Understanding Demand, Driving Innovation: Smallholder Households and Financial Services

This paper serves as background for the CGAP Smallholder Diaries and national surveys of the smallholder sector. It highlights the prevalence of smallholders among the world’s poor, and the substantial reliance on agriculture in low-income countries, hence the importance of increased productivity of small farms. The paper also reviews the many factors that influence rural poverty and the wellbeing of smallholder households, and their connection with demand for financial tools of various kinds. The shortcomings of rural financial markets to serve smallholders over time are examined along with the promise of digital financial services, and other innovative mechanisms, to expedite the alleviation of those limitations.