How Crowdfunding Can Address Funding Challenges for Agricultural SMEs in Africa
Posted: Thu Feb 13, 2025 3:42 am
The agricultural sector employs over 70% of the working population in Africa, making it a cornerstone of economic progress and livelihood development. But the sector continues to be adversely affected by containment measures to curb the spread of COVID-19, which have reduced the spending power of the public and hence the demand for agricultural products. The disruption of agri-food value chains has also had devastating impacts, with the lack of revenues making sourcing for raw materials, product development and even meeting monthly overheads a daunting challenge.
Consequently, this financial strain — combined with market inefficiencies that existed even before the pandemic — could mean the end of operations for vulnerable farmers and small and medium enterprises (SMEs) in the agri-food sector. Most have limited or no options in terms of insurance, credit and risk management, making them very prone to financial japan whatsapp number data collapse.
Funding challenges in agriculture: is crowdfunding a solution?
To address these challenges, agricultural value chains need to be bolstered by finance to ensure uninterrupted supplies and guarantee food security. But despite noticeable progress in the financial sector in recent years, such as the gradual growth of rural banks and cooperatives and enhanced access to fintech services among farmers, most SMEs and smallholders are still handicapped by the existing requirements for accessing formal credit facilities. Their major constraints include limited assets to serve as collateral, poor management skills (such as the lack of business plans), and limited record-keeping, which reduces their ability to provide lenders with information on their cash flows and financial assets. Faced with a global pandemic that seems to have no imminent end in sight, these already disadvantaged SMEs and farmers now face a greater challenge to survive.
There is thus an urgent need to protect Africa’s food systems. To help meet this need, digital financial approaches are rapidly growing — and among these approaches, crowdfunding models are at the frontier. In a depressed economy, particularly in countries with less developed financial systems, crowdfunding may turn out to be a viable means of financing for agricultural SMEs and smallholder farmers.
Consequently, this financial strain — combined with market inefficiencies that existed even before the pandemic — could mean the end of operations for vulnerable farmers and small and medium enterprises (SMEs) in the agri-food sector. Most have limited or no options in terms of insurance, credit and risk management, making them very prone to financial japan whatsapp number data collapse.
Funding challenges in agriculture: is crowdfunding a solution?
To address these challenges, agricultural value chains need to be bolstered by finance to ensure uninterrupted supplies and guarantee food security. But despite noticeable progress in the financial sector in recent years, such as the gradual growth of rural banks and cooperatives and enhanced access to fintech services among farmers, most SMEs and smallholders are still handicapped by the existing requirements for accessing formal credit facilities. Their major constraints include limited assets to serve as collateral, poor management skills (such as the lack of business plans), and limited record-keeping, which reduces their ability to provide lenders with information on their cash flows and financial assets. Faced with a global pandemic that seems to have no imminent end in sight, these already disadvantaged SMEs and farmers now face a greater challenge to survive.
There is thus an urgent need to protect Africa’s food systems. To help meet this need, digital financial approaches are rapidly growing — and among these approaches, crowdfunding models are at the frontier. In a depressed economy, particularly in countries with less developed financial systems, crowdfunding may turn out to be a viable means of financing for agricultural SMEs and smallholder farmers.