Access to agricultural finance in Jordan
This report (PDF) by Palladium Europe BV is an advisory piece with recommendations towards facilitating access to suitable financial services for smallholder farmers to improve their livelihoods and break the cycle of indebtedness. Small farmers are characterized by overproduction of many of the prevalently grown crops and low farm-gate prices and compete with previously exported crops produced by medium and large-scale farmers. The study yields ten key gaps on small farmers and their access to finance in Jordan: 1) Cycle of indebtedness needs to be neutralized before small farmers should be venturing into scaluping up and out. 2) Most small farmers do not have a bookkeeping system. 3) The business case for farmers is weak. 4) Access to credit is only desirable if it is likely to result in increased income. 5) Mobile payment and account services are not widely used. 6) Colleteral requirements and interest rates are high. 7) There is no registration in place for farmers with the Ministry of Agriculture. 8) The current market system for agricultural procude is inefficient. 9) The Credit Reference Bureau mostly has information from banks and selected MFIs. 10) No lending mechanisms are in place to favour smaller ticket sizes and to deal with higher risk of the agricultural sector. A three-step approach is recommended to develop the agri-finance landscape. First, small farmers’ business cases need to be strengthened, with access to markets being the main bottleneck. Second, patient investments in designing and deploying financial services that make farmers more resilient are required, starting with saving and payment services. Third and last, a risk sharing financing methodology and related mechanism(s) should be developed, involving multiple or all value chain actors benefitting from agricultural production. The application of a holistic approach that focuses on access to markets, access to finance and capacity building is required for sustainable improvement of small farmers’ livelihoods using financial services.