COVID-19, Agriculture and Microfinance

7 min readJul 21, 2020

The COVID-19 pandemic has spread like wildfire throughout the globe, including in Nepal. In order to slow the spread of COVID-19, the Government of Nepal declared a nationwide lockdown starting from 24 March, 2020 till 14th June, 2020. Lockdown restricted all forms of transportation and movement, both between and within localities. The lockdown imposed by Nepal was not gradual, with the initial intention to impose restriction on mobility for a week, this plan quickly escalated to nationwide lockdown overnight which extended just over 2 months. The lockdown had taken everyone by surprise; no one was prepared. Transportation, along with all forms of businesses, were shut down. All forms of economic activity have been halted since the first day.

Migrant workers living on daily wages were the most hard hit, not only because of COVID-19 but because of the economic impact brought by lockdown. Many news headlines in Nepal’s national daily newspapers noted migration of people from urban to rural areas. Many are yet to return from the foreign employment. With large numbers of manpower wanting to return to the country, one of the common notions was to involve the incoming manpower to agriculture and livestock.

Effect of COVID-19 in agriculture and microfinance: Case in Kispang, Nuwakot

Around five microfinances and cooperatives have established their branches in Kispang. Among which, we are working closely with Mahila Sahayatra Microfinance to use our technology platform to monitor loans. The microfinance provides loans to the residents, ideally, to either start a business or to improve the existing business. However, many apply loans to either repay outstanding loans or for household expenses, while only a small portion was left for their businesses, which trapped them in a vicious loan cycle. This is mainly true for farming households. The borrowers then pay the installment either through remittance (for those who have family members in foreign employment), selling their harvest or products (vegetables, livestock) or taking up any work around the village to repay the loan in installment. To understand more about the impacts of COVID-19 on agriculture and livestock production, we contacted some residents of Kispang through telephone, where we are currently running a pilot. Kispang, a rural municipality in Nuwakot district is predominantly an agrarian society. This municipality is remotely located in the hills but is not completely isolated from the market area. A dirt road connects the rural municipality to the Dhunge Bazar in Trishuli, Nuwakot, one of the main markets for residents of Kispang. The basic facilities such as health post and educational facilities are available within the perimeter of the municipality, however, like in other rural areas, youth (mainly men of working age) are absent from the village. Many have migrated either to cities or to foreign countries for the objective to have better employment opportunities than that is available in Kispang. The main source of livelihood in Kispang is labor, such as work in construction, unloading food materials for vehicles, ploughing or sowing seeds in the fields of landowners. Some have even started tea shops, tailoring, and kiranapasal.

The sudden lockdown for more than two months adversely affected the borrowers from farming households. The branch manager of Mahila Sahayatra Microfinance Kispang branch shared that many borrowers were not able to repay their installments since the implementation of lockdown. Moreover, few people who had returned from other parts of the country tested positive for COVID-19. In order to prevent any transmission in the community, even though the suspected people were isolated in quarantine, the lockdown was enforced more strictly from 22nd of May to 2nd June, restricting any non-emergency movement even within the Rural Municipality. The extension of lockdown while it was nearing to end, created fear among many borrowers regarding the uncertainty, and worry about financial security. This is the reason why many borrowers preferred to not repay the loan installment but rather have some cash on hand for at least some financial security during this uncertain time. Some who relied on remittance for loan payment were also not able to pay the installment as their jobs in foreign have been affected due to COVID-19. Only some households were able to pay the installment, mainly the owners of kiranapasals.

One of the residents of Kispang notes that due to COVID-19, people are now farming for sustenance and not as the means of income. Every household is dependent on their harvest from their own field. While another respondent shared that harvest from their own farmland is not adequate for her family. She shared that the main source of earning for her family was wielding iron utensils and working as labourer in other’s farm. She was able to repay the loan from those earnings. But the restriction in mobility even within the municipality hindered her economic activities. Before the lockdown, no one from her group had any difficulty in repaying the loan, but now no one from her center has been able to repay.

Another farmer shared that the harvest of peas in this season during the lockdown had gone to waste resulting in the loss of NRs 30,000–50,000 for each farmer. The collectors in a pre-lockdown scenario would go to the village, weigh the harvest and pay the farmers. But due to lockdown, the collectors did not come. The farmers could not access the market. They could not sell in the local market of the village as the supply was greater than the demand. The money obtained from the sales of vegetables would have otherwise been used for payment of loan installments.

In the case of livestock and animal husbandry as well, people were neither able to sell nor able to purchase their livestock as there was no cash flow. The livestock owners were not able to purchase feed for livestock so they resorted to collecting grasses from forest and preparing feed from the farm harvest (khole).

Now as the lock down is easing around the nation, people are now trying to restart the economy. Unfortunately, residents are still not allowed to move from one district to another. With the onset of monsoon, the local communities are now involved in sowing grains (millet, wheat, and rice in some areas). From 15th June, Mahila Sahayatra Microfinance has started their field operations, considering social distancing protocol. However, one of the field staff of Mahila Sahayatra shared that during the first week of lifting the lockdown, there was significantly low attendance in group meetings, she reasoned that it not only because of COVID-19 but also might have been because of sowing season as people are busy in field from early 7 am in the morning to 8 pm in the evening. Upon asking whether the borrowers were interested in taking new loans, the field staff shared that there are quite a few requests. But the microfinance is not able to disburse any loan, until previous loans have been paid. The branch manager believes that for the microfinance to operate as during the pre-lockdown period, the situation would take many months to recover.

Role of Technology and Aeloi to support farmer

Even though societies around the world are now trying to move towards normalcy, the impact of lockdown on the economy may take years to recover. The wealth gap is estimated to increase as it is difficult for the poor debtors to exit a vicious loan cycle during an economic downturn. Governments, development organizations, and other impact funders have been providing monetary investment to assist economically disadvantaged groups. This traction is likely to increase in the post-COVID scenario. Some would argue, however, that this economic support did not happen fast enough or reach the targeted populations. Tracking the funds to make sure it was all spent well is also a major issue.

Our company, Aeloi Technologies, has built a system that can monitor financial transactions to ensure that the funds have been used for the intended purpose. The way we do this is linking the recipient of funds with the vendors they will spend the funds on. For example, if we transfer funds to a farmer hoping to support her business, then she can only spend the funds at agriculture vendors to purchase goods and services such as seeds, fertilizers, or agriculture skills training. If we transfer money to a safa tempo driver for support, then she can only spend the money at safa tempo related vendors, such as charging stations and maintenance garages. We do not restrict the amount or when she spends the funds received, but we do restrict which kind of vendor she can buy from.

Mobile phones are the most commonly available technology, even in remote areas. Therefore, we use SMS, instead of a mobile app, to make sure more can access the technology. This can be a huge help for faster transaction processing in times of crisis and during the recovery phase (especially in cases like COVID-19) where mobility is restricted.

Due to lack of real-time traceability, the fund intended for support of economically vulnerable people in the informal sector, such as women and daily wage workers, may end up never being spent on them. Using our system, the money is digitized and sent through SMS, which makes the transaction trackable. Who received how much money? Where and how much was it spent? The tracking process would help to make sure the funds are used to create the impact it was intended for.

Our technology also helps provide access to affordable financial services to support increased inclusion and financial health. By monitoring the end-use of business microfinance loans, we help lower the lending risk for microfinance organizations, thus leading to lower interest rates in the long term. By connecting micro-entrepreneurs to reliable vendors and financial institutions, we are helping build a strong local value chain.

The introduction of digital finances in the long term is essential to reducing the impact of future financial crises because it enables faster and transparent policy responses. We believe our technology is one of the solutions. What other solutions are you working on?




Aeloi powers last-mile impact financing with digital tokens. We are an SMS platform helping green microenterprises access affordable financing. #fintech #social