Conceptualizing Microfinance For Effective Smallholder Farming In Africa

Abstract

Smallholder farmers in Africa desperately need pro-poor interventions to alleviate their poverty through self-sustenance. In Africa, poverty is more prevalent in rural areas, where the overwhelming majority (about 80%) of Africas population lives and about 72% are poor. Microfinance cannot have substantial impact on poverty until it significantly penetrates the rural areas where small-scale agricultural activities by smallholder farmers need financial support. This paper thus attempts to conceptualise microfinance for smallholder farming in Africa which is done from the integrated view as opposed to a minimalist view.

The integrated view was selected because it focuses on the provision of credit facilities plus related follow-up services such as training, whilst the minimalist view is concerned about giving credit only. The paper relied on literature review and digestion to conceptualise microfinance as a strategy for boosting smallholder agricultural production. Many rural farmers have no access to the traditional financial system. Therefore, basic financial services are essential for the management of their productive endeavors. This paper argues that microfinance plays a pivotal role in the commercialisation, not only of smallholder farming activities but also the successful implementation of agricultural ideas. Microfinance is one way of helping farmers to sharpen their agricultural ideas so as to promote rural economic development.

With this background it has become imperative to explore the commercialisation of rural agriculture so as to empower the farmers. The financial sector in most countries does not cater for rural finance because they require physical collateral security that rural people do not have. In this article, micro-finance is seen to be a useful intervention that can be employed to economically empower the agricultural sector.