Bridging the smallholder finance gap: Collaborative research with WeGro in Bangladesh
Farmers in many low- and middle-income countries face a major financial gap, with available resources often insufficient to enable them to increase production—and putting many higher-value products with the greatest potential to increase incomes out of reach. Yet banks and other formal financial institutions shy away from lending to smallholder farmers.
There are several reasons for this predicament. Farms tend to be small, geographically scattered enterprises, implying the costs of doing business with them are higher than for urban businesses of similar size, and harder to monitor over time due to the spatial dispersion. In addition, due to their urban orientation, bank staff also tend to be less knowledgeable about both potential profits and risks from agricultural activities, while farmers lack access to collateral, making obtaining a loan even more challenging.