Standard Bank has teamed up with the Alliance for a Green Revolution in Africa (AGRA) to create an innovative fund for Africa's smallholder farmers. The fund will operate in Ghana, Mozambique, Tanzania and Uganda, opening loan opportunities to smallholder farmers and small- and medium-sized agricultural businesses previously considered too risky for lending.
AGRA and other partners are providing a US$10 million loan guarantee fund, and in turn, Standard Bank is making US$100 million available for lending over three years.
Lack of access to finance is a major obstacle that prevents farmers from investing in good seeds, fertilisers and small-scale irrigation needed to raise farm productivity and generate profit. As a result, their yields remain one-quarter below the global average, leading to dependency on food imports and chronic food insecurity. Similarly, little or no commercial financing has been available to entrepreneurs seeking to build businesses that could boost Africa’s food production and increased profits.
African banks have typically avoided lending to smallholder farmers and to the agriculture sector because of high perceived risks by banks, farmers’ lack of collateral; the high costs of servicing rural areas; and production risks that come from unreliable rainfall, lack of irrigation, crop diseases, and price volatility.