Formal loans to smallholders are often given
in a traditional way, meaning with a fixed
term and monthly or end-of-term repayment
schedule. Often collateral is required, which
leads farmers to seek informal loans, such
as those from within the supply chain, e.g.
from traders, or loans from family and friends.
Informal loans show a much higher flexibility
in regards to repayment terms, rescheduling
in case of temporary incapacity to repay,
collateral requirements, interest payments, and
farmers appreciate that flexibility.