Effective lending to Agricultural Microenterprises
Agricultural Micro, Small, and Medium-sized Enterprises (MSMEs), which include Farmer Based Organizations, play a significant role in AGRA’s agricultural transformation agenda. As the key intermediaries for selling improved technologies to smallholder farmers (‘agro-dealers’) and for buying back, storing and processing the increased yields from smallholder farmers (‘traders and aggregators’), agricultural MSMEs in Africa enhance the competitiveness of agricultural input and output systems, and act as the lever for improved agricultural productivity.
Many MSMEs have difficulties accessing the finance they require to run and grow their businesses. These challenges are related to bottlenecks in the supply and the demand side of MSME finance: on the one hand, financial institutions struggle with the high cost and risk of financing agricultural MSMEs, while on the other hand, the entrepreneurs are often ill-prepared to comply with the requirements as defined by the financial institutions (including collateral, documentation, financial records).