Agric Digest 2: Agriculture Finance-The bloodline of Agriculture
Agriculture is our wisest pursuit, because it will in end contribute most to real wealth, good morals and happiness- Thomas Jefferson
Welcome to the second edition of your weekly Agric digest . I am sorry is coming late,it ought to have been posted yesterday. I was enjoying the atmosphere of my family after a long separation, but am back now
Recently several authors this week on steemit have made several agric-related posts and not agriculture posts because the agriculture tag is not that popular. My chat with these authors on their posts highlights the importance of finance to agriculture. I promised them to discuss it in my post and here we are.
As we all know “money is said to answereth all things”. Money is what keeps every business running and agriculture is not an exception. Agriculture is a major source of livelihood throughout the world, especially for the majority of poor people living in rural areas in developing countries.
The main source of food; one of the basic needs of human is Agriculture. Hence it is very importance to understand the blood of the agriculture life- Agricultural finance. It is the most discussed factor required improves agriculture and will continually be. My chat with these authors also revealed that. According to World Bank, Agriculture finance can empowers poor farmers to increase their wealth and food production to be able to feed 9 billion people by 2050. What then is agricultural finance?
AGRICULTURAL FINANCE
I know many of us believe agriculture finance is just providing money to the farmers alone. It goes beyond that. I am sure you are wondering what then is agricultural finance? To me it involves the whole financial aspect of agriculture from production to marketing (the acquisitions of land, labour, seeds and fertilizers, cost of maintenance of farms and transportation of products to market e.t.c). It also involves those people participating in it.
SOURCES OF AGRICULTURAL FINANCES
Money does not fall from heaven or the sky as the case might be. It must come from a source which is usually from humans be it individually, in two’s, in three’s or large groups. The agriculture economy has received so many contributions from individuals and groups all these while. The sources of finances to agricultural terms include:
Government: This source has been the worst of all with exception in certain countries especially developed countries. The Africa government has not been supportive to the agriculture sector
Individual/Farmers/Relatives: Certain rich farmers have been a source of finance to agriculture by sponsoring the management of their farms with none or little support from external bodies. Certain philanthropists have also worked with financial institutions to provide funds for farmers. Your quota is needed also. Support Agriculture.
Commercial Banks: These financial institutions have also been working to provide funds to farmers in form of loan. However, they are faced with many challenges relating to the agricultural risk that reduce their lending capacity. I must say they are working below the expected rate.
Foreign institutions (Financial and Non-financial): We must commend this source have they are been the most active in improving agriculture. They have reduced poverty rate in un-developed countries and developing countries, through their engagement in Agriculture.
The World Bank has been the most active of all and they really deserved our appraisal. They have employed several instruments to improve agricultural finance which include; setting up financial infrastructure (credit bureaus and collateral registries attending also to clients in the rural areas),capacity building and technical assistance to both private and public banks/FIs, support of agricultural cooperatives and setting up the right legal and regulatory environment to promote finance to the agricultural sector among many. Read here for full details.
Non financial institutions agricultural programs such as The AgriFin initiative of GFADR, a multi-stakeholder program funded by the Bill & Melinda Gates Foundation, has also been providing technical assistance to financial institutions in developing countries to improve their capabilities in lending to the agricultural sector.
PROBLEMS OF AGRICULTURAL FINANCES
Rural problems: The cost of entry of formal financial institutions into rural areas is high, which leads to rural areas often remaining out of the reach of financial institution. The rural areas are characterized with bad roads, un-constant power supply and bad networks which raise transaction and information cost thus influencing investment power of the financial institutions. Property and land are also not easily verified in rural areas which are a problem to use as collateral.
Lack of Understanding of Agriculture risks: Agriculture is characterized with many risks such as price fluctuations for inputs and products or crop failure due to pests and diseases, temperature or variable rainfall. It is also characterized with “long gestation period/maturation period”. All these lead to the reluctance of financial institutions to provide financial services to agricultural and activities due to lack of understanding of such risks because most of them are profit driven.
Belief of non-repayment due to sector-specific risks, such as production, price and market risks by banks: Commercial bank believe farmers will not be able to repay their loans due to the risks associated with agriculture. Thus, they tend to lend other sector money and abandoning the farmers.
You can comment the problem of agriculture finance you are facing in your country or share your finance difficulties story here
TO EVERY PROBLEM THERE MUST BE A SOLUTION. TO AVOID BULKY POSTS, THE SOLUTIONS WILL BE DISCUSSED IN AGRIC DIGEST 3
SOURCES:WORLDBANK, GAMJI ANDRURAL FINANCE
thx for sharing
You are welcome
Sad to hear they are making it difficult for people who are growing food in Africa. We are headed down that same path here in America with large corporations owning most of the food supply. It becomes more difficult for small farmers to make a living since they can sell their product so cheaply. The quality of food from these massive farms is diminishing as well.
Thats another problem
These large corporations ought to help the small farmers
But most of them are profit-oriented and selfish
And those established by government , corruption is the order of the day
The government here in Africa are not ready to improve agriculture
Most of them can't allocate 10% of there budge5 to agriculture
Its worse but i believe there is a brighter future
And there are solutions
Watch out for the next edition
Perhaps through this blog and digest. We can reach out to some government and corporations
Thanks for reading
Our family agribusiness is in constant financial difficulty because of the difficulty of financing. We provide a good product, we take excellent care of the land ( no till / no pesticides ) and yet it is a constant struggle. Thanks so much for sharing your posts.
ps..we're in the US
Are there no finacial credit for farmers in US?
Very wonderful, don't know how I almost missed it.
Thanks
Agriculture is actually a major challenge over here in Nigeria, many people go into subsistence farming leaving the commercial farming for the wealthy ones who knows little or nothing about cultivation and rearing of animals.
Yes that seperation of rich and poor still holds in the agriculture business
The wealthy ones even employed people without any agriculture education
Leaving those who studied agriculture unemployed
But those who studied agric ought to own a farm as they will mange it well
But finance is the issue and also people dont want to start little. Agriculture because of its maturation period has so many risks. Let youths learn to start little. If asked many of them will not be able to run the farm well when large capital is given to them
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Resteemed!
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