Challenges Farmers Face
Access to finance, credit, and banking services are key barriers for smallholder farmers looking to increase their production. Commercial banks or lending institutions rarely approve loans to smallholders, viewing them as high risk borrowers. If approved, farmers face prohibitive collateral requirements, high interest rates, and unfamiliarity with formal banking practices, making on-time payments a challenge and thus repeating the cycle of mistrust between the two groups.
For their part, financial institutions try to adapt commercial lending practices to agricultural finance, which does not take into account harvest cycles and crop sales. Lenders want to begin receiving repayment almost immediately, which is not practical for a smallholder borrower. Climate change can also affect farm productivity and delay sales and repayment plans. The inherent remote nature of farming also makes it challenging for financial institutions to reach and service farmer clients. The most successful agricultural finance models adapt lending practices to meet the unique needs of rural smallholders.
How Fintrac Works With Farmers
To address these challenges, Fintrac integrates access to finance and credit as a key component across all its activities. We help farmers increase the quality and quantity of their production and create market linkages to buyers, dramatically improving their incomes. This, in turn, mitigates lending risks and provides greater assurance of repayment. This is highly valuable for financial institutions, input suppliers, agrodealers, processors, exporters, and other agribusinesses to increase their business activity and expand their client base. We also train farmers in finding appropriate investment opportunities, explaining their responsibilities, and guiding them throughout the loan application/proposal and approval process.
Our Agricultural Finance Spotlight Series profiles innovative interventions in helping farmers and agribusinesses access the financing they need to commercialize and scale agricultural activities that can transform communities.
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