Agricultural leasing market scoping study for sub-Saharan Africa
This report (PDF) by Financial Sector Deepening Africa (FSDA) and Nathan Associates applies a market systems approach to agricultural equipment leasing in sub-Saharan Africa in order to capture a holistic view of how the leasing market currently works. The study has analysed core market functions (supply and demand), as well as supporting market functions and the policy environment. A country selection framework has examined the breadth of the financial sector, relative importance of agriculture in the overall economy, total employment provided by the agriculture sector, presence of major agricultural equipment suppliers and the presence of leasing companies. It has led to a closer analysis of the following countries: Ethiopia, Ghana, Kenya, Mozambique, Nigeria, Tanzania, Uganda and Zambia. Additional references have been made to South Sudan and Liberia, offering general insights on agricultural leasing in a selection of fragile and conflict-affected states, as well as to Rwanda. Constraints throughout the market system for leasing currently create an environment where effective demand to lease equipment is limited and the incentives for financial service providers to offer agricultural leasing products are low. Most farmers are unaware of how leasing works and what its potential benefits are compared to traditional bank loans. Financial service providers do not see sufficient market opportunity to justify investing in the skills and capacity required to effectively offer leasing to the agricultural sector. At the same time, there are significant benefits attached to supporting leasing in sub-Saharan Africa. The availability of financial leasing for agricultural equipment can greatly increase mechanisation, especially for smallholder farmers, and therefore has potential to drive meaningful development impact.