Crop Receipts – A New Financing Instrument for Africa

Access to finance remains a critical bottleneck for farmers and agribusinesses in Africa. Farmers, processors, and other agricultural value chain actors need better access to a broad suite of financial services for working and investment capital and for managing risks if they are to become more productive and contribute to global food security. While access to financial services is a frequent constraint at all segments of agricultural value chains, pre-harvest financing at the farm level is perhaps the biggest gap, as evidenced by the low usage of agricultural inputs and equipment in Africa. Improved access to pre-harvest financing is critical for farmers to use high quality inputs and equipment more quickly and on a larger scale. Most farmers often resort to self-financing or using other personal income. Such strategies have proven insufficient to foster broad-based agricultural growth and multipliers for poverty reduction, food and nutrition security, and overall economic growth. One promising innovation in pre-harvest finance is Brazil’s Cedula de Produto Rural, which is commonly referred to as crop receipt (CR). A CR is a bond issued by a farmer or farmer organization (FO) to deliver a certain amount of farm produce (crop or livestock) or the cash equivalent thereof at a future date. Against this promise, the buyer or financier advances a certain amount of cash or inputs to be settled at maturity of the bond. The bond can be issued to a processor, an offtaker, an input supplier, a bank, or a financial investor that provides pre-harvest finance against it. This study includes six chapters as follows:
Chapter 1 provides details on the background and purpose of the study;
Chapter 2 analyzes the international experiences with CRs;
Chapter 3 discusses generic entry points for CRs in Africa;
Chapters 4 and 5 present specific opportunities for CRs in Zambia and Uganda;
Chapter 6 presents the study’s main findings and offers recommendations.

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