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):
Guarantees: Third-party assurances (typically by public or development actors) to cover losses in case of borrower default, reducing perceived investment risk"
Case study description:
Farm Credit Bank is a mission-driven, customer-owned cooperative network dedicated to supporting rural communities and agriculture with reliable, consistent credit and financial services
Farm Credit System is a network of cooperative lending organizations and regional wholesale banks providing capital to rural communities & agriculture
Farm Credit System includes four regional banks:
- CoBank
- Farm Credit Bank of Texas
- AgriBank
- AgFirst Farm Credit Bank
1.The four banks raise funds by selling debt securities through their Farm Credit Funding Corporation
2. Proceeds from debt securities are used by the Farm Credit Banks (FCBs) to fund Farm Credit associations who support farmers, ranchers and rural homebuyers
3. As an Agricultural Credit Bank (ACB), CoBank uses the proceeds from debt securities to issue loans directly to farmer-owned cooperatives, rural infrastructure providers and other agribusinesses
4. Through the FSA Guarantee Program, Farm Service Agency (FSA)2 guarantees a small percentage of individual loans, acting as a de-risking mechanism
$428.9B issued in total agriculture loans, supporting 600K farmers, ranchers, farmer co-ops, agribusinesses, rural infrastructure providers and rural homebuyers (2024)
