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Financial products are at the heart of a financial service provider's business - they are what is "sold" to clients. Like any other business, therefore, a financial service provider must be market-driven and aim to identify and meet customers' needs on a profitable basis. Customers may be private individuals or businesses and their financial service needs will range from needing somewhere safe to keep surplus money to being able to borrow to meet a cash shortfall or being able to send money to a relative in a rural area. Someone providing financial services, therefore, has to decide whether to offer their customers one product or several products and how much to charge in order to make a sustainable business.
Agricultural businesses in particular require products which meet their needs to manage seasonal cash flows, make longer term investments and manage risks. Financial institutions are often wary of the risks associated with the agricultural sector and mechanisms may be needed to encourage them to service the financial needs of farms, traders and agribusinesses. FAO marketing and rural finance specialists have been examining these issues and providing information to member countries through their publications. |
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RESEARCH IN PROGRESS |
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Small and Medium Agribusiness Finance: a Supply and Demand Analysis
The rural finance group are currently investigating how small and medium agribusinesses finance their business operations on the one hand and how suppliers of finance manage their lending activities with agribusinesses on the other hand. This study is being conducted in three countries and builds on FAO's previous work on trader finance. The results from this research will be used to inform FAO's future normative and field work activities on small and medium agribusiness finance. |
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VIDEOS |
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To support the training activities of financial institutions and particularly the important shift of emphasis towards encouraging the introduction of savings products, the FAO Rural Finance Group has produced some videos. Click here for more information. |
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PUBLICATIONS |
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An introduction to market-based instruments for agricultural price risk management
M.G. Kang & N. Mahajan
AGSF Working document No.12 2007 |
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Market-based instruments for managing agricultural price risk are a practical and non-interventionist alternative for managing commodity price volatility. This paper describes and gives examples of the most important instruments of price risk management:
- forward contracts
- futures and options contracts
- swaps
- agricultural insurance
The paper concludes with a section on how to promote the use of these mechanisms.
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Financing Agricultural Term Investments
F. Hollinger FAO/GTZ AFR Series No.7 2004 |
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This volume focuses on the ways in which rural financial institutions can provide term finance successfully by adjusting financing products and technologies to the specific cash flow and risk profiles of rural clients and farm investments. It draws on empirical research on rural term finance providers in various parts of the world. Some cross-cutting issues are also discussed, related to the economic, legal, institutional and policy environments that determine the supply and effective demand for term finance. These include improving the legal and institutional environment for secured lending, reducing asset liability mismatches, and managing systemic yield and price risks. Key areas are highlighted for government and donor support to financial institutions, clients, policy reforms and other complementary measures. |
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Credit guarantees: an assessment of the state
of
knowledge and new avenues of research
M. Gudger ASB No.129 1998 |
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Guarantee systems for loans, as substitutes for traditional collateral, have been proposed, planned and implemented in various countries. This book attempts to address the main issues relating to guarantee funds and to give examples from which lessons can be drawn. It comes to the broad conclusion that there are few instances in which a traditional loan guarantee service adds value in a sustainable way. New approaches to the guarantee concept are aired and proposals made as to how these innovative mechanisms could be implemented in different situations. |
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Banking for the environment
W.M.Gudger & D.C.Barker ASB No.103 1993 |
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This publication is aimed at bankers and particularly those responsible for rural investment lending. Through their decisions, financial institutions can have quite an impact on natural resource management. This book explores the sources of environmental degradation, in particular forest clearance and agricultural intensification. A method of environmental cost benefit analysis for agricultural lending is explored, together with banking economics and environmental accounting. The book concludes with a model for sustainable agricultural lending through institutionalising an environmental review process. |
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