Advancing Financial Inclusion for Smallholder Households in Mozambique - FSDMoc

 
Advancing Financial Inclusion for Smallholder Households in Mozambique - FSDMoc
ADVANCING FINANCIAL INCLUSION FOR
      SMALLHOLDER HOUSEHOLDS IN MOZAMBIQUE

        Advancing
Financial Inclusion
   for Smallholder
       Households
   in Mozambique
Advancing Financial Inclusion for Smallholder Households in Mozambique - FSDMoc
ADVANCING FINANCIAL INCLUSION FOR
                                           SMALLHOLDER HOUSEHOLDS IN MOZAMBIQUE

                       TABLE OF CONTENTS
3      Tables
4      Figures
5      Boxes
6    Acronyms and initializations
9    Foreword
10   Executive summary
14   Introduction
15   Role of the smallholder in the mozambican economy
16   Key changes from 2012 to 2016
18   Enabling and inhibiting factors
18     Macro level
18        Enabling factors
18        Inhibiting factors
19     Meso and micro level
19        Enabling factors
20        Inhibiting factors
21     Client level
21        Enabling factors
21        Inhibiting factors
22   Smallholder profile and need for financial services
22     Profile of smallholder population
31     Smallholders’ need for financial services
36   Smallholders’ access to financial services
36     Smallholders levels of access
39     Smallholders product uptake
43     Summary
44   Key players in advancing financial inclusion for smallholder farmers
44     Overview of financial sector
46     Fao input subsidy scheme
47     Market linkage institutions: out-grower companies
49     Community-based institutions: accumulating savings and credit associations
52     Community-based institutions: rural finance associations
52     Community-based institutions: individual agents
53     Mobile money operators
56     Commercial banks
62        Agent banking
63     Microbanks
64     Credit cooperatives
65     Microcredit operators
67     Insurance
70   Regulatory framework
72   Government and development partner activities
72     Government funds
73     Agrifinance-focused programs
76     Agricultural development programs
79   Conclusions and recommendations
79     Conclusions
80     Recommendations
82   Annex 1. Country socioeconomic profile in 2016
82     Population
83     Economic overview
85     Infrastructure
87   Annex 2. Macro-level analysis for smallholder financial inclusion
87     Strategies and plans
90     Coordinating bodies
90     Key service providers to the banking sector
91   Annex 3. Summary of fsp loan characteristics
92   Annex 4. References
                                                                       FSDMoç | 03
INVESTING IN FINANCIAL INCLUSION

TABLES                                                            FIGURES
22 Table 1. Distribution of Agricultural farms, by                23   Figure 1. Size of agricultural holdings in Mozambique
              province
                                                                  23   Figure 2. Food and staple crops
24 Table 2. Which of the following income sources
              is…?                                                     Figure 3. Cash crops
27                                                                23
     Table 3. Document possession by smallholders                      Figure 4. Poverty status of the household ($1.25/day)
35 Table 4. Methods of coping with hardship by                    24 Figure 5. Poverty status of the household ($2.50/day)
              smallholders
                                                                  24 Figure 6. Sources of income
35 Table 5. Methods of dealing with anticipated events
              by smallholders                                     25   Figure 7. Household income from agricultural and
51                                                                               nonagricultural production (June 2014–July 2015):
     Table 6. ASCA’s national portfolio
                                                                  26             Smallholder Diaries families in Mozambique
              (2014)
54
     Table 7. Mobile operators portfolio                               Figure 8. The vicious cycle of hunger season in
                                                                  26
              (February 2016)                                                    Mozambique
54
     Table 8. Cost, limits of transactions, and eligibility       28   Figure 9. Smallholder’s education level
58            criteria
                                                                  28   Figure 10. Smallholder’s age
   Table 9. Commercial bank agricultural loan
59          characteristics
                                                                       Figure 11. Mozambique smallholder household segments
                                                                  28
                                                                       Figure 12. Top 10 reasons for saving
61 Table 10. Credit lines and guarantee funds for                 31
               agriculture                                             Figure 13. Barriers for using savings
63 Table 11. Commercial banks portfolio                           32   Figure 14. Reasons for using loans
               (December 2015)
64 Table 12. Microbank loan features                              33   Figure 15. Barriers for using credit
                                                                       Figure 16. Reasons for being part of a xitique and general
65 Table 13. Microbank portfolio                                  33
              (December 2015)                                                      xitique group
65 Table 14. Credit cooperatives features                         34 Figure 17. Access strand, by main source of income
   Table 15. Credit cooperatives portfolio                        36   Figure 18. Rural access strand, by main source of income
66           (December 2015)
                                                                       Figure 19. Urban access strand, by main source of income
     Table 16. Microcredit operator’s distribution, per           37
66                                                                     Figure 20. Distance to reach the nearest selected financial
               province
                                                                  37              service access points
67 Table 17. Portfolio statistics of selected microcredit
             operators                                            37   Figure 21. Mr. Chipindu’s journey to a bank ATM
68           (February 2016)
                                                                       Figure 22. Bank products used and top 10 reasons for
     Table 18. Insurance companies’ locations                     38
                                                                                  having or not having a bank account,
68
     Table 19. Microinsurance coverage                            39              (rural, urban)
75 Table 20. Microinsurance products                                   Figure 23. Smallholder savings strand
   Table 21. Ongoing finance-focused programs                     39
                                                                       Figure 24. Smallholder credit strand
76           (in millions US$)
                                                                  40
     Table 22. Ongoing agriculture focused programs                    Figure 25. Remittance use and channels
84             (in millions US$)                                  41   Figure 26. Insurance access strand
84 Table 23. Agriculture portion on GDP                           41   Figure 27. Use of informal services
           (in 10^6 Mt)
                                                                       Figure 28. How xitique and xitique geral were used
91 Table 24. Employment and GDP, by sector                        42
     Table 25. Summary of FSP loan characteristics                     Figure 29. Categories of financial institutions and respective
                                                                  42              supervisory authority

                                                                  44 Figure 30. Formal financial service providers versus
BOXES                                                                             distribution of smallholders, per province
                                                                  45 Figure 31. Rural commercial bank branches and adult
22   Box 1. Customer journey                                                      population, by province
                                                                  57
     Box 2. ESOKO                                                      Figure 32. Urban commercial bank branches and adult
24                                                                57              population, by province
     Box 3. Mobiles 4 All: New users, new insights, better data
27   box 4. Key examples of digital finance services in           60 Figure 33. Banking credit, per sector, 2013, and 2015
              Mozambique
                                                                       Figure 34. Microbank branches, per province
35   Box 5. Agra guarantee fund                                   63
     Box 6. An agricultural commodity warehouse receipt system         Figure 35. Mozambique poverty incidence by urban and
35                                                                83              rural areas
              for Mozambique
     Box 7. Agriculture and natural resources landscape           84 Figure 36. GNI per capita 2014 (2011 PPP $)
51            management project, 2016–2021
                                                                       Figure 37. Contribution to GDP per sector
                                                                  84

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ADVANCING FINANCIAL INCLUSION FOR
                                                                                     SMALLHOLDER HOUSEHOLDS IN MOZAMBIQUE

                                                         ACRONYMS AND INITIALIZATIONS
ADEL      Sofala Local Economic Development Agency            GIZ       German Corporation for International Cooperation
          (Agência de Desenvolvimento Económico Local de
                                                              GNI       Gross National Investment
          Sofala)
                                                              IAM       Mozambique Cotton Institute (Instituto de Algodão
ADEM      Manica Province Economic Development Agency
                                                                        de Moçambique)
          (Agência de Desenvolvimento Económico da
          Província de Manica)                                ICC       International Capital Corporation Moçambique
AEO       African Economic Outlook                            ID        Identification Document
AMB       Mozambican Bank Association (Associação             iDE       International Development Enterprises
          Moçambicana de Bancos)
                                                              IFAD      International Fund for Agricultural Development
AMOMIF    Mozambican Association of Microfinance
                                                              INE       Instituto Nacional de Estatística (National Statistic
          Operators (Associação Moçambicana de
                                                                        Institute)
          Operadores de Microfinanças)
                                                              ISSM      Mozambique Insurance Supervision Institute
ASCA      Accumulative Savings and Credit Associations
                                                                        (Instituto de Supervisão de Seguros de
ATM       Automatic Teller Machine                                      Moçambique)
BCI       Banco Comercial de Investimento                     iTC       Community Land Initiative (Iniciativa de Terras
                                                                        Comunitarias)
BIM       Banco Internacional de Moçambique
                                                              JFS       João Ferreira dos Santos
BM        Bank of Mozambique (Banco de Moçambique)
                                                              KYC       Know Your Customer
BMM       Mozambique Commodity Exchange (Bolsa de
          Mercadorias de Moçambique)                          LTR       Land Tenure Rights

BOM       Banco Oportunidade de Moçambique                    M4A       Mobiles 4 All

BTM       Banco Terra de Moçambique                           MFSDS     Mozambique Financial Sector Development
                                                                        Strategy
CCCP      Caixa Comunitária de Crédito e Poupança
                                                              MLT       Mozambique Leaf Tobacco
CCOM      Caixa Comunitária de Microfinanças
                                                              MSMEs     Micro, Small, and Medium Enterprises
CEPAGRI   Center for Agriculture Promotion (Centro de
          Promoção de Agricultura)                            MZM       Mozambican Metical

CGAP      Consultative Group to Assist the Poor               NGOs      Nongovernment Organizations

CPPM      Caixa de Poupança Postal de Moçambique              NUIT      Unique Fiscal Identification Number (Número
                                                                        Único de Identificação Tributaria)
CRC       Central Credit Registry
                                                              PCG       Partial Credit Guarantee scheme
DfID      Department for International Development
                                                              PEDSA     Strategic Plan for Agricultural Development
DFS       Digital Finance Services
                                                              POS       Point of Sales
DUAT      Right of Use and Tenure Land (Direito do Uso e
          Aproveitamento da Terra)                            PROIRRI   Sustainable Irrigation Development Project

ECA       Empresa de Comercialização Agrícola                 PROMER    Rural Markets Promotion Programme

EMOSE     Empresa Moçambicana de Seguros                      PRONEA    National Agricultural Extension Programme

ETG       Export Trading Group                                RFA       Rural Finance Association

FAO       Food and Agriculture Organization                   SDP       Social Development Programme

FARE      Fundo de Apoio Reabilitação Economica               SECF      Small Emerging Commercial Farmers’

FBAs      Farm Business Advisors                              SIMO      Interbank Society of Mozambique (Sociedade
                                                                        Interbancária de Moçambique)
FDA       Fundo de Desenvolvimento Agrário
                                                              SMEs      Small and Medium Enterprises
FDD       Fundo de Desenvolvimento Distrital
                                                              TA        Technical Assistance
FDR       Fundo de Desenvolvimento Rural
                                                              UNDP      United Nations Development Programme
FECOP     Fundo Empresarial da Cooperação Portuguesa
                                                              USAID     United States Agency for International
FINS      Financial Inclusion National Strategy                         Development
FNB       First National Bank                                 USD       United States Dollar
FSDMoç    Financial Sector Deepening Mozambique               WR        Warehouse Receipts
GDP       Gross Domestic Product                              WRS       Warehouse Receipt System

                                                                                                                   FSDMoç | 05
INVESTING IN FINANCIAL INCLUSION

                                                   FOREWORD
                                     Some 75 per cent of the population of Mozambique makes its
                                   living primarily from agriculture and the vast majority of these
                                                           are smallholders.

Any serious effort to advance financial                 on financial inclusion as captured
inclusion in Mozambique must put this                   in the 2016 launch of the Banco de
segment of the population centre stage.                 Moçambique’s    Financial  Inclusion
FSDMoç has partnered with CGAP, the                     Strategy.
Consultative Group to Assist the Poorest,            But it goes further to highlight that:
to shed light on the opportunities
to advance financial inclusion to                    > Rural farmers could play a central role
Mozambique’s rural poor. In 2016,                       in the development of agriculture but
FSDMoç and CGAP, launched the National                  investments are needed to improve
Survey and Segmentation of Smallholder                  their productions methods
Households in Mozambique, a study
                                                     > Improving small scale farmer access
undertaken by CGAP in collaboration
                                                        to financial could address these
with the Instituto Nacional de Estatística
                                                        constraints
(INE), as well as CGAP’s financial diaries
of smallholder households in a district of           > Small scale farmers require not only
Nampula Province                                        credit, but savings and ways to receive
The present report brings together key                  and make payments.
findings from those two studies with                 > Innovative solutions designed around
information from other sources, in                      the small scale farmers needs and
particular the 2014 Finscope study into                 behaviours, that address infrastructural
Access to Finance, as well as data from
                                                        challenges of distance, and leverage
INE and the Banco de Moçambique. It also
                                                        on partnerships between mobile
builds on the FinMark Trust’s 2012 report
                                                        operators, informal services, off-takers
on the Status of Agricultural and Rural
                                                        and formal financial institutions are
Finance in Mozambique.
                                                        required.
This report clearly demonstrates the
changing financial inclusion landscape of            Through           partnerships      with
rural Mozambique illustrated by:                     organisations such as CGAP, FSDMoç
                                                     will support the financial sector
> The increase in informal savings groups,           stakeholders by providing the insights
   known as ASCAs, which are often the
                                                     that will assist in developing innovative
   first important step towards financial
                                                     approaches to meet demand for
                                                                                                       “FSDMoç welcomes
   inclusion;
                                                     financial services. FSDMoç will partner          the contribution that
> The spread of digital financial services           with financial sector stakeholders                 CGAP has made to
   and    mobile-enabled      information            to address market weaknesses and
   services;                                         opportunities identified, providing
                                                                                                      making available this
> The in-acting of legislation, under the            both funding and technical expertise.                rich source...”
   aegis of the Banco de Moçambique’s,               FSDMoç welcomes the contribution
   enabling        agent         banking,            that CGAP has made to making
   microinsurance,    and      warehouse             available this rich source of information
   receipts; and
                                                     and is proud to be associated with the
> The emphasis placed by the authorities             publication of this report.
06 | FSDMoç
ADVANCING FINANCIAL INCLUSION FOR
                                                                                                           SMALLHOLDER HOUSEHOLDS IN MOZAMBIQUE

                                             EXECUTIVE SUMMARY
                                       CGAP recognizes that advancing smallholders’ financial inclusion
                                        is possible only through extensive research and evidence-based
                                                       demand- and supply-side solutions.

To understand the financial needs and behaviors of low-                           are seemingly intractable. Electricity continues to be
income smallholder families and build the evidence base                           problematic and transport is difficult. Key areas of
on this important client group, CGAP conducted financial                          agricultural production, particularly in Zambézia, Manica,
diaries with approximately 90 smallholder households                              and Sofala, are currently dangerous and not secure, and
in each of Pakistan, Tanzania, and Mozambique.                                    hence very expensive.
Complementing the qualitative work of the diaries,                                These      issues    are
CGAP also conducted a nationally representative survey                            addressed in more
of smallholder households (“smallholder surveys”) in                              detail in Annex 1.
                                                                                                                     “The smallholders’
Mozambique. The objective of the smallholder survey is
                                                                                  The         smallholders’           profile indicates that
to elucidate the heterogeneity of the sector, including
                                                                                  profile indicates that             they account for more
households’ agricultural and nonagricultural activities
                                                                                  they account for more
and cash flows, financial behaviors, and perceptions                                                                 than 75 percent of the
                                                                                  than 75 percent of the
of their agricultural and financial lives. The current
                                                                                  population, with the                population, with the
CGAP Advancing Financial Inclusion for Smallholders in                                                               highest concentrations
                                                                                  highest concentrations
Mozambique study adds information on the supply and
                                                                                  in      Zambézia       and              in Zambézia...”
enabling micro, meso, and macro environment, providing
                                                                                  Nampula        provinces.
an update of the 2012 “Status of Rural and Agricultural
                                                                                  Smallholders farm very
Finance in Mozambique” report conducted by ICC.
                                                                                  small plots, and grow
This study combined an integrated analysis of                                     a variety of products,
supply, demand, and factors that facilitate or inhibit                            mainly for consumption, though some grow cash crops
the provision of financial services to smallholders.                              such as sugar, sesame, tobacco, and cotton. In large part,
The demand analysis is based on recent data from                                  they live below the poverty line of US$2.50 per day (84
Mozambique 2014 FinScope Consumer Survey, the 2015                                percent of rural smallholders). There is very little use of
Financial Diaries, the 2015 CGAP National Survey of                               fertilizer or pesticides, and little animal husbandry, apart
Smallholder Households and other relevant demand data.                            from chickens. Income is not regular throughout the year
The supply and the enabling factors analysis is based                             and smallholders have few means to smooth income
on primary data collected through in-depth interviews                             to match expenditure. This results in “hungry months”
with the formal and informal financial institutions,                              where there may not be enough to eat, or more likely
government, development partners, and facilitators.                               there may not be enough variety to provide a balanced
This analysis updates the 2012 paper1; it will highlight the                      diet, resulting in illness at the very time the family is least
changes verified in agricultural and rural finance from 2012                      able to afford health services.
to 2016 from a service provider and policy perspectives.
                                                                                  Smallholder farmers play a crucial role in the Mozambican
The country socioeconomic profile and the macro-level
                                                                                  economy as a major producer of food, yet their
information are presented in the Annexes because the
                                                                                  production potential is far from being met. Smallholder
main focus of the report is on the smallholder.
                                                                                  farmers largely practice rain-fed agriculture and use
The enabling and inhibiting factors impinging on                                  traditional varieties of crops, low-intensity fertilizer, and
smallholders’ access to finance are presented. At a macro                         minimal pesticides. Farming is generally done without
level, many of the problems relating to infrastructure                            mechanization and productivity of the land is typically

1
    The Status of Agricultural and Rural Financial Services in Mozambique, Finmark Trust, 2012

                                                                                                                                       FSDMoç | 07
INVESTING IN FINANCIAL INCLUSION

    EXECUTIVE SUMMARY

    low. Although these families’ main activity is growing          services, the priority is saving for agricultural inputs and
    food, they are the most susceptible to malnutrition. Long       for both foreseeable and unforeseeable expenses (e.g.,
    experience has shown that it is possible to increase yields     school expenses and medical costs). The services need
    two or threefold through relatively simple interventions,       to be available in an accessible way, such as accumulative
    but these mechanisms seem to have eluded the country.           savings and credit associations (ASCAs), without the
    Moreover, in Mozambique’s current dire economic                 complicated requirements of account opening procedures
                                      situation, the need           imposed by a bank. Digital financial services will be an
                                      to produce more to            important driver of financial inclusion in the future, but
                                      reduce reliance on            first steps include financial education; the availability of
                                      imported food, is more        the digital infrastructure, including mobile phones; and
                                      acute than ever, and          an effective agent network. For instance, the smallholder
      “Although these                 the case for concerted        survey found that most (54 percent) do not own a mobile
  families’ main activity             action      to   provide      phone.
                                      smallholders with the
is growing food, they are                                           Physical distance has been the major impediment for
                                      services they have so
 the most susceptible to              long required is more
                                                                    smallholders’ increased access to financial services, and
                                                                    ASCAs are playing a tremendous role in expanding the
      malnutrition....”               compelling than ever.
                                                                    access frontier. Data from the 2014 Finscope Survey detail
                                        Despite their central       current levels of financial inclusion or, more accurately,
                                        role in the economy,        exclusion, as 80 percent of smallholders are excluded.
                                        they are part of one of     The main reason for this exclusion is the physical distance
                                        the most marginalized       between smallholders and access points for financial
                                        sectors, particularly       services. Despite the very high level of exclusion from
    in terms of access to finance. Farmers do not make              formal financial services, Finscope and National Survey
    the necessary investments in their farms to boost their         data show that smallholders do save when possible and
    yields, for two primary reasons: (1) many lack the working      that informal mechanisms, such as xitique and ASCAs,
    capital needed to purchase better seeds and fertilizer,         offer a viable mechanism for financial inclusion.
    and (2) many farmers don’t have the risk appetite to try
                                                                    Out-grower schemes and ASCAs are critical in providing
    new crop and seed varieties or plant higher-value crops.
                                                                    financial and technical assistance to smallholders.
    This situation calls for financial solutions to set money
    aside or borrow for seeds and fertilizer, savings solutions     Several important companies in the agribusiness sector
    that help farmers pay school fees or finance an off-farm        work successfully with smallholder farmers, though
    business, or insurance that enables farmers to take more        many face logistical problems when it comes to payment
    risks, coupled with access to technical agricultural training   and actively seek solutions with financial institutions.
    and information to enable them to make best use of these        New technological developments play a crucial role in
    services.                                                       opening up new possibilities. However, informal services,
                                                                    principally ASCAs, are often the first and most important
    Smallholders generally lack the key elements they need          step. Informal services can also serve as a first step to
    to access formal financial services, namely identification      introducing digital services as shown by the digitalization
    documents and mobile phones. Data from the National             of ASCA operations.
    Survey of smallholder farmers in Mozambique was
    segmented to identify the drivers of financial inclusion and    Commercial banks continue to look for ways to finance
    identify their levels of attractiveness to financial service    agriculture, and several credit lines and guarantee funds
    providers. The segmentation indicates that although the         have been set up. In addition to these mechanisms,
    percentages of the more dynamic, financially included           there are other ways in which banks can contribute to the
    segments are small, they still represent a significant          financial inclusion of smallholders, often in partnership
    market in absolute terms. The 7 percent classified in the       with other organizations that are better positioned to
    three segments most likely to access formal financial           operate in rural areas. However, the risk profile of this
    services translate into some 1.5 million people, or nearly      sector makes it unlikely that financing from banks directly
    370,000 households. In terms of their need for financial        to smallholders will ever become a reality. The impact
                                                                    of traditional microfinance operators—microbanks,
    08 | FSDMoç
ADVANCING FINANCIAL INCLUSION FOR
                                                                                      SMALLHOLDER HOUSEHOLDS IN MOZAMBIQUE

                                                                            EXECUTIVE SUMMARY

microcredit operators, and credit cooperatives—continues      While smallholder farmers are still largely financially
to be limited. Microinsurance, in an incipient phase, is      excluded, there have been remarkable changes on the
likely to develop first in urban areas, but could expand      supply side and in the enabling environment since
in rural areas, if an affordable and effective agricultural   the 2012. On the macro level, Banco de Moçambique
product can be marketed via mobile phones.                    launched its financial inclusion strategy and financial
Government and development partner activities actively        education initiative. Furthermore, new legislation and
promote financial inclusion of smallholders through           regulations have been enacted on banking agents,
various initiatives and programs. This is a good approach,    microinsurance, and warehouse receipts. On the supply
given the strategic importance of agriculture and, within     side, mobile money operators have made significant
the sector, the primordial role of the smallholder. There     advances in their outreach and are partnering with banks,
are several government and development partner                nongovernment organizations, and others to find real
programs designed to support this effort. Three relevant      solutions that are appropriate for Mozambique. Banks
government funds are designed to support agriculture          are making significant investments in extending their
and finance:                                                  services via digital channels, while ASCAs have been the
> Fundo de Desenvolvimento Agrário                            most effective informal financial services for rural areas,
                                                              continuously including the low-income segments in the
> Fundo de Desenvolvimento Distrital
                                                              financial sector. From an economic sector perspective,
> Fundo de Desenvolvimento Rural                              agriculture is getting more attention from donors, with
                                                              several large projects aimed at increasing productivity
Each of these faces limitations in effectiveness. Some
government and development partners’ activities, listed       and promoting financial inclusion. In addition, in recent
here under agrifinance-focused programs, combine              years large agricultural trading companies have been
activities both to support production and improve             expanding their activities, investing in local communities,
access to finance; others are more generally focused on       promoting better agricultural practices, and providing a
agriculture. The funds allocated to these programs are        market for production. Farmers’ associations are playing a
approximately US$200 million over five years.                 bigger role as the counterpart for agricultural companies
                                                              by facilitating sales, financial education, and training.
Notwithstanding, there are many opportunities to
advance financial inclusion for smallholder farmers that      This report presents a set of recommendations and best
have yet to be explored. Many players interact or could       practices targeted to the private sector, donors, and
interact with smallholder farmers to improve agricultural     policy makers that will enable them to overcome the
productivity and provide access to finance. Often these       current barriers to financial inclusion for smallholder
roles can be effectively combined, particularly if this is    households. Some of the recommendations focus on
done through partnerships such as an off-taker and a bank,    the need to increase agricultural income through the
an agricultural marketer and a mobile money operator,         promulgation of better farming techniques and access
and ASCAs and mobile money operators. There are
                                                              to improved seeds, fertilizer, and pesticides, ways to
many examples of well-organized farmers’ associations
                                                              reduce post-harvest losses, and better market linkages.
facilitating the interaction between agribusiness
                                                              In regard to financial services, ASCAs continue to play
companies and smallholders. Warehouse receipts are
                                                              an important role. Al though banks are not likely to deal
another effective way to link smallholder farmers with
                                                              directly with smallholder farmers, they can effectively
financial institutions and the wider market, while reducing
post-harvest losses and allowing the smallholder to           partner with other organizations as a conduit, be they
sell when prices are more favorable. The possibility of       farmers’ associations, agribusinesses, or mobile money
providing agricultural advice via mobile phones is still      operators. This report highlights the need for partnerships
largely unexplored. Major advances have been made by          and robust financial education. Development partners
the mobile money operators in extending their services to     have a critical role to play as a catalyst for change and as
rural areas, and this will continue with the entry into the   facilitators. Given the weakened state of the economy,
market of two new players, Movitel’s mobile money and         donor community investment in large, well-coordinated
Zoona, an operator-neutral money transfer service.            programs will be crucial.
                                                                                                                  FSDMoç | 09
INVESTING IN FINANCIAL INCLUSION

                                             INTRODUCTION
                                   Access to financial services is increasingly recognized for its
                                   multiplier effects in an individual’s self-development and in a
                                           country’s economic growth and development.

                                          Its importance is felt daily in its        and best practices that enable players
                                          capacity to meet an individual’s           to overcome current barriers to financial
                                          lifecycle, emergency, opportunity,         inclusion for smallholder households, and
    “Its importance is                    and money management needs.                identify particular questions or constraints
                                          Yet, more than half of working-            to explore or untangle. With this analysis,
 felt daily in its capacity
                                          age adults do not have access to           stakeholders can better align their
 to meet an individual’s                  financial services, especially in          efforts and identify areas for strategic
  lifecycle, emergency,                   rural areas of developing countries.       interventions.
opportunity, and money                    Smallholder families represent a
      management...”                      large part of the financially excluded     To interpret these results, it is important
                                          population, leading to numerous            to note that the research encountered
                                          global efforts to bring access to          limits in the availability of some data.
                                          finance to this segment.                   First, because the financial sector in
                                                                                     Mozambique is undergoing a restructuring
                                         Understanding the financial needs           phase, certain banks were unwilling to
                                   and behaviors of low-income smallholder           openly disclose their orientation toward
                                   families enables stakeholders to invest           agriculture finance, particularly those
                                   in evidence-based interventions to                banks that had a significant agriculture
                                   improve the economic and financial                portfolio at the time of the 2012 report.
                                   situation of smallholders. To develop this        Second, although banks were open to
                                   understanding and to build an evidence            meeting with consultants conducting
                                   base on smallholders, CGAP conducted              the interviews, obtaining data from the
                                   financial diaries with approximately 90           banks proved to be a challenge because
                                   smallholder households in each of Pakistan,       release of certain data required internal
                                   Tanzania, and Mozambique. These were              authorizations, which were not always
                                   complemented by a series of nationally            forthcoming. To fill in the data gaps,
                                   representative surveys of smallholder             the consultants requested aggregate
                                   households (“smallholder surveys”) in             data from the Bank of Mozambique
                                   Mozambique, Uganda, Tanzania, Côte                (BM). Finally, banks found it difficult to
                                   d’Ivoire, Nigeria, and Bangladesh. The            identify the total number of individual
                                   objective of the smallholder surveys is to        clients engaged in agriculture, because a
                                   elucidate the heterogeneity of the sector,        majority of bank clients are legal entities
                                   including households’ agricultural and            and some banks provide credit to groups
                                   nonagricultural activities and cash flows,        or associations, thereby registering only
                                   financial behaviors, and perceptions of           two or three members of the group.
                                   their agricultural and financial lives.           This situation inhibits monitoring of the
                                                                                     impacts of agriculture and smallholder
                                   Building on these demand-side studies,            finance.
                                   this holistic analysis explores the
                                   supply side of the market, the enabling
                                   environment, and key stakeholders. It
                                   also provides a set of recommendations

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ADVANCING FINANCIAL INCLUSION FOR
                                                                                        SMALLHOLDER HOUSEHOLDS IN MOZAMBIQUE

                      ROLE OF THE SMALLHOLDER IN
                      THE MOZAMBICAN ECONOMY
                                 Agriculture is one of the largest sectors of the Mozambican
                              economy. It contributes 25 percent of the Gross National Product
                                             and 20 percent of export revenues;

80 percent of the population is involved        This calls for financial solutions that set
in agricultural activities.    Agricultural     aside money or borrow for seeds and
production is largely organized in small,       fertilizer, savings solutions that help
hand-cultivated units of land. Ninety-nine      farmers pay school fees or finance an off-
percent of production comes from 3.8            farm business, or insurance that enables
million subsistence farms; these farms are      farmers to take more risks, coupled with
1.43 hectares on average.                       access to technical agricultural training
                                                and information to enable them to make
Smallholder farmers play a crucial role in      best use of these services.
the Mozambican economy. Smallholder             Traditionally, banks have
agriculture is a major producer of food,        had little interest in serving
and yet it is one of the most marginalized      populations of farmers that
sectors, particularly in terms of access
                                                live far from bank branches
to finance. Smallholder farmers largely
                                                and require small transaction               “Microfinance
practice rain-fed agriculture and use                                                 organizations of various
                                                sizes, which yield limited
traditional varieties of crops, low-intensity
fertilizer, and minimal pesticides. Farming
                                                revenue.          Microfinance       types have had some local
                                                organizations     of    various
is generally done without mechanization,                                               success but they do not
                                                types have had some local
and the productivity of the land is typically
                                                success but they do not seem          seem to have a business
low. Although their main activity is growing
                                                to have a business model that                 model...”
food, smallholders are highly susceptible
                                                enables them to grow and
to malnutrition. Long experience has
                                                increase their impact. They
shown that it is possible to increase
                                                are also hampered by limited
yields two- or threefold with relatively
                                                management capacity and
simple interventions, but the mechanisms
                                                insufficient capital to invest in
for doing this seem to have eluded the
                                                technology and in their loan fund.
country.
                                                Government credit schemes have also
Moreover, in Mozambique’s current dire
                                                failed to consistently and sustainably
economic situation, the need to produce
                                                serve smallholders. The studies on
more locally so as to reduce reliance on
imported food is more acute than it has         which this report is largely based—CGAP
ever been, and the case for concerted           Smallholder Financial Diaries, CGAP’s
action to provide smallholders with             National Survey and Segmentation of
services they have required for so long is      Smallholder Households in Mozambique,
more compelling than ever.                      and Finscope’s Financial Inclusion Study—
                                                do not identify any significant access to
Farmers do not make the necessary               the financial services supposedly available
investments in their farms to boost their       to this segment. However, there are
yields for two primary reasons. First,          important changes in the financial services
many lack the working capital needed            landscape, which, together with effective
to purchase better seeds and fertilizer.        interventions to improve smallholder
Second, many farmers don’t have the risk        productivity, can finally begin to bring
appetite to try new crop and seed varieties     significant changes to smallholders’
or plant higher-value crops.                    financial inclusion.

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INVESTING IN FINANCIAL INCLUSION

                    KEY CHANGES FROM 2012 TO 2016
                                   Since the 2012 publication of the Agricultural and Rural Finance
                                   Report, there have been many changes in the smallholder finance
                                                        sector in Mozambique.

Many of these changes represent positive steps toward im-              that permit remote client registration and loan origination.
proving productivity and financial inclusion.                        > Several banks have developed digital financial services,
                                                                       which are critical components to expanding financial ser-
   MACRO
                                                                       vices to vulnerable segments and remote areas globally.
> Worsening economic and security situations have negative
                                                                     > The banking sector, whose eventual benefits to smallhold-
  effects on smallholder operations through increased input
                                                                       ers are as yet unclear, has been restructured.
  prices. Moreover, this situation may deter stakeholders
  from helping smallholders, particularly those in the center        > Some banks and the mobile money operators have devel-
  of the country where the security issue is felt the most.            oped partnerships to extend services to the nonbanked.
> Banco de Moçambique (BM) launched its Financial Inclu-             > There has been a relative decline of microfinance in the
  sion Strategy, which includes the strategy for financial ed-         banking sector, with the purchase of TCHUMA and ProCre-
  ucation and indicates a high-level commitment to financial           dit, and the failure of rural microfinance institutions (MFIs)
  inclusion, with emphasis on smallholders.                            to grow and make significant impacts.
> BM introduced a regulation on banking agents and some              > The growth of accumulative savings and credit associa-
  of the major banks rolled out banking agent networks, thus           tions (ASCAs), has enabled smallholders to access savings
  allowing banks to expand to rural areas at lower costs.              and credit products in more convenient ways.
> BM introduced the regulation of Warehouse Receipts, Bol-
                                                                     AGRICULTURE
  sa de Mercadorias launched pilot projects, and the USAID
                                                                     > Out-grower and agricultural trading companies have
  Trade Hub, including certification of some 15 warehouses
                                                                       grown.
  and development of a software platform to manage the
  business, was created.                                             > Significant projects to promote agriculture and incorporate
                                                                       access to financial services have been funded by the World
> Microinsurance legislation to provide special, more acces-
                                                                       Bank, USAID, DfID, and others.
  sible requirements for companies to enter into this market
  and provide smallholders with solutions that respond to            > FAO has launched its e-voucher scheme for providing sub-
  their risks was discussed.                                           sidized inputs to smallholders and emerging farmers.
                                                                     > The Bolsa de Mercadorias/Warehouse Receipts Scheme
   MESO AND MICRO                                                      is being developed; when completed, it will aim to allow
   FINANCIAL SERVICES                                                  farmers to use their produce as collateral to access credit
> The national payments system switch, SIMO, launched.                 at formal financial institutions.
  SIMO allows for a more interoperable payment system
  thereby reducing the costs of transactions, particularly in        CLIENTS
  rural areas where banks are not abundant.                          > Increased extension services have been provided via do-
> Mobile money services grew significantly, with substantial           nor-funded projects and out-growers. These services
  investment by Vodacom and to a lesser extent by MCel in              equip smallholders with the best practices in agriculture
  expanding their coverage and promoting the use of their              activity.
  mobile money services. The imminent entry into the mar-            > Market links have increased through out-grower compa-
  ket of Movitel, the mobile network operator (MNO) with               nies and farmers’ associations.
  the widest network coverage in rural areas, will enhance           > The growth of effective farmers’ associations is enabling
  the potential for mobile money services, particularly if in-         interventions to be more collective and risk sharing.
  teroperability becomes a reality.
                                                                     > Financial literacy has increased. This will enable smallhold-
> The launch of Zoona, a mobile money payments service                 ers to use financial services responsibly and in ways that
  not linked to any mobile network, is pending.                        improve their economic and financial situation and not in-
> Several new lines of credit and guarantee schemes aimed              crease their vulnerability.
  at agriculture, thus reducing the risks facing financial insti-    > Mobile phone ownership and awareness of mobile money
  tutions in the agriculture sector, were introduced.                  has increased. This allows smallholders to opt for a more
> Several banks have developed tablet or smart phone apps              convenient way of accessing and using financial services.
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ADVANCING FINANCIAL INCLUSION FOR
                                                                                          SMALLHOLDER HOUSEHOLDS IN MOZAMBIQUE

              ENABLING AND INHIBITING FACTORS
                                Agriculture is one of the largest sectors of the Mozambican
                             economy. It contributes 25 percent of the Gross National Product
                                            and 20 percent of export revenues;

MACRO LEVEL                                                    small solar systems, green mini-grids, and more efficient
                                                               cooking stoves. M-Kopa, a pay-as-you-go household solar
ENABLING FACTORS                                               system that uses mobile money to allow frequent small
                                                               payments to facilitate acquisition of the systems, is very
Positive support from BM for financial inclusion. This is
                                                               interested in these efforts.
evidenced not only by the Mozambique Financial Sector
Development Strategy (MFSDS) 2011–2020 and the Fi-             INHIBITING FACTORS
nancial Inclusion National Strategy (FINS) 2016–2022, but
                                                               Failure to implement national strategies to strengthen
by the concrete actions taken by BM in implementing use-
                                                               agriculture. Although the government has defined many
ful regulations on banking agents and warehouse receipts.
                                                               strategies to improve smallholders’ productivity and finan-
Other regulations, such as one on opening new branches,
                                                               cial inclusion, these do not have action plans that guaran-
may have inadvertently discouraged branch opening, and
                                                               tee the implementation of coordinated actions to achieve
instead promoted the development of branchless banking
                                                               the goals of the respective strategies.
technologies.
Political commitment for rural development. Plano Quin-        Political instability and lack of security. The current
quenal do Governo 2015–2019 includes specific chapters         low-level civil war is impacting some of the country’s most
on agriculture and on the need to integrate smallholders       productive areas in Zambézia and Manica provinces. It is
into VCs. However, the capacity to implement these strate-     making road transport dangerous and expensive and will
gies is weak and the plan’s main objective—to “consolidate     inhibit the marketing of agricultural production.
national unity, peace and sovereignty”—is proving elusive.     High interest rates. At the end of October 2016, BM raised
Weak currency makes imports more expensive and ex-             the reference rate for credit to 23.25 percent. At this level,
ports more attractive. The dramatic fall in the value of the   even the small amount of credit that goes to agricultural
metical has once again brought to the fore the need for        becomes unviable. It is unclear when rates may start to fall,
Mozambique to produce more food and reduce the quan-           or even whether they have reached their peak.
tities it imports. It also makes Mozambique’s exports more     Pending banking crisis. The economic crisis has already
attractive. This should encourage a focus on increasing the    led to one bank, Moza, being taken under BM control and
productivity of the sector.                                    another, Nosso Ban-
Willingness of donors to continue implementing large-          co, having its license
scale projects. Although the 2012 report on the Status of      withdrawn. The Minis-
Agricultural and Rural Finance noted that dependence on        try of Economics and
donor programs is unsustainable, recent experience is that     Finance is forecasting
the large-scale programs being implemented with support        further problems in            “Given the size of the
from the World Bank, USAID, DfID, and others are crucial       the banking sector.          country and the limited
for bringing about real change in the agricultural sector.     Inadequate        infra-      existing road network, it will
Increased use of renewable energy. Given the inability of      structure leading to           be many years before this
the national electricity company, EDM, to supply reliable      high operating costs.                will change....”
power to the nation, we are seeing more initiatives to pro-    The 2012 report iden-
mote renewable energy, such as the line of credit for busi-    tified deficiencies in
nesses involved in renewables, administered by BM and fi-      the road and power
nanced by KfW, and a new DfID multimillion pound project       networks as major in-
to be launched in 2017, to promote companies involved in       hibiting factors. Given
                                                                                                                     FSDMoç | 013
INVESTING IN FINANCIAL INCLUSION

    ENABLING AND INHIBITING
    FACTORS
    the size of the country and the limited existing road net-      a further boost. However, the scope for delivering financial
    work, it will be many years before this will change. As for     services through these channels should not be exaggerat-
    electricity, there have been moves to increase the use of       ed as there are several conditions that must be in place to
    renewables, including construction of mini-grids. German        be able to take maximum advantage.
    Corporation for International Cooperation (GIZ) has been        Development of partnerships between banks and mobile
    promoting suitable technologies under its EnDev program,        money operators—although it is possible to see banks and
    and DfID is preparing a large program, BRILHO, to promote       mobile money operators are rivals in the provision of finan-
    the use of renewable energy.                                    cial services, there are
    Inappropriate reporting demands. Microbanks are sub-            also opportunities for
    ject to the same reporting requirements that apply to ful-      fruitful collaboration,
    ly fledged commercial banks. Mobile money operators,            and mobile money                  “nongovernment
    classified as financial institutions, also have inappropriate   operators have always
                                                                                                  organizations (NGOs)
    reporting requirements. Rather than a “one-size-fits-all” ap-   made clear their will-
                                                                                                 have promoted farmers’
    proach, reporting requirements should be tailored to the        ingness to participate
                                                                                                associations, with mixed
    needs for prudential supervision of each type of institution.   in joint ventures and
                                                                                             success. The more successful
    Restrictive regulations on location of data processing. BM      integrate their infor-
                                                                                              ones are now playing a very
    regulations require that financial service providers maintain   mation systems. Con-
                                                                                                   important role in the
    their data processing within country. This regulation inhib-    trary to some of the
                                                                                                 interaction between the
    its the use of cloud-based systems which could be of great      rhetoric about mobile
                                                                                                       smallholder...”
    benefit for small MFIs that do not have the financial capac-    money making cash
    ity to maintain a costly local IT infrastructure.               redundant,      mobile
                                                                    money needs banks
    MESO AND MICRO LEVEL                                            to be able to function
                                                                    well.
    ENABLING FACTORS
    Banks embracing and actively developing digital services        Stronger farmers’ associations — for many years, nongov-
    — as detailed in the report, banks are actively investing in    ernment organizations (NGOs) have promoted farmers’ as-
    new technology to roll out digital services. While many,        sociations, with mixed success. The more successful ones
    such as mobile apps for smart phones, will initially target     are now playing a very important role in the interaction
    wealthier, urban clients, this lays the groundwork for the      between the smallholder and other players, in the areas of
    extension to poorer clients                                     bulking product for marketing, accessing credit, facilitating
                                                                    financial education and improving agricultural techniques.
                                        Growing outreach of
                                                                    Many still need support to be able to execute all these roles.
                                        mobile phone/money
                                        operators —the growth       New opportunities offered through mobile technology
                                        of outreach of mobile       — there are examples in other sub-Saharan countries of
                                        phone/mobile money          the use of mobile phones to provide extension services to
 “the growth of outreach                has been one of the         smallholder farmers, such as mFarmer in Kenya and Far-
 of mobile phone/mobile                 key characteristics of      merline in Ghana. Some projects are now being piloted in
money has been one of the               recent years. As noted      Mozambique.
   key characteristics of               in the report, the immi-    Warehouse Receipts — warehouse receipts as promoted
      recent years...”                  nent entry into the mo-     by the Bolsa de Mercadorias de Moçambique and USAID’s
                                        bile money market of        Trade Hub offer secure facilities to store agricultural prod-
                                        two new players, Movi-      ucts in appropriate conditions, access to finance, and in-
                                        tel and Zoona, will give    creased linkages to the market. It is also a relatively risk-free

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ADVANCING FINANCIAL INCLUSION FOR
                                                                                          SMALLHOLDER HOUSEHOLDS IN MOZAMBIQUE

                                                                    ENABLING AND INHIBITING
                                                                                   FACTORS
way of involving the banks in financing agriculture              CLIENT LEVEL

INHIBITING FACTORS                                               ENABLING FACTORS
Limited outreach of banking institutions — although the          Gradual spread of better farming practices. Although the
number of bank branches, automated teller machines               process is relatively slow, and the government extension
(ATMs) and point-of-sale (POS) devices has risen signifi-        service is not entirely effective, agricultural practices are
cantly in the past few years, this has scarcely scratched the    gradually improving because of interventions by NGOs and
surface in terms of increasing access to financial services.     out-grower companies.
Given the very high cost of operating in rural areas, it is to   Better seed supplies are
be expected that the banks’ outreach will be determined          also increasing. FAO’s
by their ability to use alternative strategies. Even banking     e-voucher scheme will
agents are likely to operate relatively close to a branch be-    help to improve ac-
                                                                 cess to better-quality          “agricultural practices
cause of the need for support and supervision.
                                                                 inputs, strengthen the
Banks’ limited commitment to financing agriculture — De-                                        are gradually improving
                                                                 input dealer network,
spite the existence of numerous lines of credit and guaran-      and provide technical
                                                                                               because of interventions
tee funds to encourage banks, and to a lesser extent, other      advice. The use of mo-        by NGOs and out-grower
financial service providers to lend to agriculture, take-up      bile-based    technolo-              companies. ...”
seems quite limited. The experience of Standard Bank and         gies, such as those of-
the AGRA fund is probably being replicated in other banks.       fered by ESOKO, could
The recent rise in interest rates and the effect of increasing   also play an important
bad debts in other sectors, such as commercial and con-          role.
struction, will make their use more problematic. For small-      Continued growth of
holder financing, banks are so risk-averse that these will not   ASCAs. Although good data are hard to come by, what ex-
be sufficient to provoke a change in attitude.                   ists indicates a continued growth in the number of ASCAs.
Failure of MFIs to grow to a scale sufficient to make a sig-     This is undoubtedly the most effective first step on the path
nificant impact—although the creation of new kinds of mi-        to financial inclusion.
crocredit institutions was made with high hopes of increas-      INHIBITING FACTORS
ing services to the rural areas, growth has been slow and        Low income levels. Poverty and low income levels continue
limited.                                                         to be a significant barrier to financial inclusion.
Lack of interoperability between mobile money operators          Low educational levels. Low levels of literacy hinder partic-
and between mobile money and other payment systems               ipation in informal savings schemes and make mobile tech-
— the launch of Movitel’s mobile money product can have a        nology difficult to access.
significant impact on access to digital finance services (DFS)   Small plot sizes. The very small plot sizes make it difficult to
because of their extensive network coverage in rural areas.      produce enough for family consumption and with leftovers
MPesa and, to a lesser extent, other established players         to sell or trade. One solution is higher productivity, through
have experience in promoting agent networks and educat-          the correct use of fertilizers and pesticide, another is to re-
ing clients. Interoperability between the three companies        duce post-harvest losses. Land is not scarce and families
would make the introduction of DFS for smallholder farm-         could farm larger areas if they were able to pay for manual
ers much simpler. The Central Bank has stated this as an         labor.
aim, but there is no plan yet. Some banks can integrate with     Limited attraction of agriculture as an occupation. Mo-
mobile money through developments to their core banking          zambique needs its smallholders to stay on the land, and
systems and through payments switches, but there is still        agriculture is, therefore, the occupation of choice. As such,
work to be done to achieve interoperability.                     agriculture needs to be a more profitable business, through
                                                                 improved productivity and access to financial services

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INVESTING IN FINANCIAL INCLUSION

                            SMALLHOLDER PROFILE AND
                           NEED FOR FINANCIAL SERVICES
                                         Smallholder families represent between 75 percent and 80
                                       percent of the population in Mozambique—about 21 million out
                                                      of an estimated 26 million people5.

    PROFILE OF SMALLHOLDER POPULATION4

TABLE 1 SHOWS THE DISTRIBUTION OF AGRICULTURAL FARMS

    PROVINCE                                        SMALLA                       MEDIUMB                           LARGEC                           TOTAL
    Niassa                                          168,926                              341                                5                      169,272
    Cabo Delgado                                    414,029                           4,436                                21                     418,486
    Nampula                                         739,457                            3,222                              34                       742,713
    Zambézia                                        688,439                            1,452                              23                       689,914
    Tete                                            358,210                            8,520                              40                       366,770
    Manica                                          194,036                            3,829                              52                        197,917
    Sofala                                          228,983                            3,113                              77                       232,173
    Inhambane                                       199,354                          13,603                               36                       212,993
    Gaza                                            194,669                          10,068                              167                      204,904
    Maputo                                          775,971                            3,288                             273                       779,532
    Total                                        3,962,073                           51,872                             728                     4,014,673
a. Small farms—fewer than 10 ha of planted area without irrigation; fewer than 5 ha of irrigated planted area; fewer than 10 cattle, 50 goats/sheep/swine, and/
or 5,000 poultry.
b. Medium farms—between 10 and 50 ha of planted area without irrigation; 5–10 ha of irrigated planted area; 10–100 cattle, 50–500 goats/sheep/swine, and/
or 5,000–20,000 poultry
c. Large farms—more than 50 ha of planted area without irrigation; more than 10 ha of irrigated planted area; more than 100 cattle, 500 goats/sheep/swine,
and or more than 20,000 poultry
Source: Anuário de Estatísticas Agrárias 2015, Ministério da Agricultura e Segurança Alimentar

A majority of small agriculture farms are in the central (37                      Research from the Instituto Nacional de Estatística (INE)
percent of smallholders) and northern (33 percent) regions.                       points to very small average farm sizes, with the average
                                                                                  farm size ranging between 1 and 2 hectares. More than
The most populated provinces, Zambézia and Nampula, are                           80 percent all agricultural holdings manage fewer than 2
where most smallholders are located (around 36 percent).                          hectares.6

FIGURE 1: SIZE OF AGRICULTURAL HOLDINGS IN MOZAMBIQUE

Source: Anuário de Estatísticas Agrárias 2015, Ministério da Agricultura e Segurança Alimentar

4
   Unless otherwise noted, most data presented in this section are from the CGAP study National Smallholders Survey.
5
  INE population projections for 2016.
6
  Anuário de Estatísticas Agrárias 2015, Ministério da Agricultura e Segurança Alimentar.

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ADVANCING FINANCIAL INCLUSION FOR
                                                                                                         SMALLHOLDER HOUSEHOLDS IN MOZAMBIQUE

                                                     Smallholders mostly farm
                                                     on plots that belong to the
                                                    household under customary
                                                         law (44 percent).

Smallholders mostly farm on plots that belong to the                         With these very small plots, most smallholders produce
household under customary law (44 percent). This means                       primarily for consumption, with little available for sale or for
that they do not have a title that states that the land                      trading. The Smallholder Survey indicates that most of the
belongs to them. About 24 percent of the households                          crops grown are food crops (especially maize and cassava).
own their own land with a lease or a certificate. Around 14                  Very few produce cash crops (12 percent produce sugar
percent share communal land, and 2 percent use land that                     cane and 11 percent sesame).
belongs to the government.7

FIGURE 2: FOOD AND STAPLE CROPS                                             FIGURE 3: CASH CROPS

Source: National Smallholders Survey, CGAP, 2016

Some of these traditionally considered food crops are now                    Not surprisingly, given these factors, smallholders are
finding bigger markets. Cassava is being grown for sale to                   poor, particularly those in rural areas. Fifty-five percent of
Cervejas de Moçambique to make beer, and Mozambique                          the smallholders are below the poverty line of US$1.258 a
is a source of cowpeas for the Indian government. Other                      day; 85 percent are below the US$2.50 poverty line.
crops like soya are becoming increasingly important.

7
    National Survey and Segmentation of Smallholder Households in Mozambique, CGAP, 2016.
8
    From Progress out of Poverty Index 2013, Grameen Foundation, http://www.progressoutofpoverty.org/.

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INVESTING IN FINANCIAL INCLUSION

SMALLHOLDER PROFILE AND
NEED FOR FINANCIAL SERVICES
FIGURE 4: POVERTY STATUS OF THE HOUSEHOLD ($1.25/DAY)            FIGURE 4: PPOVERTY STATUS OF THE HOUSEHOLD ($2.50/DAY)

The Smallholder Survey found that income sources are             sale (25 percent vs. 15 percent of those age 15–29).
relatively stable across demographics. There are small
                                                                 Smallholder farmers who consistently contribute to the
differences by age for farming-related activities and getting
                                                                 income of their households said that growing and selling
money from family. Those under 30 are slightly more likely
                                                                 crops are the most important, most reliable, and most
to generate income by getting money from friends and
                                                                 enjoyable farming activities (Table 2). By comparing
family (38 percent vs. 30 percent of those age 30 and older).
                                                                 these three concepts, data show that a large portion of
Those age 30 and older are more likely to earn income from
                                                                 smallholder farmers equate the most important income
growing and selling crops (61 percent vs. 53 percent of
                                                                 source with the one they like getting the most and with the
those age 15–29) or rearing livestock, fish, poultry, bees for
                                                                 one that is the most reliable.

TABLE 2: WHICH OF THE FOLLOWING INCOME SOURCES IS…?
 INCOME SOURCES                                    MOST IMPORTANT (%)     LIKE GETTING THE MOST (%)      MOST RELIABLE (%)
Growing something and selling it, such as
crops, fruits, or vegetables                                         40                            40                   41

Earning wages from occasional jobs                                   14                            14                   14
Getting money from family or friends                                  8                              7                    7
Earning wages or salary from a regular job                            7                              6                    6
Rearing livestock, poultry, fish, or bees, and
selling it or its byproducts                                          5                              5                    4

Running own business in retail or manufac-
turing (selling or making goods)                                      4                             4                     4

Running own business by providing services
                                                                      4                             4                     4

Getting a grant, pension, or subsidy of some
sort                                                                  3                              3                    3

Other                                                                 2                              2                    2
Don’t know                                                           13                            14                   14
Source: National Smallholders Survey, CGAP, 2016

018 | FSDMoç
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