Description financing model: Direct Farmer Financing (Market):
Direct Farmer Financing (Market) involves pioneering banks providing loans directly to farmers, supported by catalytic capital through de-risking instruments or financial incentives to improve loan affordability and uptake
Applicability: Applicable to broad range of farmers and agri-SMEs that meet defined eligibility criteria
Considerations: Scalability depends on the availability of catalytic capital
Description of de-risking tool(s):
Tranching: Investment structure split into tiers with different risk-return profiles, enabling blended capital participation by matching investor risk appetite
Case study description:
The CNA Fiagro program was launched by the Brazilian Confederation of Agriculture and Livestock (CNA) to provide micro-credit to small and medium-sized farmers who face difficulties in obtaining resources from traditional banks (e.g., bureaucracy, guarantees, and additional costs)
The CNA Fiagro program was launched by the Brazilian Confederation of Agriculture and Livestock (CNA) to provide micro-credit to small and medium-sized farmers who face difficulties in obtaining resources from traditional banks (e.g., bureaucracy, guarantees, and additional costs)
1. The CNA Fiagro fund was launched with $5M in capital, of which $2M came from CNA as the junior tranche and the rest from external investors as the mezzanine/ senior tranche. EcoAgro, a Brazilian asset manager, manages the funds
2. Rural farmers receive the loans, ranging from $5K to $50K ($17K on average) with terms of up to 12 months and a 16% annual interest rate4. Farmers use the loan for short-term needs like working capital or short-term capital expenditures (e.g., installation of photovoltaic panels or irrigation systems)
3. SENAR (National Rural Learning Service) technicians act as credit agents, gathering detailed information about the proposed use of funds, visiting the producers in order to help them improve their operations & fill out the mandatory MRV form.
