Investing in agriculture means supporting local production and spin off agro-industries and lifestyles, and keeping farmers and other value chain actors in business. Given the limited funding, perceived inherent risks, high costs for borrowing and the difficulties faced in doing business in Pacific Island States, there is need for concerted action as about 80% of the population depend on agriculture.
Experts from financing institutions, agribusiness sector, farmers/ farmer organizations, and development agencies from different Pacific and Asian countries shared their experiences during the FijiForum2018. Findings from a multi-country study on Documenting Legislation and Access to Finance and Agri-Value Chain Risk Management (download the full document here) and success stories from other regions, were discussed and validated. Gaps and strengths in legislation, critical success factors and key innovations that will be crucial in improving the current finance and business environment were identified and a regional action plan developed.
Stakeholders therefore considered critical questions including:
Are there existing models and approaches in Pacific Island States that can be considered by other countries? Would a regional approach to designing the enabling policy and regulatory framework for agriculture and value chain (VC) financing mechanisms strengthen the agribusiness sector and enable agri-entrepreneurs (including farmers) take advantage of opportunities in domestic and or export niche markets; health and tourism sectors?
The regional action plan on Finance and Business Environment for Value Chain and Agribusiness Development aims at:
Improving the policy and institutional framework for financing agribusiness / VC development in the Pacific that benefits smallholder farmers and SMEs by
- Increasing access to agribusiness/value chain financing through blended finance mechanisms (public-private collaboration).
- Developing an enterprise incubation ecosystem that benefits policymakers, entrepreneurs and financiers.
Some key actions include:
- Develop policy position papers creating the enabling environment for Agriculture, Value Chain/Agribusiness financing in the Pacific
- Organize consultation(s) for financiers (public, private)
- Develop/design innovative financial products / instruments for farmers /SMEs
- Map finance leverage points along priority Value chains (Crop / Fishery/ livestock)
- Develop & implement capacity-building for VC actors
- Monitoring and Evaluation of Change
- Improve IT based financial services
What is needed to successfully implement these actions?
- Good understanding of VC financing; pitfalls (inefficiencies) and opportunities.
- Redirecting donor funding to Development Financing Institutions (DFIs) to support agri-enterprise and VC development
- Secure financial support / budgets from governments for agriculture/agri-enterprise development.
- Financial literacy/ capacity building for farmers associations and SMEs (hand-holding) and for contract negotiation.
- Improved capacity and higher accountability of DFI funds for sustainability of development initiatives.
- Willingness of commercial banks to make funding available (on easier terms) to farmers/SMEs.
- Enabling policy and regulatory framework
- Champions / proponents of Value chain financing, finance technology (fintech)
- An incubation ecosystem for start-ups and piloting innovations
Download the Regional Action Plan on Finance and Business Environment for Value Chain and Agribusiness Development here.