bankingciooutlook

Banking-finance in Agriculture

Banking CIO Outlook | Thursday, July 07, 2022

Our essential agricultural finance programs incorporate the Global Trade Liquidity Program (GTLP), the Critical Commodities Finance Program, the Food and Agri and Global Warehouse Finance Program (GWFP), and the Food System Development Program.

FREMONT, CA: Agriculture gives numerous people livelihood in developing and emerging economies — particularly those living in rural areas. Yet access to agricultural finance is always a hurdle. Lack of access to finance stops several farmers from adopting new technology and enhancing their efficiency.

With a requirement for food expected to increase by 60% by 2050 and the agricultural system under pressure to satisfy the current market, the only way to increase food production is to invest in sustainable technologies and climate-smart agriculture.

These investments would enable farmers to produce more food with less environmental impact. Wise investments could also lower food prices and encourage economic health in rural areas.

Financing the agricultural area gives many challenges for financial institutions: Achieving remote rural areas can be costly; Weather risks, crop concentration, and price volatility raise the credit risk for lenders, reducing their appetite to finance the sector;

Risk-assessment technologies usually lack precision for evaluating investment opportunities in rural areas, And funding the agricultural sector requires integral risk-management strategies and close collaboration with tech providers and agribusinesses.

What we do

With partnering financial institutions, IFC helps to offer customized short- and medium-term working capital and long-term agricultural financing. Our investments incorporate credit lines and risk participation. In addition, we often complement these investments with advisory services.​

IFC's Global Agri-Finance Advisory Program intends to help raise the availability of agricultural finance in emerging and developing markets by promoting proper risk-mitigation products and skills development in financial institutions. Our program supports various types of institutions—banks, microfinance institutions, and fintech—as follows:​

• We work with banks to aid in strengthening agricultural supply chain finance, climate finance for agribusinesses, risk-assessment models, and digital scoring for agriculture.​

• We help microfinance institutions develop digital scoring models, E-wallets, and mobile payments, build credit agents' skills in rural areas and build strategic alliances with agribusinesses.​

• We assist fintech with developing digital scoring models, implementing risk-management frameworks, enhancing portfolio management in rural areas, and creating strategic alliances in agricultural supply chains.​

• Our essential agricultural finance programs incorporate the Global Trade Liquidity Program (GTLP), the Critical Commodities Finance Program, the Food and Agri and Global Warehouse Finance Program (GWFP), and the Food System Development Program.

Food System Development Program

IFC's Food Systems Development Program is a consultative initiative in partnership with the German Federal Ministry for Economic Development and Cooperation, BMZ, to encourage sustainable rural transformation in Africa.

Using an integrated, private investment-led, and market-oriented approach, the program promotes access to agricultural finance and value chain development to advantage smallholder farmers, farmer organizations, and micro, small and medium enterprises in the farming sector.

The program helps financial institutions and agricultural value chain actors in Africa develop innovative financing solutions to address historical challenges in the provision of agricultural finance. It concentrates on building financial services partnerships along the value chains and leveraging digital technology to develop and test new tools, processes, and financial products to meet the needs of all actors along the value chain.

The program also follows an extensive research and learning plan, harnessing and sharing insights acquired in program projects for the industry & the public good.

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