Risk-sharing models increase market access and financial and non-financial services to farmers

Abstract

Developing risk-sharing models or strategic alliances with farmers, agribusinesses, and financial institutions in value chains can effectively increase access to markets and expand outreach of financial and non-financial services to farmers underserved by formal financial institutions. After understanding the existing financial relationships among farmers and agribusinesses in different value chains and contexts, innovative risk-sharing models were developed. Experiences gained developing and pilot-testing these models provide practical examples of how financial institutions, agribusinesses and market facilitators can work together to reduce the risks and costs of lending to small farmers, while capitalizing on the benefits. Risk-sharing models were pilot-tested by Caja Nor Perú (CNP), Financiera El Comercio A.S.E.C.A. (El Comercio) and International Development Enterprises-India (IDEI) during the 18-month SEEP Network Practitioner Learning Program (PLP), Strategic Alliances for Financial Services and Market Linkages in Rural Areas. From this practitioner-led research, six main findings on how to develop risksharing models were drawn, and a topic previously unaddressed by rural finance research - the role of market facilitators in strengthening value chains and developing financing arrangements - was explored.