Access to Finance for Smallholder Farmers: Learning from the Experiences of Microfinance Institutions in Latin America

Understanding the motivations of MFIs that venture into agricultural finance
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This paper aims to identify and disseminate the best practices of MFIs that have successfully implemented agricultural lending operations targeting smallholders in Latin America and the Caribbean (LAC). The report particularly focuses on smallholders in loose value chains and subsistence farmers in order to support replication and expansion of scalable approaches to financial inclusion. It also seeks to understand the motivations of MFIs that venture into agricultural finance, how the products they offer have been structured, and how these products are implemented. In addition, the study also highlights areas of technical assistance and other forms of donor support that may affect MFIs’ effectiveness in reaching smallholders. The paper provides the following key recommendations for MFIs serving or looking to serve smallholder farmers:

  • Consider risk-based loan pricing for crops and products;
  • Introduce or expand product costing;
  • Evaluate opportunities for cross-selling;
  • Explore opportunities to introduce or expand value chain finance;
  • Explore lower cost delivery channels such as agents and ATM networks, mobile phone banking, and debit cards;
  • Consider introducing or expanding availability of longer-time financing for asset acquisition.

About this Publication

By Varangis, P., Kioko, M. et al.