Redefining finance for agriculture: Green agricultural credit for smallholders in Peru
This report (PDF) by Global Canopy helps identify gaps and opportunities to support and scale up green agriculture, smallholder agriculture and financial inclusion. It explores the state of lending and investment, the farmers’ views on barriers to sustainable agiruclture and explores the role of financial access within it. The report finds that farmers agree that the financial sector could be a critical enabler of the shift to sustainable agriculture if provided credit that responded to the needs of farmers. This would mean; longer payback periods, lower interest rates and the provision of finance for packages that include a combination of irrigation systems, pest management, and agroforestry. The financial institutions (FIs) were interested in using credit as a tool to incentivise sustainable agriculture, but highlighted that there were barriers which made this difficult. The sector is inherently risky with no clear functional risk transfer alternatives in Peru. A number of recommendations are: 1) Access to sources of capital with reduced costs and longer payback periods is a requirement; 2) Develop guarantee funds and insurance products for farmers; 3) Develop new, green, products in partnership with FIs and enhance their internal capacity to channel resources towards sustainable agriculture; 4) FIs need to be committed to the green finance agenda; 5) Alliances with organisations that have the ability to engage with farmers and build their capcity is key to ensure benefits of the transition to sustainable agriculture reach the farmers and mitigate risks; 6) Provide geographical information about borrowers to support implementation of green agricultural credit; 7) Government participation and gurantee funds that are designed together with the financial institutions is key; 8) FIs all consider gender when developing credit products.