Breakout Group 1: Finance for food new conditions, new options?

Chair: Presenters:

Hanns Martin Hagen Stefan Schmitz (BMZ), Rabo Bank, GIZ /KfW

The Groups main findings and recommendations 1. 500 million smallholder households and many commercial SME farmers are widely underserved by commercial banks. 2. Like farming, building strong agri finance institutions requires commitment, investment and a long-term perspective. 3. Each market, each sector, each farmer segment is different. Local knowledge and partnership is critical for success. 4. Value chain approach should be central to finance. 5. Governments/bank regulators, NGOs, donor agencies need to work together to create a supportive framework.

What changes or initiatives could member institutions take forward in food production, farmers and markets? 1. Respond to changes in rural development by moving to new market-driven financing paradigms: diversified financial services with innovative financial products, value chain finance, warehouse receipts, international investment funds, combining finance with business development, ICT to improve costs & outreach. 2. Improve evidence base on impact of access to finance. 3. Help build consistent and reliable data sources, which will permit credit scoring.

What initiatives could Platform members take together to support the Groups findings? 1. Help governments implement consistent rural finance policies. 2. Capacity building and knowledge management; e.g., map the public instruments that are available for financial institutions; document who does/offers what. 3. Directly target the issue of risk (both real and perceived) in agricultural finance. 4. Combine funding with smart subsidies (e.g., guarantee system) and risk sharing.

What are the key messages from the Group that Platform members should further communicate: 1. Momentum to improve financial services is now. 2. There is no silver bullet, but there are successful experiences on which one can build. 3. Look at agricultural finance not as a stand-alone product, but in conjunction with risk and business development 4. Medium- to long-term finance is a major bottleneck for commercial banks: donors may help. 5. We need strong partnerships.