The Missing Middle in Agricultural Finance
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Private-sector finance has made a start in filling this long-established gap, widened over the last decade as public-sector financing frameworks for small-scale agriculture have been withdrawn. However, the flow of capital to agricultural SMEs needs to be scaled up. This paper looks at the barriers to doing so.
This paper seeks to show that while the reason for the missing middle is fairly straightforward, eliminating it requires a multi-track approach to match the complex pattern of demand, supply, and infrastructure features.
- Too few smallholder farmers are aggregated in producer organisations or other SMEs capable of partnering with lenders or investors.
- Improvements, fairly straightforward, in the legal and administrative infrastructure that supports the finance sector can reduce transaction costs, for example by making collateral easier to use and credit history on borrowers more available.
- Collateral substitutes such as factoring and leasing can be legally enabled and encouraged.
- Some risks can be shared or transferred through guarantee and insurance mechanisms.
- Most rural finance providers need a degree of institutional reform if they are to contribute substantially to solving the problem of the missing middle.
- Returns on investment in agricultural SMEs can be increased through the public-sector taking responsibility for improving the physical infrastructure in rural areas and supporting farmer education and locally specific R&D.
- Non-profit actors: donors and NGOs and others, can make a major contribution by work alongside financial institutions to remove frictions in the market for small-scale agricultural capital.
|Auteur||Doran, A. McFadyen, N. and Vogel, C. Rober.|
|Year of Publication||2009|
|Nombre de pages||54 pp.|
|Région / Pays||Globale /|
|Langue principale||Anglais (en)|
|Mots-clés||Financement Agricole, Services Financiers|