Smallholder farmers run 85% of the world’s farms and thus play a crucial role in our global food provision. As any entrepreneur, they need access to finance to run and grow their business. Yet despite their importance in the food value chain, smallholder farmers’ access to capital and financial services remains very limited, as investors and financial institutions generally consider (smallholder) agriculture as risky because of the uncertain cash flow and risks of crop failure and natural disasters.

From 2013 to 2015, Hivos, Enclude and Triodos Investment Management ran the Sustainable Agricultural Finance Expansion Programme to enhance access to finance of smallholder farmers, producer organisations and rural small- and medium-sized enterprises (SMEs) involved in sustainable agriculture.
The programme supported microfinance institutions in India, Nicaragua, Uganda, Indonesia, and Peru to scale up green agricultural finance.

The institutions were selected from the network of Hivos and Hivos-Triodos Fund. Fund Manager Karel Nierop: “Microfinance institutions are in the position to play a catalysing role to develop innovative financial products for smallholder farmers, such as micro-leasing, factoring, and value chain finance. In addition to providing sufficient financial services to these farmers, it is also very important promote sustainable farming practices.” 

A number of the assisted institutions are now in the position to scale up financing green agricultural activities, some brought agronomists into their financial institution to support loan officers in assessing and monitoring agricultural loans or to directly provide technical advice on sustainable agriculture to clients. As key partner in this programme, Enclude provided technical assistance to the selected institutions. 

The lessons of this three year programme have been published in the Greening Agriculture report. An important conclusion in the report is that many microfinance institutions are not yet aware of the relevance of green (agricultural) finance or do not know how to integrate this into their core business of poverty alleviation or enhancing financial inclusion. The programme proved to be highly effective in strengthening the capacity of the selected institutions to offer agricultural finance to smallholders. All three partners are committed to continue building on the experiences of the Programme.

Karel Nierop: “In the coming years Hivos-Triodos Fund will further expand its activities to promote sustainable food and agriculture. Both by encouraging microfinance institutions to be active in this extremely important sector and by investing in small- and medium-sized agricultural enterprises active throughout the value chain.”

For the full report, click the PDF below.

Greening agriculture PDF 4.2 MB