An Integrated Approach to Financial Services for the Poor

MSD Hub editor's note (Michael Field, Senior Systems Specialist, Vikāra Institute):

The authors of the blog point out an important distinction between formal finance and finance that flows through market actor interactions and transactions. The blog makes an odd comparison between value chain finance and market systems finance that does not align with common definitions. Historically, value chain finance is a common type of financing that emerges within market systems like bank finance, factoring, etc. While many Market Systems Development (MSD) practitioners default to formal finance, like bank or MFI financing, as a starting point, increasingly practitioners are recognizing that value chain finance is often a better place to start. Value chain finance is most often integrated into transactions like a payment plan for inputs, check-off schemes for suppliers, etc. Value chain finance tends to flow because market actors recognize the importance of leveraging their resources to ensure the overall value chain can operate effectively. Market systems finance is not a type of finance, but an approach by practitioners to facilitate improvements in the financial services system, including both formal finance and value chain finance. It is also an essential principle of MSD approaches to distinguish between donor/practitioner efforts (i.e., time, money, knowledge, etc.) that are temporary and functions that are internal to a market system (i.e., production, financial services, marketing, expertise, etc.). This principle is critical as a core capacity of any well-functioning market system is the ability to send and respond to signals allowing the system to effectively adapt and evolve. When donors take on permanent functions, signals are muted or confused by donor biases that then foster maladaptation, and discourage market systems from evolving in ways that are more inclusive, competitive, and resilient. As a result, the central aim of any MSD intervention is not to deliver a market function, but to catalyze market actors to take on functions, services, etc. , that may be limited or not functioning effectively. Without an effective capacity within market systems to signal and respond to signals in ways that lead to ongoing improvements, market systems cannot accrue on an ongoing basis value addition and wellness benefits. 

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The Challenge for Smallholder Producers

Smallholder farmers and rural entrepreneurs face persistent barriers to affordable finance. Limited collateral, seasonal cash flows, and high transaction costs make formal lenders view them as high-risk. As a result, many rely on informal sources such as family, moneylenders, or savings groups, which often provide insufficient capital and impose high interest rates. Women and youth are disproportionately excluded due to weaker networks and limited bargaining power.

The question is: What financing approach truly benefits smallholder producers? Value chain financing? Market systems financing? Or both?

What is value chain financing?

Value chain financing provides financial services across the stages of a product’s lifecycle, from inputs to processing and distribution. Its goal is to improve productivity and profitability for all actors in the chain including producers, suppliers, processors, and buyers.

Key Features includes:

• Customised financial solutions to address the specific needs of businesses within the value chain. This can include factoring, portfolio-based financing, and securitization of receivables, which involves turning deliverables into tradable securities. 

• Access to Capital such as Credit, loans, and guarantees to boost efficiency.

• Stronger Relationships builds trust among value chain actors, reducing risk.

This approach leverages business relationships as informal collateral, helping enterprises stay competitive and manage risk.

What is market systems financing?

Market systems financing addresses root causes of market failures, ensuring markets serve all players, including small producers, especially women and youth. It focuses on systemic change through analysis, collaboration, and innovation to improve market performance and outcomes, i.e. improved productivity and income levels.

Key Features include: 

• Recognizes complexity and diversity of stakeholders in the market system. For example, in the case of soybean production in Ghana, the soybean chain includes input suppliers, farmers, aggregators, feed millers, processors, and a mix of local and regional buyers. Around this core sit transporters, small warehouses, community graders, digital platforms, mechanics, and fuel vendors. There are also service organisations such as extension providers, laboratories, and business development services, that shape quality and productivity.

• Requires time, experimentation, and adaptive solutions to address market systems challenges.

• Enhances collaboration and digital innovation for inclusive finance.

Our Integrated Approach: THRIVE 2030

World Vision and VisionFund combine both approaches through Transforming Household Resilience in Vulnerable Environments (THRIVE 2030). We design client-centric products informed by value chain and market assessments. Producers undergo Inclusive Market Knowledge and Access (iMKA) training to prepare for formal finance from VisionFund. 

iMKA Modules and Their Purpose:

• Producers’ Coordination: Helps smallholder producers, both individuals and groups, organize effectively to achieve economies of scale and strengthen collective bargaining power.

• Market-Led and Environmental Sustainability: Equips producers with skills to manage and adapt to climate-related risks such as droughts, floods, and erratic rainfall, ensuring sustainable productivity.

• Mindset and Behavioral Change for Market-Led Production: Builds capacity to link positive mindset shifts with market-driven production strategies through engagement with diverse market actors.

• Engagement and Sustenance of Market Actors: Provides knowledge and skills to connect and maintain relationships with key market actors for end-to-end production, boosting household income and profitability.

• Financial Literacy and Entrepreneurship Skills: Empowers producers to diversify income streams, manage finances effectively, and position themselves for access to formal financial services.

Innovation Through Partnerships

Public-private partnerships are central to THRIVE 2030’s success. Examples include:

• E-THRIVE Platform: The partnership with Farm Concern International (FCI) across Zambia, Malawi, Kenya, Tanzania, Ghana and Uganda, digitizes producers, connects buyers and suppliers, and enables loan and insurance applications to access finance from VisionFund. Producers are also able to do gross margin analysis for themselves.

• Everyone THRIVE Ghana Partnerships with Fairtrade, Esoko, and Ghana Commodity Exchange advances certification, market access,  extension services, and warehousing for producers, making them competitive in the marketplace.

• VisionFund as a microfinance institution is also a partner to finance the value chains end to end to ensure that no part of this network suffers due to lack of access to financing.

These partnerships strengthen value chains and market systems, ensuring small producers access finance and markets.

VisionFund’s Role: CrediEnterprise

Producers require seasonal credit paired with savings and, ideally, insurance; timely liquidity for land preparation and planting is fundamental, and small top-ups for harvesting services can dramatically reduce field loss. Aggregators and traders need purchase-order finance to “mop up” harvest quickly, pay farmers on delivery, and inventory credit to hold stock until mills can absorb it. Transporters from okada riders to small truck owners need asset finance and short cycle working capital for maintenance and fuel; without timely movement, quality declines and prices fall. Storage providers require warehouse-receipt finance to keep grain dry and to smooth seasonal price fluctuations. 

VisionFund’s CrediEnterprise product provides flexible financing for:

• Seasonal working capital for farmers.

• Purchase-order and inventory finance for aggregators.

• Asset finance for transporters and storage providers.

• Bundled insurance and advisory services.

CrediEnterprise supports on-farm, off-farm, and non-farm activities, promoting livelihood diversification and resilience in the face of economic and weather invariabilities. This diversified approach to financing ensures that women and youth are active players in the market place as they can also access finance for food vending, retailing micro-transport services for example. The result is more inclusive participation, fairer value distribution, and measurable gains in household welfare and community resilience.

It also ties financing to climate-smart practices, aligning incentives for sustainability. Lenders can condition loans on adoption of soil and water conservation, agroforestry, efficient irrigation, and reduced chemical use, verified through extension support or buyer standards. Financing can also be timed to seasons and bundled with inputs like drought-tolerant seed, solar pumps, and post-harvest technologies that cut losses and emissions. By de-risking green investments through off-taker contracts and insurance, value chain finance aligns incentives so producers, aggregators, and buyers all benefit from improved resilience, higher-quality outputs, and compliance with emerging environmental regulations and market requirements.

To de-risk both VF MFIs and Clients, producers are eligible for the loans once they completed and implementing lessons from iMKA and Empowered World View (EWV) trainings. VisionFund’s confidence is also spiked by the partnering approach, knowing that access to finance is provided to well-trained producers. 

Why Integration Matters

When finance addresses the entire system:

• Liquidity flows smoothly across functions.

• Quality and predictability improve, enabling buyers to plan with greater confidence.

• More value is retained locally, boosting inclusion for women and youth, creating jobs and building resilience of households.

The bottom-line truth is that value chain finance is necessary, but not sufficient. Market systems financing matters too. An integrated approach delivers the greatest impact. That means looking beyond the “core” production-to-processing corridor BUT designing finance that addresses the supporting services, information flows, and norms that enable the whole system to function. 

VisionFund rediEnterprise thus provides a configurable backbone

• seasonal working capital for farmers; 

• purchase-order and inventory finance for aggregators; 

• asset finance for first-mile logistics and storage; and

• the option to bundle insurance and advisory. 

Together, we can transform markets and empower smallholder producers.

Call to Action

Join us in building inclusive financial systems that leave no one behind.

Contact us today:

• iMKA

• CrediEnterprise

• Partnerships

Author: Angeline Munzara (THRIVE 2030 Director of  Operations, Strategic Integration and Partnerships), Francis Karugu, VisionFund Senior Advisor-Agriculture Finance & Makalius Charles, World Vision US THRIVE 2030 Regional Integration Manager- Inclusive Market Knowledge and Access.