Standard microcredit has had limited impact on smallholder farmers, but a range of financial innovations can help them invest in productivity and manage climate risk. Asset-collateralized loans enable farmers to finance productive assets. Seasonal credit provides capital before harvest when food is scarce and after harvest when selling immediately means accepting low prices. Financial planning tools help farmers allocate annual crop income throughout the year. Insurance innovations, including premium payments aligned with farmers’ cash flow and pre-approved emergency credit, increase resilience to climate shocks. Bundled services models deliver credit, inputs, training, insurance, and market access through a single channel. Village input fairs bring input dealers directly to villages, increasing farm investments, and can be paired with credit access for input purchases. Rigorous evidence demonstrates that many of these innovations improve agricultural output, food security, and resilience. This document reviews this evidence and outlines pathways to transition these innovations to scale.
Among these innovations, asset-collateralized loans (ACLs) have an especially well-developed evidence base, including long-run experimental results, and illustrate in detail how a financial innovation can transition to scale through local institutions. ACLs allow farmers to take loans collateralized by the purchased asset itself, a common arrangement in higher-income countries for homes and cars which is largely absent in smallholder lending. In a randomized evaluation in Kenya, offering asset-collateralized loans for rainwater harvesting tanks increased loan take-up roughly ten-fold, with no increase in defaults, and raised milk sales revenue by 6 to 8 percent (Jack et al., 2023). The model has since replicated successfully across several similar financial institutions (Carney et al., 2026). A preliminary analysis of the costs of helping an institution adopt asset-collateralized lending conservatively estimates a benefit-cost ratio exceeding 15:1 (Deutschmann et al., 2026).
Seasonal credit products, financial planning tools, innovative insurance designs, bundled services models, and village input fairs also have rigorous evidence of impact and are at various stages of scaling. Financial planning tools are being tested at scale in Malawi with One Acre Fund. Bundled services providers including One Acre Fund, Babban Gona, and myAgro serve millions of smallholder farmers across sub-Saharan Africa. Village input fairs are scaling across West Africa. The pathways to scale differ. Some innovations may operate primarily through private sector channels, while others generate widely distributed benefits that may require public support. External partners could help these innovations reach more farmers by providing technical assistance and, where needed, capital or risk-sharing mechanisms, at modest cost relative to the documented benefits.