Agro-Value Chain Finance and Climate Adaptation

This briefing note by the International Institute for Sustainable Development (IISD) examines the role of the banking sector in providing agricultural finance that supports climate adaptation within agro-value chains, with a particular focus on developing countries in Africa and a case study on the coffee sector in Uganda.

• Climate change poses significant risks to financial service providers in agro-value chains, as client risks translate into institutional risks. These include reduced demand for credit during emergencies, fewer savings deposits due to asset loss, higher loan default rates, and decreased customer bases resulting from lower profits for processors and traders.
• Agricultural lending in Africa is disproportionately low compared to the sector's economic importance; while agriculture accounts for approximately 32 per cent of GDP and 65 per cent of total employment, it receives only five per cent of bank lending.
• In Uganda, the coffee value chain is highly vulnerable to climate change, with increased drought frequency, intensity, and rising temperatures since 1960. Climate hazards have caused direct reductions in yield and quality, and indirect economic losses, such as the 1997–98 El Nino which caused over US$47.5 million in road damages and a 60 per cent drop in coffee exports between October and November 1997.
• Centenary Rural Development Bank Ltd in Uganda is piloting a coffee credit scheme based on a 'factoring principle' adapted from the Warehouse Receipt System (WRS). This model allows the bank to advance 80 per cent of an invoice value to bulkers, who then pay farmers immediately, reducing the typical 90-day waiting period and potentially lowering farmer vulnerability to shocks.
• Information and communication technologies (ICT) are reducing transaction costs and improving financial inclusion. Examples include mobile banking services and a smartphone application piloted by GIZ and SAP in Ghana and Uganda that allows farmers to register transactions, providing the data necessary for banks to evaluate risks for loans and insurance.
• The document recommends four primary actions for the banking sector to manage climate risk: explicitly integrating climate risk into risk-management strategies via vulnerability assessments; incentivizing adaptation through 'climate-proofed' financial instruments (such as preferential rates for adaptive practices); developing new products through partnerships with tech and research firms; and explicitly targeting women, who are noted to be more likely to repay loans than men in rural Africa.

APA

Dekens, J., & Bingi, S. (2014). Agro-Value Chain Finance and Climate Adaptation. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/agro_value_chain_bank_sector.pdf

Chicago

Dekens, Julie, and Susan Bingi. Agro-Value Chain Finance and Climate Adaptation. International Institute for Sustainable Development, 2014. https://www.iisd.org/system/files/publications/agro_value_chain_bank_sector.pdf.

Wikipedia

{{cite report |last1=Dekens |first1=Julie |last2=Bingi |first2=Susan |title=Agro-Value Chain Finance and Climate Adaptation |publisher=International Institute for Sustainable Development |date=June 2014 |url=https://www.iisd.org/system/files/publications/agro_value_chain_bank_sector.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{dekens2014agrovalue, author = {Dekens, Julie and Bingi, Susan}, title = {{Agro-Value Chain Finance and Climate Adaptation}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = jun, url = {https://www.iisd.org/system/files/publications/agro_value_chain_bank_sector.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }