Building from their existing clustering initiative that assists over 900 smallholder farmers by operating as a collective, Agri Academy and its funding partners commit to implement an innovative financing model that will facilitate access to affordable development finance for semi-commercial smallholder farmers. This, combined with a comprehensive capacity building program, will contribute to the establishment of more sustainable business models, job creation in rural areas and increased income for the farmers. The model will offer farmers comprehensive financial services through electronically equipped cluster offices, such as access to short-term interest free loans focusing on production cycles, micro insurance, savings products, and market access. Job creation will be facilitated by the extension of this financial model, as smallholders who were not previously able to support themselves solely through farming will be able to become full-time farmers. Additionally, the finance model will improve access to financial services especially for women and youth.
The financing model will not only benefit the smallholder farmers operating as a collective, but also partners and stakeholders supporting this financial model within the cluster initiative as they join in the collective by providing services, training, finance, and expertise to increase income and long-term sustainability of the farmers. In the future, the model could be replicated in Africa and Asia as a collective way to better address typical challenges of smallholder farmers. It will also serve as a learning platform for the packaging of financial products, guaranteed funds, and capacity building that contribute to an inclusive value chain. In addition to the cluster approach financial partners, Agri Academy will be backed by its current local technical partners on production practices, input suppliers, and market access as well as governmental collaboration support. Of the current 903 farmers organized into clusters, by the end of the commitment we will have reached an additional 1097 farmers, who all will receive access to affordable (no-interest/low-interest) development finance.
To implement the project Agri Academy will first identify partners (technical and financial) who will participate and support the project. In cooperation with the identified partners, an action plan will be developed with clear defined objectives and outcomes within a specified timeframe. Indicators (economic, job creation, turnover, capacity) will be selected to form the basis of a quarterly monitoring and evaluation process during implementation. The project will have the following deliverables and implementation steps, based on 12 quarters:
1. Q1-Q3: Partners will be identified and collaborate as a network to support smallholder farmers either with capacity building or financial resources.
2. Q1-Q6: Learning programs relating to financial operation, management, and risk, insurance will be developed from materials provided by partners. This capacity building program will be localized to fit the South African environment. Training materials will also be accredited with the Education Authority to ensure smallholder farmers receive a certificate reflecting a financial competency at a specific level.
3. Q3-Q11: The proposed financial model already developed by Agri Academy and its smallholder farmers will be finalized with inputs from the partners. This will be known as a model for access to affordable development finance for smallholder farmers in rural South Africa.
4. Q3-Q7: Structured financial literacy training workshops will be held to ensure smallholder farmers to have the necessary skills to work and implement activities relating to loan capital. These training materials will also be available at the cluster offices online.
Female entrepreneurs will also allocate twenty hours per youth farmer for mentorship. Mentorship will focus on the relevant components of the value chain - from production to processing. This will be linked to the development finance model whereby youth farmer will receive interest free loans. Besides the mentorship there will also be a capacity building program focusing on good agricultural practices, business management, production, marketing, and financial literacy.
Driven by a growing global population expected to reach 7.5 billion by 2020, global demand for food is on the rise. By 2050, 70% of the worlds food will be produced in Africa, implying an ever-increasing need to focus developmental efforts on smallholder farmers to amplify their contributions to the world food supply, food security, poverty reduction, and job creation.
According to Findex (2013) over half of Africas population is already employed in agriculture, yet only 1% of bank lending goes to the agricultural sector. Only 4.7 % of adults in rural communities in developing countries have taken a loan from a formal institution and just under 6% are banked. In South Africa, agriculture is the primary economic activity for rural populations, who are among the most affected by a lack of formal financial inclusion. 37,000 smallholder farmers producing 90% of the agricultural output face a total lack of access to affordable development finance. Due to the land reform policy implemented after 1994, many farmers became dependent on governmental grants rather than pursuing entrepreneurial avenues in an incubated business environment. Additionally, smallholder farmers face other related hurdles, such as low productivity, limited access to markets for their products, a lack of title deeds of land, poor infrastructure, and lack of trust among value chain partners supporting them.
Increasing access to financial services, while not a means to an end, is critical to provide funds for farm investments in productivity, improve post-harvest practices, smooth household cash flow, enable better access to markets and promote better management of risks. Access to finance can also play an important role in climate adaptation and increase the resilience of agriculture to climate change, thus contributing to longer-term food security.
South African Agri Academy still needs to grow the guaranteed fund of agricultural finnace solutions. No bank wants to grant any loans to South African Agri Academy's farmers, especially in the current economical and climatic conditions. South African Agri Academy is urgently looking for partners to contribute to access for affordable development.
Agri Academy has experience over the past fifteen years working with smallholder farmers as evidenced by its market access development program:
Gap compliance according to retailers requirements Agri Academy is a member of Global Gap international and with their partnership trained a farm assurer per cluster. This enables the farmers to meet the market access requirements as a condition stated by retailers.
Successful implementation of cluster methodology with 12 clusters country wide representing 903 farmers
Agri Academy has a training facility reflecting good agricultural practices as well as e-learning facilities linked to the 12 cluster offices country wide.
Cluster offices are equipped with state of the art computer, printer, and fax and scan equipment as well as an e-learning program reflecting the training done face to face in classrooms.
All Agri Academys smallholder farmers training programs are accredited with the relevant Agricultural training authority.
Agri Academy already works with private sector and governmental role-players to enable smallholder farmers to benefit optimum support towards sustainable business.