AFD in Peru

agrobanco

Coming to the rescue of La Sierra and La Selva

14/06/2017

Help farmers in the most remote areas of Peru tackle climate change and allow them to continue to live off their land. This is the commitment of Agrobanco , the Peruvian development bank for agriculture, via a very ambitious range of financing.

 

Climate change: The Peruvian paradox

There is a curious paradox in Peru: agriculture and farmers are very vulnerable to climate change – we have all heard about El Niño and La Niña and their trail of destruction, but are also largely responsible for it. Indeed, forests continue to be destroyed to gain more farmable land: over 60% of greenhouse gas emissions are caused by this change in land use.

In addition, as in many countries, intensive agricultural practices cause damage and deplete resources. But how then can these destructive dynamics be reversed, while giving priority to providing smallholder farmers with solutions?

“Following the organization of COP20 in Lima in 2014, there was a marked increase in the interest and mobilization of Peruvians for combating climate change”, explains Eleonore Pocry, project manager at AFD’s agency in the Peruvian capital, “Many realized that it was essential to improve agricultural practices.”

 

© Agrobanco

 

Agrobanco to the rescue of La Sierra and La Selva

One of the main actors in this revival is called Agrobanco . It is the public development bank for Peru’s agricultural sector. Its range of loans focuses on farmers who have the most difficulty accessing credit in the Andean region (La Sierra) and Amazonian region (La Selva). These farmers have huge needs.

“To help them”, points out Céline Bernadat, project manager for financial institutions at AFD, “Agrobanco offers competitive financial solutions, but that is not all, because to change production model, farmers also need advice. The bank consequently works with intermediaries who have trained as engineers and are able to play a dual role: prepare the loan application and help farmers launch their projects. This is a constructive and highly innovative approach in Peru.”

 

Banco Verde

Agrobanco has been experiencing very strong growth for the past three years. It is even destined to become the bank for innovative and “climate-compatible” rural development. In 2015, the Banco Verde (Green Bank) plan was adopted. However, to stay on course with its objectives, it needs support. The meeting with AFD came about through the dynamics of the COPs and the Franco-Peruvian bilateral dialogue on climate change and has happened naturally. “We believe that the environmental aspects are key to our activity”, points out Carlos Ginocchio, Chief Executive Officer of Agrobanco, “And our objectives and those of AFD for the fight against climate change are aligned.”

In practical terms, this loan involves making a EUR 50m credit line available to Agrobanco. The objective? Increase the number of green projects from 10 to 25% of the portfolio by 2019. The first loans allocated concern investments by coffee, cocoa, organic banana and ginger smallholdings. Most are “long-term” loans (between 3 and 8 years), allowing perennial crops to be planted, with a grace period before the arrival of the first produce.
 

 

Helping more those who innovate more

Banco Verde’s objectives do not end there. A second phase, and for at least 40% of the credit line, will concern new innovative projects: silvopastoralism, compost, biomass production, improving irrigation

The criteria are currently being defined and fine-tuned thanks to technical assistance financed by a EUR 5m grant from the European Union Latin America Investment Facility (LAIF). “It involves establishing suitable bases for indicators and a risk management system so that we can implement sustainable investments”, adds Claude Torre, “It is a promising and structuring approach which can be replicated elsewhere!”

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