Smallholder Households: Distinct Segments, Different Needs

The 500 million smallholder households worldwide represent a large pool of potential financial services customers. However, they are not a monolithic group. To create and provide appropriate and desirable products for the segments within this group, financial services providers, government bodies, and agricultural development partners need to understand the segments they want to serve.

This Focus Note proposes an approach that distinguishes three segments of smallholder households—Subsisting, Commercializing, and Diversifying—according to their crop and livestock sales, amount of agricultural land, and smallholder livelihood profile. Using data from nationally representative surveys of smallholder households in Mozambique, Uganda, Tanzania, Côte d’Ivoire, Nigeria, and Bangladesh, the analysis estimates the market size of each segment and outlines recommendations on high-value financial solutions. Key findings include:

• The Commercializing segment is the primary market for financial solutions related to agricultural goals.
• The Diversifying segment is in transition and generally values the standard portfolio of financial services.
• To serve the more vulnerable Subsisting segment at scale, partnerships, technology, and comprehensive approaches to financial and nonfinancial services are key.
• Agriculture exerts a strong influence on the identity and income of smallholder households. But their financial inclusion is not primarily determined by their agricultural livelihood profile.
• Farm and nonfarm aspects of their livelihoods need to be considered to help each segment of smallholder households effectively build resilience and capture opportunities.