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23/07/2012

New publication proposes innovative agricultural finance and risk management instruments for transition economies

A new working paper entitled "Innovative agricultural finance and risk management" has just been published by FAO’s Investment Centre Division in collaboration with the European Bank for Reconstruction and Development (EBRD). The publication looks into the issue of risk management in agricultural finance in transition countries. These countries - like Kazakhstan, Ukraine and the Russian Federation - have the potential to become major world grain exporters if their agricultural yields could increase –  with investment from the private sector –  to reach the standards achieved in similar parts of the world. This would help meet the rising global food demand  which could increase an estimated 70 percent by 2050 as a result of population and income growth. However, to attract private investment in agriculture, new financial and risk management instruments need to be developed.

 The paper identifies effective ways for international financing institutions such as EBRD to adjust their investment portfolio to support the creation and development of agricultural finance and risk management products, mechanisms and institutions. These include pre- and post-harvest financing instruments, price risk management and the development of trading platforms. As a result of these advances, the entire agriculture supply chain could be reinforced to become more profitable and secure for all parties involved, and consequently food production could be substantially expanded. Governments have a role to play by creating policy, legal and regulatory frameworks to facilitate contract enforcement and other types of controls that make private investors more comfortable in providing support to agricultural finance.

For the full paper, please click here.