Edited by Frederique Dahan
Chapter 6: Untying the Gordian knot: Farmers, banks, insurers, warehouse receipts, commodity exchanges, collateral managers and access to credit
AbstractDuring the past 25 years there have been many initiatives to encourage banks in emerging markets to extend finance to the agricultural sector, but few have achieved a satisfactory outcome. The chapter argues that isolated actions do not work and recommends a multi-tiered, targeted approach which would encompass working at all levels of the ecosystem – central bank; commodity exchanges, warehouses; using also a diversity of tools (such as financing leasing, security over growing crops, collateral management service); providing a government-subsidized multi-peril crop insurance programme. If bank liquidity and access to refinancing, price risk management, legal security, collateral management and minimal transaction cost are not addressed convincingly and if any element is missing or dealt with by half-measures, experience shows that the effort will either be fruitless or unsustainable over time.
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