Written by: Gabriel Aparicio, Program Manager, and Eliana Mora Quintana, Program Officer at Fundación Capital in Colombia.
Value chains are key drivers of sustainable development and economic growth. In the early stages of production, they generate employment and income opportunities for vulnerable communities. For the past eight years, the Colombia Más Competitiva program (C+C) program has been working with chains such as specialty coffees and cocoa, sustainable tourism, and natural ingredients (açaí, copoazú, vanilla, and jagua), promoting products that are now prominent in national and international markets.
The growth of these chains has increased demand for financial solutions that not only improve access to products and services, but also promote responsible financial habits. This is key to strengthening the actors involved and ensuring the sustainability and resilience of priority economic sectors in the country.
Financial health in value chains
Financial health, according to the Consumer Financial Protection Bureau (2015), is “a state in which people can meet their present and future financial obligations, feel secure about their financial future, and make decisions that allow them to enjoy their lives.”
With this perspective, C+C adapted the Financial Health Network methodology to assess four key dimensions: spending, saving, debt, and planning. This approach classifies financial health into three levels on a scale of 0 to 100: healthy (above 80), limited (40-79), and vulnerable (below 40).
In a recent study supported by Fundación Capital, 1,335 people in 13 departments were analyzed. The results show a national average of 54.4 points, indicating limited financial health. Only 5.8% achieved a healthy status, while 94.2% face some degree of vulnerability: 76.6% have limited health and 17.6% are vulnerable.
Among the four value chains evaluated, tourism performed best, with an average score of 65.3. In contrast, the natural ingredients chain scored lowest at 51.1. This result is not surprising, as stakeholders in these chains have expressed an urgent need to improve their financial habits.
Access to financial system products (such as digital wallets, savings accounts, or credit) was one of the variables evaluated. 82.6% of respondents have at least one financial product, with the tourism sector having the highest access (96%). These findings open the door to future research exploring the specific barriers that limit financial access in agricultural chains.
In addition, the survey showed that the natural ingredients chain faces major barriers in this regard, as no one achieved a healthy financial status, which could be explained by territorial conditions, since these activities are concentrated in municipalities in areas belonging to the Territorially Focused Development Program (PDET), marked by armed conflict, poverty, institutional weakness, the presence of illicit crops, the informal economy, and the predominance of cash use.
On the other hand, tourism stands out not only for its better financial health score (20.5%), but also for its proximity to urban areas, where there is greater access to financial products and services. This could indicate that the figures are not only a reflection of actors in the chain, but also of the financial dynamics of their consumers. This demand has promoted better financial habits, in contrast to agro-productive sectors such as coffee and cocoa, which face greater difficulties in their financial health despite their relevance to the Colombian economy.
In particular, 18.3% of the coffee producers evaluated are in a “vulnerable” financial situation, and although 90% have at least one financial product, this does not necessarily translate into greater financial well-being. The cocoa chain shows similar behavior, although with less access to financial products (76.2%).
Main financial challenges
One of the main challenges is the ability to save in agricultural chains (cocoa, coffee, and natural ingredients). In general, their expenses tend to be higher than their income, which makes it difficult to generate savings, increasing their vulnerability and financial insecurity.
The study also shows that most actors in the value chains analyzed have “limited” financial health, which translates into difficulties in achieving financial goals, dealing with emergencies, and making informed decisions about their savings. While the solution to these needs cannot be attributed exclusively to financial issues, it is clear that innovative financial solutions, designed specifically for these sectors, can be a crucial support in strengthening their financial habits and improving their well-being.
Financial health goes hand in hand with financial inclusion, which promotes access to products that help improve economic well-being and support people’s productive activities. In this regard, the use of savings-oriented products remains low: only 53.6% of respondents save, and the vast majority do so at home (49%). Among the value chains studied, tourism shows the highest savings rate (63.5%), while cacao shows the lowest (53.1%).
A booming product that contributes to financial health is digital wallets, although only 40.8% of respondents reported having one, and of these, 41.3% use them only once a month. Another product with great potential for these agricultural production chains is agricultural and parametric insurance, although only 2.2% of respondents have this type of insurance.
The MTa® Masterclass Colombia program has taken an important step forward by providing actors with tools and information on financial health. However, it is essential to continue and deepen these efforts in order to achieve a lasting impact. It is necessary to continue working on creating tailored financial solutions and promoting ongoing financial education so that members of these value chains can achieve financial health, enabling them not only to meet their obligations but also to build a more secure future that allows them to enjoy their lives.
This article was originally published on LinkedIn on November 19, 2024.
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