Agricultural Alliance, CSAF, reaches two million smallholder farmers with nearly $600M in credit
After two years since the establishment of the Council on Smallholder Agricultural Finance (CSAF), its members continue to grow their lending and reach to small farmers and their communities. CSAF is an alliance of social investors, including founding members Oikocredit, Alterfin, Rabobank, responsAbility Investments AG, Root Capital, Shared Interest Society, and Triodos Investment Management, and the newly added Global Partnerships and Incofin Investment Management.
CSAF announced this week that its members provided $597 million in loans to 672 small and medium-sized enterprises (SMEs) in 2015. Over 2.1 million smallholder farmers are connected to domestic and international markets through these businesses, which include various actors across the agriculture value chain – from farmers’ cooperatives in Bulgaria to coffee roasters in Uganda to fruit exporters in Brazil. This growth marks a 70% increase since 2013, before the members began formally working together through CSAF.
Banking the ‘Unbankable’
By targeting the ‘missing middle’, the nine social impact investors finance agricultural businesses that are often considered too small and too risky for commercial banks. CSAF members seek to transform agricultural economies and improve farmer livelihoods, all while promoting climate smart agriculture and other sustainable methods that protect the environment. Combined financing from CSAF members is estimated to have stimulated $3.7 million in annual revenue among these missing middle partners.
Diversifying Agriculture Portfolios
However, 2015 also marked a year of challenges, including price volatility in both agricultural commodities and emerging-market currencies. The agricultural sector is inherently exposed to higher risks than lending in financial services – such as crop losses due to disease and weather. Low coffee prices and the effects of coffee leaf rust, for example, caused a 12% decline in the coffee sector amongst CSAF members.
As both social lenders and farmers themselves look to minimize risks through crop diversification, CSAF members balanced the coffee sector decline with new growth in other sectors. Investments in cocoa grew by 14%, while increases were also made in commodities such as grains, nuts, quinoa and rice. Risk is also distributed geographically, with CSAF lending now spanning across 66 countries.
Looking ahead, several opportunities exist to support the continued growth, development, and stability of the agriculture sector. CSAF members look forward to the continuation of building capacity at the SME level through technical assistance, improving enabling environments, and working together to leverage blended capital to most effectively and positively impact the life of the smallholder farmer.