Financing Agricultural Value Chains in Latin America: Barriers and Opportunities in Mexico, Peru and Honduras
Small and medium commercial family farms in Latin America represent a large and important portion of the agricultural sector, with significant potential for catalyzing economic growth in the region. Despite this potential, small and medium producers often face several key constraints when looking to traditional lenders for credit. First, small and medium producers in Latin America lack capital and have limited cash flow. Their tenure often is not secure enough to be able to use their land as collateral, and banks often do not accept the collateral they do have, such as livestock, equipment, and other moveable property. Small and medium farmers and agribusinesses often have poor credit histories, or lack them altogether. They also tend to lack business plans, financial statements, and the ability to project cash flow realistically.
Small and medium farmers integrated into value chains, however, often have access to some form of financing from input suppliers and/or buyers. Using examples from Mexico, Peru, and Honduras, this report demonstrates that financial institutions can often leverage these value chain finance arrangements to mitigate risk and help small and medium producers capitalize on new opportunities to grow in the global market. This report also looks to the US for factors critical to expanding access to credit for small and medium farmers.
Authors: Alejandro Escobar, Fernanda Lopez, Francisco Rojo, Yolanda Strachan, Carolina Landsberger
Orginal publication date: April, 2014
Publisher: Multilateral Investment Fund
Other ELLA knowledge materials relating to Smallholder Farmers and Rural Development:
GUIDES AND BRIEFS
LEARNING ALLIANCE HIGHLIGHTS