Blog Shamba Shield: Revolutionizing Financial Protection for Smallholder Farmers in Kenya

Imagine a smallholder farmer in Kenya, facing the effects of climate change including unpredictable droughts and floods. Farm planning and investment becomes increasingly challenging, and difficulties securing credit further adds to the burden. Shamba Shield addresses these issues by offering a comprehensive package that improves credit assessments, offers financial protection, and enhances financial literacy and information through digital agro-advisory services. Shamba Shield aims to be socially inclusive, empowering women and youth, and providing equitable access to financial protection. 

Challenges for Smallholder Farmers 

For smallholder farmers, accessing credit has always been a challenge, and without access to credit, farmers cannot invest in essential farm improvements. Lending institutions are often hesitant to extend loans to these farmers due to several factors: Farmers' lack of financial history and formal credit records increases the perceived risk for lenders. Furthermore, small-scale operations and high risks of non-performing assets make smallholder farmers seem uncreditworthy to traditional financial institutions. To add to this challenge, high transaction costs for servicing these farmers often result in high interest rates, making loans less affordable. Finally, many farmers do not understand financial products or how to improve their creditworthiness.

Shamba Shield's Comprehensive Approach 

At its core, Shamba Shield includes the climate-credit scoring tool, which utilizes advanced data analytics to assess a farmer's creditworthiness, factoring in climate risks, farm management practices, and resilience potential. By incorporating climate risk profiles, the tool widens access to credit for farmers, making them more attractive prospects for lending institutions. This is complemented by risk-contingent credit, which offers loans with built-in insurance against weather risks, ensuring farmers can invest in their farms without fear of unpredictable losses. The digital agro-advisory services shared through Shamba Shape-Up (SSU) - a popular farmer engagement platform - further strengthens the innovation bundle by providing educational content on best agricultural practices, financial literacy, and climate adaptation strategies, thus enhancing farmers' knowledge and capabilities. Through its wide reach and popularity, SSU educates farmers on the benefits of the risk contingent credit and climate risk scoring, incorporating real-life case studies to illustrate how these tools can protect and enhance their livelihoods.  

The components of Shamba Shield complement each other, addressing financial access, risk management, and knowledge enhancement. This integration reduces transaction costs, simplifies access, and ensures that insights from one component inform and enhance others. CGIAR centers including the Alliance and IFPRI, as well as CGIAR research initiatives including 'ClimBer' and 'Livestock and Climate' are working with key partners such as Safaricom-Digifarm, Financial Access, Mediae, Family Bank, Equity Bank and the Kenya Meteorological Department (KMD) to test and scale the innovation bundle. 

Fostering Partnerships for Scalable Solutions 

To further strengthen the product, CGIAR partners organized a scaling workshop to identify ways to enhance and expand Shamba Shield in East and Southern Africa. The recent Innovation Profiling and Scaling Readiness (IPSR) workshop in Nairobi, Kenya, brought together experts and partners to refine the Shamba Shield innovation package and develop a strategic scaling plan. This collaborative effort, based on the science of scaling, identified high-priority next steps for developing an effective and responsible scaling strategy.