Supply Chain Finance–A digital solution from Kenya
At harvest time many smallholder farmers sell their produce to informal traders who pay cash on delivery but offer low prices without additional services like input and extension services. Farmers need cash on delivery to meet their immediate needs such as school fees payments, family emergencies and credit repayments. However, payments are often delayed which can result in farmers getting indebted. The expectation of delay can also lead farmers to side-sell to informal buyers causing farmers to miss out on good prices and value addition services. It prevents the establishment of a solid relationship between farmers and professional buyers who offer better prices. Supply chain finance has rarely been tested with smallholders in loose value chains.
The paper lays out key lessons from the deployment of innovative supply chain financing solutions in the agriculture food value chains. A key takeaway in this paper is that due to the unstructured nature of the food crop markets and the dominance of cash-based transactions, the demand for supply chain financing solution is low in staple food value chains. It is also useful for researchers who may want to build a body of knowledge on value chain financing mechanisms that work.