Developing internal trade corridors for agriculture in Africa and removing obstacles to formal trade will help farmers benefit from rapidly rising food demand in African cities, the Fin4Ag conference in Nairobi heard Tuesday (July 15). Tools like warehouse finance can support that process.
At the 2nd African Continental Briefing at the Fin4Ag conference in Nairobi, participants discussed how to strengthen value chains, build trust and help the public sector empower private players to finance farmers.
Haiti has found itself at the forefront of agricultural microfinance with an initiative that is shaking up misconceptions about the bankability of smallholder famers and will soon also be launched in Latin America (LatAm) and Africa.
Despite having nearly 20% of the world’s cultivated land, Africa’s share of the global agricultural market measured by insurance premiums paid is smaller than 1%, according to Jean-Christophe Debar, director of the Foundation for World Agriculture and Rurality (FARM). Latin America is better “but still under-developed”.
Value chains like livestock and dairy face a unique set of challenges, giving them a reputation as being higher risk than those for soft commodities like grains.
Governments in African, Caribbean and Pacific countries have a huge responsibility to support agriculture, which in many cases employs more than half the population and is a foundation for the economy.
The love affair between banks and traders is sometimes resented by producers, who struggle to access bank finance directly. But traders are the arteries and veins of agricultural finance, helping money flow right across the value chain, adding value with processing plants, and supporting smallholders with technical assistance.
One of the biggest challenges small farmers face when they try to access finance is that they are an unknown risk. More farmers in African, Caribbean and Pacific countries have a mobile phone than a bank account, and even when they have tapped credit, it tends to be in a non-traditional form that passes through the net of mainstream credit data collection.
Warehouse receipt finance is spreading fast, giving smaller traders and bigger farmers or cooperatives the chance to tap finance immediately while they protect their produce and hopefully negotiate better prices for it.
Development finance institutions (DFIs) have of course always led the charge in sweetening deals in emerging markets – using their own liquidity, quasi-sovereign rating or willingness to lend for longer tenors as a way to attract banks to the table. But now the DFIs are experimenting with new strategies and structures to get funding to the small farmers and traders who need it most.
African banks are taking the lead in financing the continent’s farmers, traders and soft commodities. With more local money in the system, they are also reaching further down the value chain, though still find financing farmers directly a challenge. At the same time, international banks are snapping up stakes in local players, hoping to piggy-back on their distribution network and on-the-ground expertise.
Now in its 21st year, the annual pre-export financing of Ghana’s cocoa harvest is an example of how African agriculture really can attract big international banks – and increasingly cheaply – given the right mix of government involvement, industry organisation and deal structure.
India’s microfinance industry has been through the mill in recent years. One microfinance institution (MFI) that has also faced its share of problems – but has weathered them better than many – is BASIX.
Agriculture forms the backbone of many economies in the Pacific Islands. Despite their geographic remoteness, a handful of islands are quietly building burgeoning export industries in commodities such as cocoa, coffee and sugar and, in the case of Papua New Guinea (PNG), a value-added tuna canning industry.
Tony Elumelu is chairman of Nigeria-based investment company Heirs Holdings and conglomerate Transcorp. He is also founder of the Tony Elumelu Foundation, a philanthropic organisation that supports entrepeneurship across Africa.
TXF talks to Lamon Rutten, CTA Manager (Policies, Markets and ICTs) at the inaugural TXF Natural Resources and Commodities Finance Conference in Amsterdam.
Jamaica’s first digital agricultural clearing house using SMS to Web technology will launch in August, connecting small farmers with buyers.
East Africa-focused microfinance platform Musoni will extend to Uganda by year-end, focusing from the start on rural regions and agricultural finance, according to CEO Bart van Eyk.
TXF is delighted to be the official media partner for this year’s Fin4Ag conference in Nairobi, Kenya. Running from July 14 to 18 at the Kenya School for Monetary Studies, Fin4Ag will bring together more than 500 financiers, farmers, regulators and other agri-finance experts from public and private organisations across Africa, the Caribbean, the Pacific and elsewhere
We’re taking the global export roadshow to Lisbon! Join us on the 7th & 8th June 2022 for another unmissable hybrid event. Deal makers from across the globe are attending in force. Don't miss out...
The destination for African commodity finance! A unique opportunity to come together with deal makers across this exciting region for virtual networking opportunities second to none!
Returning in-person to London! Calling all changemakers in trade & export finance - Join us for another thought-provoking edition to plot your ideas about diversity, sustainability and inclusion.
Return of the hugely popular virtual event which addresses the challenges of sustainable commodity finance head on. Bringing you an atmosphere that is inspiring & ideas led! The time is now...
TXF Asia is back, in-person, in Singapore! After three fabulous virtual editions, nothing can compare to face-to-face meetings and getting back in the room with the finest export finance minds.
Three virtual editions later, TXF APAC makes its first in-person return, in Singapore! Join us for an intimate, local language event curated specially for the trade and commodity finance market.
The climax to Geneva commodities week, TXF Geneva brings together the European commodity finance market for an unparalleled two days of thought leadership, networking and education.