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March 14th, 2016

Opportunities for value chain finance in Africa’s intra-regional food trade

Published by CTA,

This brief paper (PDF) explores the opportunities for African banks in financing intra-African food trade, in particular using value chain financing mechanisms (also called structured financing techniques). Value chain financing is used widely in the continent’s agricultural trade, but mostly for exports to and imports from other parts of the world, not for intra-African trade. And most such value chain financing transactions are managed by international banks, with African banks having at best a supporting role. Apart from a relative lack of familiarity of value chain financing techniques among African bankers, their negative perceptions about the risk of agricultural financing also constrains the market, as does their lack of awareness of the large commercial opportunities in financing short-distance value chains (from farmers to cities in the country or neighbouring countries). The brief concludes that there is a lot of scope for improving intra-African food trade. For example, governments and regional institutions, with the support of the donor community, can do more to encourage food sector operators and African banks to develop viable value chains for intra-regional food trade and its financing, including by creating dedicated re-financing and guarantee facilities.

Curated from publications.cta.int