Show me the data: Using data to unlock access to finance for smallholders

In 2016, our landmark report Inflection Point identified a series of enablers to help close the USD 50 billion smallholder financing gap and unlock growth in smallholder finance. To no surprise, market transparency and availability of market data were some of the most critical. To close the financing gap, providers and practitioners need to make more customer-centric decisions, understand how to build more sustainable business models, and identify the effectiveness of different smallholder solutions. Yet, without transparent markets and reliable data, stakeholders across the value chain are unable to make smart decisions on how to improve smallholder financial solutions.

Since the publication of this study, we’ve seen improvement in market data transparency, creating opportunity to unlock access to finance for smallholders. While this improvement is significant, particularly around transparency for demand-side and impact data, there is a notable gap in data transparency for supply-side needs.

1. Supply-side data is crucial for providers to better understand the competitive landscape and features of effective business models. With granular-level data, providers can understand what competitors are doing to serve smallholder farmers, understand a product’s value proposition, and identify which solutions have proved financially sustainable and how. However, there are three critical challenges providers face in regards to supply-side data: (1) there is a limited number of efforts aggregating data on market actors, (2) those that are aggregating data, often fail to provide enough granularity for it to be valuable and (3) providers themselves are often unwilling to share data publicly on their business model given competitive market risks
2. Demand side data is fundamental to understanding an actor’s target client and developing customer-centric products. To effectively provide financial solutions for smallholders, providers must gather and analyze data to understand who their target customer is and how to better serve them. For example, CGAP’s Smallholder National Survey data helps providers understand how to segment smallholders and build solutions that address the needs of each segment. Organizations like CGAP are doing an exceptional job at making demand-side data available, however, there needs to be a more concerted effort around making the data usable for a given audience.
3. Impact data is critical for providers to assess effective interventions in terms of farmer impact. For instance, evaluation studies by J-PAL and IPA allow providers to understand which smallholder financial products have the greatest impact on farmer livelihoods.  Research institutions and think-tanks tend to play a heavy role in gathering and sharing impact related data, however, smaller on-the-ground organizations often lack the resources to implement impact measurement activities at scale, particularly rigorous impact evaluations. Additionally, few organizations are aggregating and collecting sector-wide evidence to compare impact evidence across different institution types.

Bringing data transparency to the next level

Making credible, relevant, and quality data accessible is only one piece of the puzzle. To really reap the benefits of these data sets and unlock growth in agricultural and smallholder finance, data providers need to make the data not only accessible but, most importantly, usable. For example, the Lab is working with partners to think through how to make demand-side data usable for FSPs to better design products. This might include hosting workshops with potential users to explore data use-cases, organizing data “hackathons”, publishing case studies that highlight the business case for data, and developing how-to-guides for data usage. Additionally, to catalyze these efforts in data transparency, each stakeholder has a specific role to play:

• FSPs and DSPs can increase market transparency and user access by partaking in relevant databases – such as the Smallholder Finance Explore. This requires engaging with the data available, building their team’s capacity, and sharing information on their solutions.
• Funder and donors should support the development and maintenance of market databases as a public good to ensure improved market transparency is accessible for organizations at every stage; as well as data capacity building within organizations to ensure they are able to benefit from new data sets.
• Think tanks, researchers, practitioners can celebrate and communicate the progress of data resources to speed up uptake and usage from a variety of users.