New impetus for value chain finance and Successes in Farmer Business Models 13 July 2014

theodejager

“We have everything which money cannot buy, what we need, what we lack is proper value chain development, finance, technology, expertise”

Background

Agriculture remains an important means of alleviating poverty. However, shortage of finance can constrain its development. Its evolvement across Africa requires high-quality, competitive products and is organized in value chains which often exclude smallholders. Agricultural value chain finance provides a comprehensive look at the models used by farmers in order to increase the scope and reduce the cost and risk of financing to agriculture.

 In the 1960s many African states set up programmes of large-scale farming which promoted mechanisation. However, these programmes have failed, which has led to a lot of scepticism about mechanisation policies. Currently, agencies which dare to design mechanisation programmes, simply provide equipment but hardly integrate its maintenance in their strategies.This panel discussed the concept of agricultural value chain finance in Africa, new developments and new opportunities for farmers. 

Presentation

The key elements of session 1 and 2,

           •New opportunities in agricultural value chain finance

           •Agricultural finance and trade

           •Agribusiness advisory services : new context in Africa

           •Financial inclusiveness from a farmer’s perspective : challenges and opportunities

This briefing addressed the rural finance gap through agricultural value chain finance. Financial services providers often see high risks because they lack an understanding of the agricultural sector and food markets, and have no way to evaluate the risks in agricultural value chains.

To most financial institutions, the cost of directly lending to small-scale farmers in the remote rural areas is prohibitive and they are reluctant to finance rural entrepreneurs, citing high transaction costs and risks related to agriculture such as crop failure, diseases and market fluctuations as a justification. The result is a serious and long-lasting rural finance gap that keeps the economic potential of agriculture under used.  More than 700 agriculturists, value-chain partners, ICT developers, financiers, central bank governors and the media gathered to explore new tools, mechanisms and approaches to revolutionise agriculture to ensure that smallholder farmers get access to finance.  The Technical Centre for Agricultural and Rural Cooperation (CTA) Director, Dr Michael Hailu said at the opening of the conference that there was an urgent need to transform smallholder agriculture into a profitable and sustainable enterprise in Africa, the Caribbean, the Pacific and other developing countries. 

Bringing about real changes depends to a large extent on access to finance that enables smallholder agriculture to grow and prosper. The Fin4Ag conference gives us a unique opportunity to learn about the different tools and initiatives that facilitate successful smallholder inclusive agriculture-value chain finance”

The president of Southern African Confederation of Agricultural Unions (SACAU) and the Pan African Farmers Organisation (PAFO), Dr Theo de Jager outlined the significance of smallholder inclusive agriculture-value chain finance in Africa.

Dr de Jager urged farmers’ organisations on the continent to take the lead in ensuring that agriculture gets the support it deserves in order to change the lives of farmers and millions of people on the continent. 

“Farmers in Africa represent a significant number of the continent’s population – they are the poorest people in the world, yet they do not live on the poorest continent in the world. We have good soils and a good climate – things money cannot buy, but we lack in technology, infrastructure, market linkages and expertise”.

Interview with Theo de Jager, President, SACAU, South Africa from CTA on Vimeo.

The African Rural and Agricultural Credit Association (AFRACA) Secretary General, Mr Saleh Gashua said the conference provides a platform for all agricultural stakeholders to accelerate contacts with key players in the industry with a focus on the existing functional models on agri-value chain finance.