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Specialized Tools in Agricultural Financing for SMEs

Rene Verberk

To come to sustainable Agri finance solutions it is critical to follow a segmented market approach. This means that we have to develop different financing tools for different size of loans and different size of food and Agri clients. For different stages in the value chain we find various financing solutions available for SMEs:

Value chain financing (VCF): VCF instruments are a group of financing solutions in the agricultural value chain based on the relationship between partners in a chain. One of these partners is the financial institution. The nature of VCF is that it converts credit risk into performance risk. To make VCF successful it should be based on long term partnerships in which value chain partners look at how to optimize the value chain: reducing of costs and market-oriented quality end products.

Cooperatives: Often the value chain financing solutions will be used after smallholders have organized themselves in cooperatives. Using financing instruments for individual small farmers often  is too costly and too risky and leads to high-interest rates. Financing solutions via cooperatives often only works when cooperatives have a certain level of professionalism and have a good corporate governance. During this module we will elaborate on how to build a strong agri cooperative.

Warehouse Receipt System: Warehouse receipt finance is a form of secured lending to owners (farmers, traders, processors) of non-perishable commodities, e.g. grains, which are stored in a warehouse and that have been assigned to a bank through warehouse receipts. Warehouse receipts give the bank the security of the goods until they have been sold and the proceeds collected while giving the farmer the choice to sell his crop later in the year when prices are usually higher than at harvest time.

The course will contain theory on specialized tools in agricultural finance for SMEs whereby we use specific value chain financing solutions. A very important part of the training will be using the theory in practical cases.

Intended audience: Top and middle management of MFI’s and banks, donors and other stakeholders especially when they work in an agricultural and rural environment. Having already some experience in Agri finance is an advantage.

Boulder Institute of Microfinance

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Syracuse, New York 13202, USA
+1 (315) 760-3091

info@bouldermicrofinance.org

Boulder Institute