AFRACA impact story

Building members’ digital capacity

During AFRACA’s 21st General Assembly in 2021, members identified digital transformation as a key focus area for AFRACA’s programme of activities going forward. This need was informed by challenges faced by members during the COVID-19 pandemic years, when coping mechanisms centered around the digitalisation of financial services and products.

AFRACA members needed to understand how to leverage the benefits of digital technologies to support sustainable growth in the sector and subsequently to improve nutrition and food security, livelihoods, and eradicate poverty. Supported by Small Foundation, AFRACA worked to build the capacity of members on new innovations through its Digitising Rural & Agricultural Finance (DIG4RAF) programme.

DIG4RAF workshop, Nairobi, May 2022

The first of its kind in the sub-Saharan African region, the DIG4RAF Conference held in Nairobi in May 2022 brought together financial sector players, fintechs, and agtechs to take stock of the wide range of digital solutions being deployed in the sector. The scope of innovations highlighted in the conference ranged from digital financial products, credit scoring tools, core banking solutions, agricultural risk mitigation tools, and instruments such as digital insurance and commodity trading platforms, among others.

The conference yielded a range of insights and actions, including:

• Digital agricultural finance has managed to either digitise the credit component independently or combine agricultural technology with complementary credit packages, enabling small scale growers and other value chain actors to access various new forms of credit.

• Rural and agricultural finance is often a ‘policy orphan’ stuck between multiple government ministries.

   

• Agtech and agfin innovations face scaling challenges due to a rigid, formal financial sector accustomed to traditional lending models. More flexible forms of private capital are necessary to take them to the next level.

   

• Financial service providers, agtechs and fintechs have tried to align around co-creating suitable financial products based on innovations, but the majority have failed to take off. A major challenge is that banks are skeptical of the integrity of data presented by third-party data providers operating outside of formal financial systems.

   

• The ecosystem surrounding agtech and fintech development in the East African region was key to progress. To replicate this success, AFRACA developed its DIG4RAF training programme, which has been well-received by member institutions. The forging of new partnerships; including a potential partnership between LendXS and Centenary Bank in Uganda to pilot LendXS’ innovative digital solution.