Financial Sector Development in Africa: Opportunities ... - World Bank

Financing Agriculture: Selected Approaches for the Engagement of Commercial Finance 107
• Improving the working capital of agricultural value chains helps
players retain earnings for investment by default.
• Equity investment has a major role to play in transforming mediumsize
agribusinesses in Africa and setting them on a renewed high-growth
trajectory.
• Improved capitalization has the effect of improving access to bank
lending as a result.
• Larger businesses tend to have greater growth potential than microenterprises;
these should be the primary target group.
• Effort should be made to avoid too much focus on long-term lending,
which is a very difficult objective—there is much more opportunity in
shorter-term finance and medium-term credit for machinery and
equipment financing if the legal environment is supportive.
Africa is a huge and growing market with a vast export potential for
home-grown agrifood products. There is great promise for African
agriprocessing in terms of input substitution, but the industry needs
transformation in order to achieve this. Finance is only part of the solution.
There are also major challenges in the policy and business environments
and supporting infrastructure to overcome.
Notes
1. Developed markets learned this lesson in the 1990s when intense branch
rationalization was halted and sometimes even reversed. To a certain extent,
customers adopted much cheaper mobile and Internet banking channels.
But when it came to perceptions of the bank as a brand, and when they
needed to make major financial services purchases or transactions, the value
of a convenient branch presence was deemed essential.
2. When considering what “qualifies” as an agricultural business, the definition
should not be too narrow. Agricultural value chains depend on a wide range
of ancillary services, so it is useful to expand the definition of the agricultural
private sector to include these players.
References
Coates, Mike, Richard Kitchen, Geoffrey Kebbell, Catherine Vignon, Claude
Guillemain, and Robin Hofmeister. 2011a. Financing Agricultural Value
Chains in Africa: Focus on Dairy and Mangos in Kenya. Bonne, Germany:
GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit). http://
www2.gtz.de/wbf/library/detail.asp?number=9738.