Access to finance

A major obstacle Ethiopian farmers have to overcome in upgrading and expanding their agricultural activities is the lack of access to finance. Micro-Financing Institutions (MFIs) have been impaired in their efforts to extend production credit to farmers by lack of sufficient credit funds and limited institutional setup.

The MFIs, as well as Farmers’ Cooperatives Unions (FCU’s), suffer from difficulties in obtaining loan funds from public banks since the sector often finds it easier and less risky to lend to industries and businesses they are familiar with rather than lend to the agricultural sector which is almost entirely based in rural areas. Only 10% of public and private bank loans usually go towards strengthening the agriculture sector. Lack of skilled manpower and weak institutional setup are also significant concerns.

AGP-AMDe focuses on increasing access to finance for participants all along the value chain to enable increased investment, improved productivity and expanded trade. The project continues to promote new solutions to agricultural finance issues by building the financial management capacity of farmers’ cooperatives, Saving and Credit Cooperative unions and MFIs. Thus, creating a linkage and facilitating loan applications for partners to access working capital and asset financing as well as promoting agricultural equipment leasing as alternative financing. In doing so, 18 FCUs have been assisted to obtain USD $6.6 million of working capital and project financing in the past twelve months.