Providing Cost-Effective Credit to Small-Scale Single-Crop Farmers: The Case of Financiera El Comercio

This paper sets out the challenge of finding appropriate mechanisms to finance single-crop farmers in Paraguay. It begins by highlighting that single-crop farmers have traditionally been unable to access credit through formal financial institutions. The vast majority of financial institutions find such farmers too risky or too costly to serve. For this reason, many such farmers find that they can only receive credit from those businesses with whom they regularly buy from and sell to, i.e. traders, processors, suppliers, storage facilities and exporters in the same value chain.

This InSight discusses the case of Financiera El Comercio, a regulated microfinance institution in Paraguay. El Comercio has implemented a partnership with silos that enables it to provide small loans to single crop soybean farmers despite their high risk profile. It considers why and how El Comercio entered this market, and the necessary conditions for this type of credit. Finally, the paper discusses lessons learned from this type of credit and other successful models of financing small farmers.

The conclusion states that financing of single crop farmers requires specific conditions for a successful outcome, such as the existence of a strong value chain, a strategic alliance with an important member of the value chain, and favourable geographic, climate, and price conditions. When these conditions exist, the participation of the financial institution makes it possible for these small-scale single-crop farmers to enter the formal sector and access credit.

  • Resource type
  • Author Wittlinger, B. y Mori, T.
  • Organisation
  • Year of Publication2006
  • Region
  • LanguageEnglish
  • Number of pages14 pp.
  • EditionInSight

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