. Funder: Support for finance provider Primary type of funding support provided to organisation. Dalberg Risk assessment and mitigation strategies Use of alternative data and data analytics for loan assessment Primary method used by organisation to secure a loan. FSP makes use of structured, semi-structured or unstructured data not necessarily related to past financial services usage to inform decision-making. Has the product a focus on gender? A product that has been designed specifically to respond to female clients' needs and/or preferences. Client acquisition channel Primary channel or method used by organisation to attract new clients. Dalberg Disbursement, repayment and/ or savings channels Number of branches or customer service points Number of field agents Number of agriculture-specific field agents Digitized customer relationship management Primary channel through which loans to clients are disbursed, clients' repayments and savings deposits are collected. The number of staffed points of service and administrative sites / branches used to deliver or support the delivery of financial services and wide array of face-to-face and automated services to clients. The number of employees who directly and regularly interact with clients, and may be responsible for arranging and monitoring client loans or other products. The number of employees whose main activity is to manage the agricultural finance portfolio, and is directly responsible for arranging and monitoring smallholder farmer loans or other products. FSP makes use of mobile or digital communications channels and technologies to enhance customer relationship management and client communications. Digitized customer registration Clients are able to register for financial service via mobile or digital channels. Dalberg Loan or product structure is flexible Loan or product has been designed to respond to specific clients' needs, and may include longer loan tenor, flexible repayment schedule, balloon or bullet repayments, and a grace period. Dalberg Adapted from Insights2Impact Dalberg MIX Glossary Adapted from MIX Adapted from MIX Dalberg Definition 23

24 Repayment structure is flexible Loan or product term covers growing season Credit product does not have a fixed repayment schedule. Borrowers can pay as little or as much as they want at any time, as long as they complete repayment by the final deadline. Credit product term is aligned with the length of the growing season (crops), fattening season (livestock) or milk production cycle. Grace period offered Repayment of the credit product does not start immediately after disbursement. Object of the loan Primary purpose for which the farmer uses the loan. Dalberg Product uses declining balance interest rate Fees charged < 2% of loan amount Collateral or compulsory deposit required APR The interest calculation is based on the balance of money that remains in the borrower s hands as the loan is repaid during the loan term. As the borrower repays instalments, the remaining loan balance declines over time. The total amount of fees applied to this loan product represents less than 2% of the total amount of the loan disbursed. Collateral or compulsory deposit is required as security for repayment of a loan, to be forfeited in the event of a default. An annual percentage rate (APR). The annual rate charged for borrowing, expressed as a percentage that represents the actual yearly cost of funds over the term of a loan, including all associated fees and interest rate. Average Loan processing time (days) Average number of days between client's application and disbursement of financial product Is APR or other transparent pricing communicated to clients? Total insurance coverage in the last 12 months Total pay-outs to clients in last 12 months Average premium per client in last 12 months Minimum deposit requirement FSP communicates clear, sufficient, and timely information about APR or other pricing in a manner and language clients can understand so that clients can make informed decisions. Total amount of insurance (total coverage, not just premiums) issued under this particular product in the last 12 months. Total amount paid out to clients in claims, in the last 12 months. The average specified amount of payment required periodically by an insurer to provide coverage under a given insurance plan, in the last 12 months. This can be expressed as an amount (in chosen currency), or as a percentage of the total value of the loan. Amount, ranging from $0 (no deposit required) to whatever is required as a minimum deposit to open a savings account. This can be expressed as a percentage of total loan. Withdrawal cost Amount charged per withdrawal transaction. Total deposit amount Total deposits in the last 12 months. Dalberg Type of saving product Please see Glossary for definitions. Dalberg Average deposit size Total deposits divided by total number of customers of this product, in the last 12 months. Dalberg Average transaction size Total transaction value divided by number of transactions in the last 12 months. Dalberg Total transactions amount Total value of all transactions using the product in the last 12 months. Dalberg Type of transactional product Primary purpose for which the farmer uses the transactional product. Dalberg Microfinance Transparency Dalberg Dalberg Dalberg Dalberg Payment structure suits smallholder farmer cash flow The payments product has been designed to align with farmers' seasonal cash flow. 24

25 Transaction fees Transaction fees, expressed as a percentage of total transaction value. & Dalberg Pricing is transparently communicated to the client OSS brackets Commercial sustainability of the product Annualized repayment rate of the product Inputs, assets, services are readily available Inputs, assets, services are available at time demanded by client Inputs, assets, services available within reasonable distance of client Inputs, assets, services are of good quality FSP involvement The institution fully discloses to the clients all prices, instalments, terms, and conditions of all financial products, including all charges and fees, associated prices, penalties, linked products, third party fees, and whether these can change over time. Organization's ability to cover its costs through operating incomes. Financial expense, impairment losses on loans and operating expenses are included in the calculation as they are a normal and significant cost of operating a FSP. Formula: Financial revenue / (Financial expense on funding liabilities + Net Impairment Loss on gross loan portfolio + Operating expense) The extent to which the product relies on donor support to cover overhead or operations. The percentage of payments falling due that have actually been collected in the past 12 months. The numerator is actual cash collections of principal and the denominator is the principal amount that was due to be paid. FSP is involved in ensuring that clients have access to the inputs, assets, and/or services they need to for their farming activity. Involvement can be direct or via partner organisation. FSP is involved in ensuring that clients have access to the inputs, assets, and/or services when they need them. Involvement can be direct or via partner organisation. FSP is involved in the delivery of inputs, assets and/or services where clients are. Involvement can be direct or via partner organisation. FSP is involved in monitoring the quality of the inputs, assets and/or services being provided to clients. Involvement can be direct or via partner organisation. Direct: FSP provides and funds pre-harvest support. Indirect: FSP facilitates pre-harvest support via partnerships or referrals. Nothing: FSP is not involved in any way in the provision or facilitation of pre-harvest support. Informal management services provided Linkages between FSP's clients and providers of post-harvest services are made on an ad hoc basis. Formal programs in place for postharvest management FSP involvement FSP is involved in providing post-harvest support services to clients of this product. Involvement can be direct or via partner organisation. Direct: FSP provides and funds post-harvest storage support. Indirect: FSP facilitates post-harvest storage support via partnerships or referrals. Nothing: FSP is not involved in any way in the provision or facilitation of post-harvest storage support. Where storage takes place Location of crop storage Informal linkages exist between clients and buyers/producers Formal linkages exist between clients and buyers/producers Guaranteed market opportunities exist for clients FSP involvement Linkages between FSP's clients and local buyers or producers are made on an ad hoc basis. FSP is involved in providing its clients with a formalized link to the market. This can include: buying the product directly from the client, sourcing buyers for clients, and facilitating off-taking agreements between its clients and buyers. Involvement can be direct or via partner organisation. FSP has an agreement in place whereby clients of this product are guaranteed a buyer for their farming outputs. Direct: FSP provides and funds post-harvest market linkage support. Indirect: FSP facilitates post-harvest market linkage support via partnerships or referrals. MIX MIX Dalberg CGAP Dalberg Dalberg Dalberg 25

26 Agricultural training available to clients Agricultural training available to clients using formal curriculum Multiple agricultural trainings delivered during product cycle Organization does quality checks on trainings Nothing: FSP is not involved in any way in the provision or facilitation of post-harvest market linkage support. FSP makes agricultural training available to its clients. This can include direct delivery of training, or facilitating the delivery of training via a partnership or coordination with existing agricultural training providers, such as government extension workers. Agricultural training follows a formal curriculum. Agricultural training is delivered on a regular basis or according to a defined schedule, over the course of the product's term. FSP follows a process for assuring the quality of the agricultural training provided to its clients. This may also include monitoring the impact of trainings. Training cost Cost per client of all trainings provided. Delivery party and mechanism Training or tools are mobile-based Financial literacy training takes places (Yes, No) Classroom/theoretical training offered by administering party Training engages clients in participatory learning with additional materials Training is offered in a convenient location for clients Regular measurement of farmer yields takes place Formal measurement with strong control group RCT, or other academic quality work, done to verify results Name of the organisation that delivers the agricultural training, and channel through which training is delivered (for example: field-based agent, extension officer, digital app) The agricultural training or supporting tools are delivered digitally. Please provide name of the organisation that designed the digitized training or tools. Training that aims to develop the skills and knowledge an individual needs in order to make informed and effective financial decisions. Training is conducted in a classroom setting, and does not include practical or participatory components. Training includes practical or participatory components. Organization ensures that the training is delivered either in the field, or in a conveniently located venue that is easy for clients to access. Organization implements a process or mechanism for monitoring the yields of its farmers in a systematic way, and at regular intervals. Organization is comparing the outcomes of this financial product on farmer yields against a counterfactual that shows what would have happened to farmers not accessing the product. This allows the organization to attribute observed changes in outcomes to the product, by following experimental and quasi-experimental evaluation designs. A Randomized Control Trial, or any other methodologically rigorous impact evaluation has been conducted to verify impact results. Academic quality refers to research that is conducted according to elevated professional standards, and has been published in an Academic or Scholarly Journal. Method of data collection Please see Glossary for definitions. Impact on farmer yields brackets Percentage increase in the yields of farmers accessing the financial product over a specific timeframe. Dalberg Dalberg & Dalberg Measurement of change to profit / income or poverty reduction takes place Using methodical process over time to measure change Organization has defined precise, measurable indicators to track farmers' change in income / profit or poverty level, and information for each indicator is collected at set intervals, using methods that conform to good research practices. Baseline information on key indicators is collected, and is updated regularly, at pre-determined intervals. Methods used confirm to good research practices. 26

27 Showing positive progress Independent study of impact done Analysis of the data shows an improvement in farmers' wellbeing outcomes across precise, measurable indicators. Indicators are directly associated with the desired outcomes or impact. An independent, third party researcher / research firm has conducted an impact evaluation to determine whether the financial product has had the desired effects on farmers and their households, and whether those effects are attributable to the financial product. 27

28 7 GLOSSARY Organization Type Funder: Support for finance provider Agro dealer Agro-processor Bank Cooperative Donor agency Exporter Extension provider Farmer organisation FinTech FSP Government Informal financial institution Investment fund Microfinance Institution NGO Private Retailer Social lender Guarantee Investment Agricultural input supply retail business; dealer in agricultural products. A business that transforms raw products originating from agriculture, forestry and fisheries. A financial institution licensed to receive deposits and make loans A farm, business, or other organization which is owned and run jointly by its members, who share the profits or benefits. An organization, either private or public, that donates funds in accordance with its charitable objectives. A business that sends goods or services to another country for sale. An organisation that delivers information inputs to farmers. A group of farmers that have a defined membership, purpose for assembling and organizational structure, established to support members in pursuing their individual and collective interests. A company that provides computer programs and other technology to support or enable banking and financial services. An organisation that provides financial products and services to its clients. The group of people with the authority to govern a country or state. A financial institution whose financial activities and services take place beyond the scope of a country's formalized financial institutions and lie outside financial sector regulations A supply of capital belonging to numerous investors used to collectively purchase securities while each investor retains ownership and control of his/her own shares An organization that offers financial services to low income populations. Almost all give loans to their members, and many offer insurance, deposit and other services. A non-profit organization that operates independently of any government, typically one whose purpose is to address a social or political issue. A company whose shares may not be offered to the public for sale and which operates under legal requirements less strict than those for a public company. A person or business that sells goods to the public in relatively small quantities for use or consumption rather than for resale Impact driven smallholder agricultural lenders that are primarily driven by social and environmental intent to support smallholder farmers, likely with lower than risk adjusted net market returns. A financing facility that covers the payment or performance of the provider's debt or obligation in the event of a default by the provider. A monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit. 28

29 Client type Risk assessment and mitigation strategies Object of the loan On-lending Technical assistance Non-commercial smallholder farmer Commercial smallholder farmer in loose value chains Commercial smallholder farmer in tight value chains Medium farmer Large farmer Cooperative or farmer association Micro-entrepreneur Smallholder farmer, segment unspecified Value chain actor Cash flow Collateral Group method Guarantor Access inputs Access land Finance infrastructure development Finance provided for the purpose of on-lending to the provider's clients The provision of advice, assistance, and training pertaining to the provider's operations. Non-commercial smallholders are generally considered subsistence farmers. Agricultural production is concentrated in staple crops, could include small livestock. They not connected to a structured value chain of any kind. Commercial smallholders in loose value chains tend to be somewhat less poor than the non-commercial smallholder segment. Their crop mix usually focuses on staple crops and could also include some highervalue crops. Commercial smallholders in loose value chains generate some surplus to sell, usually in informal local or regional markets. Commercial smallholders in tight value chains take a more business-like approach to farming. A sizeable portion of agricultural income may be derived from higher-value specialty crops, but likely to grow some staple crops as well. Manage at least two hectares of land and have access to buyer-provided bundles of improved seeds, inputs, agricultural and weather information, finance, and secure markets and prices. Medium farmers: farmers typically managing between 2 and 10 hectares of land Large farmers: farmers typically managing more than 10 hectares of land Cooperative, farmer association or producer group: a type of cooperative that unites agricultural producers for production or other activities needed by the members (such as processing, marketing of output, or supply of the means of production). Micro-entrepreneur: small size non-farming business in the agricultural value-chain (e.g. processor) contracting a loan of less than $50K. Farmer making use of small-based plot of land, growing primarily subsistence crops and relying almost exclusively on family labour. Value-Chain Actor (eg: SME, agri-business): Formalized, registered businesses that operate along the agricultural value-chain, providing products and/or services to other actors within the value-chain. The amount of stable and continuous income that is available to the borrower. Property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup its losses. The group is held accountable as a unit for any single member s delinquent repayment or default. A person or organization that provides a guarantee and is responsible for the repayment of the borrower's debt in the event of a default Loan to cover the purchase of all materials used in primary production of crop (eg: seeds, fertilizers, water, agro-chemicals). Loan to cover the purchase or leasing of agricultural land. Loan to cover the development of agricultural infrastructure (eg: irrigation canals) 29

30 Type of insurance product Type of savings product Asset financing for pre-harvest activities Asset financing for post-harvest activities Rehabilitation of three crops Livestock Working capital (beyond trade finance or input loans) Trade finance Accident insurance Asset/property insurance Health insurance Life/funeral insurance Livestock insurance Traditional crop insurance Weather-index based insurance Compulsory/mandato ry savings Contractual/program med savings Current accounts Demand/sight deposit Informal savings Loan that gives client access to assets used in pre-harvest activities, such as equipment, machinery and vehicles (eg: tractor) Loan that gives client access to assets used in post-harvest activities, such as equipment, machinery and vehicles (eg: processing equipment) Loan designed to finance the renovation & rehabilitation of tree crops by farmers. Loan to cover the purchase of livestock. Loan to cover the capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities. Loan product designed to finance the gap between the time intermediaries buy from farmers and sell to buyers. Insurance against bodily injury or death because of accident. Asset/property insurance: A policy that provides financial reimbursement to the owner or renter of a structure and its contents, in the event of damage or theft. Type of insurance on either a specific asset (eg: automobile) or a property that provides financial reimbursement to the owner or renter of a structure and its contents, in the event of damage or theft. Insurance coverage that pays for medical and surgical expenses that are incurred by the insured. Insurance that pays out a sum of money either on the death of the insured person or after a set period. Insurance that provides a lump sum benefit to the insured if an animal listed in the policy dies from one of the perils specified in the contract. Insurance that protects producers against either the loss of their crops due to natural disasters, such as hail, drought, and floods, or the loss of revenue due to declines in the prices of agricultural commodities. Insurance contract that responds to an objective parameter (e.g. measurement of rainfall or temperature) at a defined weather station during an agreed time period. The parameters of the contract are set so as to correlate, as accurately as possible, with the loss of a specific crop type suffered by the policyholder. Savings payments that are required as part of loan terms or as a requirement for membership. Client commits to regularly depositing a fixed amount for a specified period to reach a predetermined goal. Early withdrawal is prohibited or penalized. Demand deposit accounts that allow the account holder to transact using checks. Demand/sight deposit: Fully liquid accounts in which the saver may deposit and withdraw any amount at any time with no advance commitment. Often, the saver must maintain a minimum required balance. Informal savings: Savings held outside of a formal financial institution, such as saving at home, savings groups, rotating savings and credit associations (ROSCAs), accumulating credit and savings associations 30

31 Type of Inputs offered Passbook accounts Savings/regular savings accounts Time/Certificate/fixed deposit Usable Assets Services (ASCAs), reciprocal savings and lending with neighbours, money guards, and informal sector deposit collectors. Passbook accounts: Demand deposit accounts that use passbooks rather than checks, ATMs, or point-of service devices for transactions. Savings/regular savings accounts: Demand deposit accounts that use passbooks, magnetic stripe or smart cards, ATMs, point-of-service devices, or some combination of these for transactions. They do not allow account holders to use checks and may limit number of withdrawals. Time/Certificate/fixed deposit: A savings product in which a client makes a single deposit that cannot be withdrawn for a specified period. At the appointed time, the client withdraws the entire amount with interest. All materials used in primary production of crop (for example: seeds, fertilizers, water, agro-chemicals) Equipment or other assets used in primary production of crop (for example: tractors, processing machinery, land) Information or other services used in primary production of crop, such as extension services, weather forecasts or market price information. Method of data Self-reported Client self-reports information on farm yield, without in-person validation or review by an external party. collection In-field collection Client's farm yield data is measured in-person by an external party. 31

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