Innovations in access to finance for producer organizations in Mali
The Challenge
In Mali, many producer organizations struggle with gaining access to finance. The challenge Agriprofocus faced was this: How to help producers in Mali expand their business so that they do not have to rely on intermediary actors, and the producers add value (e.g., processing) to their produce and sell to more formal, upstream markets? Therefore, it was imperative for the project to help bridge the gap between producer capital needs and the requirements from investors who lend capital. This project led by Agriprofocus included producer organizations that receive support from other projects, for example, from USAID financed ICCO project. The reason to blend beneficiary organizations was so that the project could capitalize on the synergies of other donor led projects. In this, innovative project financed by a multitude of donors, runs from 2018 until 2022.
Background
Malian Value Chain
Like many other countries in Africa, agricultural value chains in Mali are all characterized by informality and fragmentation. As a result, producers are overly reliant on intermediary actors (e.g., traders, collectors, and wholesalers) to bridge gaps to create market access. These intermediary actors, though, add unnecessary complexity, and many engage in rent-seeking behavior. This reality creates a situation whereby producers receive unattractive prices for their produce and creates a lack of transparency in the value chain, which is a precondition to investment.
Loan Maturity Mismatch
Most financial institutions in Mali have a shorter-term lending cycle than what agribusinesses need (due to their crop growing cycles).
This maturity mismatch presents a limitation that can be solved through underwriting or product innovation. Furthermore, Malian law prevents banks from offering leasing products, precluding this asset class from being available to agricultural sector firms with existing bank relationships. Establishing new relationships with a lease-financing entity is a considerable hurdle for smaller producers.
Financing the Sector
The most significant source of capital for agricultural firms in Mali is bank loans. However, while the commercialized agricultural output is responsible for over 40% of Mali’s GDP, loans directly to agricultural producers in 2016 represented only about 4% of all credit extended to the Malian private sector.
The Solution
Agriculture Financing Fair
To bridge the gap between producers and the market (and finance), Agriprofocus realized that they had to strengthen these producers’ level of professionalism.
Therefore, in 2018, they conducted SCOPE assessments and provided TA. With the information obtained by the assessments, they also held workshops to help these producers write a business plan. After the business plans were drafted, they held an Agricultural Financing Fair (known as Finiagri) This innovative fair is a meeting place between finance professionals and stakeholders in agriculture.
With the Banks and financing institutions, Agriprofocus helped create innovative financial products (e.g., campaign credits, financed business model based on purchase or sale contract, credit lines, warranty depending on the type of agricultural product and the campaign for 3 to 6 months or up to 2 years). For long-term loans, Agriprofocus guarantees funds or other funds to guarantee the loan from banks.
During the fair, the producers meet with the Finance professionals and bring their business plan along with the SCOPE assessment report.
These documents help financial institutions make better-informed decisions about loans. As a result of these business plans, SCOPEassessement documentation, the brokering of relationships and sponsoring this fair, 930 agribusinesses received favorable feedback from financial institutions.
Fore more information about SCOPEinsight’s work on unlocking finance for agribusinesses, read about our partnership with Mix and AGRA here or contact us directly.
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