Financing for Agriculture: How to boost opportunities in developing countries

The document analyzes the scarcity of agricultural financing in developing countries, where risks like natural hazards and high transaction costs deter lenders. It categorizes financial needs into four groups: farmers/entrepreneurs, value chain actors, rural infrastructure, and R&D. The brief details a range of instruments from informal savings and micro-finance to complex value-chain and infrastructure financing. It emphasizes the government's role in risk management through credit guarantees and insurance subsidies, and the importance of flexible regulatory frameworks to attract investment while protecting savings.

• Agricultural financing is severely limited in developing countries due to high transaction costs in rural areas and inherent risks such as natural hazards, price volatility, and farmers' inability to provide collateral.
• In Africa, the agriculture sector receives less than 1 per cent of commercial lending, reflecting a broader lack of understanding of financial risks and opportunities in the sector.
• Agricultural finance is categorized into four primary needs: financing for farmers and small entrepreneurs, transactions between value chain actors, costly rural infrastructure projects, and the generation of knowledge through Research and Development (R&D).
• Financial instruments for the rural sector range from informal community savings (such as tontines in Senegal and susu groups in Ghana) and micro-finance to formal traditional finance, leasing, factoring, and weather-based insurance.
• Value-chain finance focuses on business transactions between participants to reduce risk and cost, utilizing internal finance (like trade and input-supplier credits) and external finance (such as receivables financing and warehouse receipts).
• Governments can boost agricultural finance by managing risks through credit guarantee funds, subsidizing insurance premiums, and acting as facilitators to link value chain actors.
• Effective financial regulation must balance openness and flexibility to encourage innovation with the need to prevent abuses by financial institutions, while avoiding overregulation that hinders adaptability.

APA

Ruete, M. (2015). Financing for Agriculture: How to boost opportunities in developing countries. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/financing-agriculture-boost-opportunities-devloping-countries.pdf

Chicago

Ruete, Marina. Financing for Agriculture: How to boost opportunities in developing countries. International Institute for Sustainable Development, 2015. https://www.iisd.org/system/files/publications/financing-agriculture-boost-opportunities-devloping-countries.pdf.

Wikipedia

{{cite report |last1=Ruete |first1=Marina |title=Financing for Agriculture: How to boost opportunities in developing countries |publisher=International Institute for Sustainable Development |date=September 2015 |url=https://www.iisd.org/system/files/publications/financing-agriculture-boost-opportunities-devloping-countries.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ruete2015financing, author = {Ruete, Marina}, title = {{Financing for Agriculture: How to boost opportunities in developing countries}}, institution = {International Institute for Sustainable Development}, year = {2015}, month = sep, url = {https://www.iisd.org/system/files/publications/financing-agriculture-boost-opportunities-devloping-countries.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }