Value Chain Financing

 

Agricultural lending requires risk assessment well beyond the agricultural borrower to include an analysis of market dynamics that determine the fluctuations of prices and production in the agriculture sector. This is because the ability of farmers to produce, sell their products, and profit from their farming activities is influenced by the economic performance of individuals or businesses from whom they buy and sell. Farmers’ cash flow is linked to the competitiveness and reliability of their suppliers, buyers, and service providers. These farmers, businesses, and individuals are interdependent actors participating in the transformation of agricultural products, each one of them adding value through their efforts to produce products that the end consumer will purchase. The total set of interactions between these actors to produce a specific agricultural product is often referred to as a value chain. A value chain is the path that a product follows from raw material to consumer, from input supplier to producer, and on through the various actors (private or public) that take ownership of the product before it arrives at its final condition and location.

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