Leading Agricultural Lenders Deploy $682 Million to Support Small Businesses and Farmer Livelihoods Globally
Members of the Council on Smallholder Agricultural Finance (CSAF), which includes several e-MFP members, today announced in their newly published State of the Sector report that they provided $682 million in loans to 765 small and medium-sized enterprises (SMEs) during 2016.
This financing helped to generate an estimated $7.6 billion in combined annual revenue among these businesses, which employ 75,000 individuals and connect more than 2.3 million smallholder farmers—nearly one-third of whom are women—to domestic and international markets.
CSAF is an alliance of 11 leading impact-focused lenders that serve the financing needs of agricultural enterprises in low- and middle-income countries. By targeting high-impact businesses that source agricultural products from smallholder farmers and create jobs in rural communities, CSAF members seek to improve farmer livelihoods, transform agricultural economies, and promote farming practices that sustain the environment.
CSAF lending in 2016 represented a 9 percent increase compared to the $627 million in credit disbursed to 732 businesses during 2015, and signals a continued commitment among lenders to support agricultural SMEs. However, lending activity varies substantially across regions and value chains.
For instance, members reported that lending increased 44 percent in sub-Saharan Africa and 24 percent in Southeast Asia, but declined by 10 percent in South America and by 8 percent in Central America. Similarly, despite increased lending to borrowers in major coffee-producing countries like Colombia, Indonesia, and Uganda, overall lending to the coffee sector decreased for the second consecutive year due to a range of production, price, and market challenges. This decline was offset by a 20 percent increase in lending to other value chains, including cocoa and tree nuts. These and other trends by crop and geography are explored in the report.
“Today, a large information gap restricts the flow of appropriate capital to agricultural businesses with significant potential for growth and impact,” said Brian Milder, who serves as the coordinator of CSAF. “By sharing data and learning, we hope to highlight the impact, risk, and return profile of these enterprises and encourage others to address their financing needs in a way that is responsible, sustainable, and transparent.”
This third annual State of the Sector report is the latest example of CSAF’s commitment to sharing market insights while also respecting the confidentiality of individual borrowers’ business and financial information. The work was conducted in partnership with MIX, an external analytics firm, and is supported by Mastercard Foundation and Small Foundation.
Formally launched in 2014, CSAF provides a forum for agricultural lenders to convene on a pre-competitive basis and exchange learning, identify best practices, and develop industry standards around responsible lending practices. Members and affiliates include: Oikocredit, AgDevCo, Alterfin, Global Partnerships, Impact Finance, Incofin Investment Management, Rabobank, responsAbility Investments AG, Root Capital, Shared Interest Society, and Triodos Investment Management.
To learn more about the opportunities and challenges associated with smallholder agricultural finance, download the full report here