Inadequate financing of the agricultural sector remains a major constraint in developing countries. Despite the existence of genuine financial needs of large magnitude, financial institutions face difficulties in serving the clientele in the agricultural sector. As a result, the financing requirements of a significant number of farmers, farmers' groups and small- and medium-sized agricultural companies are not covered in terms of production, bridging, or mid- and long-term investment credits – a situation that seriously hinders possibilities of progress in agricultural production, product transformation and sales.
This study intends to (i) draw broad lessons from the history of public participation and the support provided by international donors for agricultural finance in numerous countries; (ii) make a diagnostic of the current situation, put forward the reasons for inadequacy between supply and demand for financial services in the sector and analyse the various solutions that have been found; and (iii) submit proposals for the creation of financial products that are responsive to the agricultural sector’s needs and constraints.
The study indeed elaborates on the elements that are key to innovative agricultural finance: reduce delivery costs, adapt to agricultural growth patterns and cash flow cycles and use value chains to ensure proper loan repayment.