A baker's dozen lessons of value chain financing in agriculture

Abstract

Value chain finance in agriculture is an approach to financing that uses an understanding of the production, value added and marketing processes in a chain to best determine financial needs and how to best provide financing to those involved. Many diverse and innovation financial instruments may be applied or adapted to fit the specific financial needs of chain actors. Commodity flows and cash flow projections can be used to secure financing and reduce risk. This article looks at this approach and at the application of financial instruments and innovations, drawing lessons for widespread application. The 13 lessons are drawn from 90 cases presented in four regional conferences on value chain finance organized by the Food and Agricultural Organization of the United Nations (FAO) and on a study on structured finance for agriculture. These lessons show the high potential of this approach for successfully increasing finance to agriculture and agribusiness, with less risk and lower transaction costs.