Local bank financing for Smallholder Farmers: A $9 Billion Drop in the Ocean

Published on

October 24, 2013

The first briefing note in a series from the Initiative for Smallholder Finance provides an overview of the market size and scope of local bank lending to smallholder farmers.

 

Local bank lending – which should be a main avenue for smallholder financial access – is estimated at $9 billion and meets only 3% of overall demand. This is a small figure and meets less than 3% of the estimated total smallholder financing demand, which is $300 billion excluding China and $450 billion globally. Furthermore, this amount is dwarfed by the $230 billion in total bank lending to the agricultural sector.

In addition to revealing new data on local lending to smallholders, this research assesses the types of financing products offered to smallholder farmers and explores the barriers to provision.

Currently, global development donors have tried to incentivize bank lending to smallholders by focusing on guarantees, but those have not been sufficient to stimulate lending. This briefing note argues why banks need investment funds and technical assistance to build their smallholder banking capabilities and better serve rural and agricultural clients.

About the Author(s)

Initiative for Smallholder Finance
Learning Lab Strategic Partner

ISF is an advisory group committed to transforming rural economies by delivering partnerships and investment structures that promote financial inclusion for rural enterprises and smallholder farmers. Combining industry-leading research with hands-on technical expertise, ISF develops practical, profitable, and sustainable financial solutions.

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