Technical Summaries: A Range of Agricultural Finance Products

We are delighted to share with you four new knowledge notes focused on the technical specificities of a range of agricultural finance products. The purpose of these notes is to share, in a brief technical but readily accessible manner, details of how such products can support sustainable agricultural finance by banks and other financial institutions. The four technical knowledge notes include:

•    Agricultural Export Financing
•    Credit Guarantee Schemes
•    Input Supply Financing
•    Warehouse Receipt Systems

The knowledge note on agricultural export financing examines the range of options available to assist agricultural exporters in growing their businesses, by overcoming cashflow constraints that prevent their growth. Banks can support such clients by providing guidance on the range of financial products that exist to assist exporters in managing cashflow and risk.

Credit guarantee schemes for agricultural finance have repeatedly come in and out of fashion and are offered by governments, development agencies and wholesale banks in an attempt to share risk with lending institutions and overcome some of the binding constraints to agricultural finance. The knowledge note considers the range of services available and some of the technical challenges that limit their impact.

Agricultural value chain financing is of growing interest to many banks interested in expanding their lending to the agriculture sector, specifically for those wishing to lend to value chain actors in key commodity supply chains. Our knowledge note on input supply financing considers how value chain actors can facilitate financing to smallholders, and how banks and other financial institutions can provide financing to these entities in volumes that make such activities economically worthwhile.

Many banks are actively involved in supporting agricultural collectors, processors, and exporters at key stages of the season when they require working capital to build up their stocks. Many provide financing based on volumes of stocks held in warehouses, using either their staff or formal collateral managers to monitor stock levels. Recently more governments have opted to introduce supportive regulations for warehouse receipt systems to facilitate such lending. This knowledge note considers the differences and similarities between collateral management arrangements and warehouse receipts systems.

We hope that these technical knowledge notes are useful in your planning and operations. Please do not hesitate to share these with your colleagues and kindly let us know your thoughts and whether there are other subjects and topics that you would like to see prepared notes.