This paper reports on a study of how traders of grains and horticultural produce in Asia finance their activities and how they use that finance. "Traders" is interpreted broadly, and the paper considers activities from large-scale paddy milling to small-scale rice retailing, and from small-scale rural assembly of horticultural produce to large urban wholesalers. The study was carried out in 2001 using country case studies of Cambodia, India, Myanmar, Nepal, Pakistan, the Philippines and Vietnam.

The general conclusions of this paper are that lack of working capital is not a major constraint to the functioning of agricultural marketing systems in Asia. That is not to say, however, that some actors on the marketing chain could not benefit from additional working capital sources. Lack of investment capital does appear to constrain both entry of new participants and expansion by existing participants, particularly processors such as paddy millers. One reason why the availability of working capital does not appear to present too many problems is the existence of many vertical financial linkages within marketing systems. These pivot around millers in the case of staples and wholesalers in the case of horticultural produce. Both millers and wholesalers lend to traders who buy from farmers and these traders may, in turn, make both production and consumption loans to farmers. Wholesalers and millers also lend in the opposite direction, to distributors and retailers. Farmers are significant providers of finance to the marketing system, by being prepared to accept short-term deferred payment. This paper concludes that such linkages seem to be generally non-exploitative and serve primarily to secure supply, guarantee markets and reduce transaction costs.

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