Redefining Finance for Agriculture: Green Agricultural Credit for Smallholders in Peru
- Partner: Mennonite Economic Development Associates (MEDA), International Development Research Centre (IDRC)
- Publication Type: Brief
- Date: December 2019
- Team: MarketShare Associates
- Recommended Citation:
MarketShare Associates was engaged as MEDA’s learning partner on INNOVATE and produced a series of briefs highlighting key results and learnings from the research portfolio assessing the potential of non-traditional finance to stimulate agricultural innovation adoption among smallholder farmers in South Asia, South America and East Africa. MSA produced this brief summarizing key findings and recommendations for government actors and financial institutions from the case study conducted by Global Canopy on “Redefining Finance for Agriculture: Green Agricultural Credit for Smallholders in Peru”.
Global Canopy’s case study found that smallholder farmers have a good understanding of and interest in financial services, but face inadequate access to appropriate and flexible financing options. Financial institutions (FIs) lack incentives to enter the market for agricultural credit. Lending to smallholders is risky due to lack of access to assets by producers, weather, and other factors. With rural areas being low-demand zones, loans are typically small, but require a significant amount of due diligence. Transaction costs are thus too high to justify. Multi-stakeholder approaches, and the support of government, are therefore needed to align the goals of smallholders and FIs and achieve investment in sustainable agriculture.
