Agricultural Finance – The Opportunity Difference

This post is also available in: Tiếng Việt (Vietnamese)

Introduction

Africa is still not producing sufficient food to provide a balanced diet to the population, despite its natural resources of land and water. The majority of smallholder farmers across the continent have adopted, by default, a low input/low output farming systems. Only farmers who can provide collateral to a financial institution are able to access the finance needed to purchase improved seeds, fertilizers and chemicals to optimize their productivity. Lack of collateral excludes the majority of farmers from financial services.

Opportunity International launched an agricultural finance pilot in 2005 by conducting research on options for providing weather-indexed crop insurance in Malawi in conjunction with the World Bank. Today our banks provide a full range of financial services to smallholder farmers in five countries in sub-Saharan Africa: Ghana, Malawi, Mozambique, Rwanda and Uganda.

Opportunity’s agricultural finance initiative equips farmers with the services they need to move from subsistence to economically and commercially active farming, thereby increasing household incomes and food security throughout Africa. Our strategy includes four key components that are designed to increase success rates for both the farmer and the bank:

1)      Determine if a farmer has the potential to transition into commercially active farming based on household profile and land size

2)      Engage with the critical players in the value chain – input suppliers, smallholder farmers, warehousing/bulking agents and off takers – prior to providing the farmer with financial services

3)      Provide a full range of financial products tailored to farmers’ needs

4)      Protect the bank’s investment and increase sustainability by developing low-cost delivery channels, diversifying our savings portfolio, securing credit guarantees and tailoring the agricultural model to the needs of farmers in each country