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August 27, 2020

Lower interest rates and digital loans for Rwandan farmers


Patricie Nyimnoeneye tends to her potato crop on her farm in the Musanze District of Rwanda on 6 May 2019. Spark Photo / Tobin Jones

A big step towards a more inclusive financial sector that supports the livelihoods and well-being of smallholder farmers in Rwanda. That’s what the partnership between SPARK and Equity Bank means, as it launches digital loans for smallholder farmers (SHFs) and will show that these farmers are bankable and worth the investment. 

72% of Rwanda’s population is engaged with agriculture: it is the main economic generator. However, while smallholder farmers face challenges in accessing financial services, such as loans, because of the lack of collateral or bankable data, financial institutions in Rwanda are struggling to find the right way to serve these farmers. 

SPARK’s Agribusiness Programme Manager Sylvie Bambara noted: “The lack of data on farmers operations, of agricultural insurance and of collateral, are the key problems. The challenges also include insufficient confidence or competence by lending institutions in the agricultural sector to assess and manage risks, and the inadequate infrastructure of rural bank branches.” 

SPARK’s Irish Potato Value Chain Financing programme, funded by Access to Finance Rwanda, bridges that gap. Since 2019, Irish Potato farmers have been creating ‘bankable data’ about their businesses, such as records of harvests and sales, which now allows them to access loans from Equity Bank. 

SPARK is proud to implement the DA2F (Digital Access to Finance) loan Platform in the Irish Potato sector. A loan guarantee fund de-risks a total of 300 smallholder farmers loans and facilitates the Bank to pilot this new financial product. SPARK is confident that banks will learn that smallholder farmers with strong historical production track records, and who have been reliable members of good performing cooperatives, are a creditworthy clientele.   

Starting from September, Rwandan smallholder farmers can apply for reduced interest rates in their country. The loan is accessible fully digitally, which simplifies the work for farmers. The application process to loan disbursement is quick and matches with the seasonality of the farmers’ business. Together with fintech provider MoneyPhone, SPARK has offered banks to digitise their onboarding channels. 

“Besides the reduced interest rate, the loans are more inclusive and accessible as farmers are scored by the bank on their historical records of supply at the cooperatives,” says Marthe Paauwe, SPARKs regional programme director. “As such, it replaces the bank’s collateral requirements which are often unrealistic for smallholder farmers. This type of data collection in combination with the central role of the cooperative is a new method in Rwanda that envisions a shift in the formal financial sector.”

The loans are (at least) available to support farmers across the upcoming two agricultural seasons (September 2020 – February 2021 and March – June 2021). 

This pilot programme aims to prove to financial institutions that smallholder farmers are bankable and make for reliable investment, both economically and socially. As more and more Irish Potato farmers gain access to financial services, they can increase their productivity, grow their businesses and create more jobs in their communities.