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BRIEFAugust 31, 2022

Agriculture Finance & Agriculture Insurance

Key Messages

  • Agriculture finance empowers poor farmers to increase their wealth and facilitates the development of food value chains for feeding 9 billion people by 2050.
  • Our work in agriculture finance helps clients provide market-based financial services, and fund long-term and green investments to support sustainable agriculture and agri-food value chains.
  • Demand for food will increase by 70% by 2050; at least $80 billion annual investments will be needed to meet this demand.


The accelerating pace of climate change, population growth and changing dietary preferences, global pandemic, and conflicts have threatened food security and the development of agri-food sector. They put tremendous pressure to shift the policy focus to the development of a more sustainable and resilient agri-food industry around the world. Estimates suggest that the global food demand will increase by 70% by 2050 and at least $80 billion annual investments throughout the value chains will be required in response. Most of which needs to come from private sector due to the limited public resources, large scale in mechanization, climate smart technologies, processing, and agri-food logistics. Smaller investments are also needed for farmers and agriculture micro, small and medium enterprises to increase their productivity while reducing environment impact and taking into account climate risks.

Financial systems in most  developing countries are ill prepared to finance the shift to sustainable agriculture and agri-food industries. Banks, microfinance institutions, and institutional investors have traditionally been providing very limited resources for the sectors. Agriculture loans and investments portfolios currently are disproportionately low compared to the agriculture sector’s share of GDP. Important challenges for the financial markets include managing unique risks in agriculture, high transaction costs in dealing with large number of small farmers, and micro, small and medium enterprises (MSMEs) along the agriculture value chains, limited effective demand for finance, lack of expertise of financial institutions in managing agricultural loan portfolios. On the other side, many countries have put in place inadequate or ineffective policies and instruments, which often limit the opportunities to mobilize private capital for the sector.

What We Do

We assist client countries in developing and implementing agriculture finance strategies and instruments to crowd-in private capital, deepening resilient agriculture finance markets. Such markets provide adequate financial services along agriculture value chains from farmers to MSMEs operating in processing, commercialization, transportation of agriculture products.

Policy and Regulatory Interventions: We conduct diagnostic studies including FSAP (Financial Sector Assessment Program) on the state of agriculture finance and produce concrete action plans to reform public policies and regulations in order to create an enabling environment to mobilize agricultural finance. Some examples of policy and legal/regulatory intervention areas include lending quotas, interest rate caps, bank branch expansion regulations, prudential regulations impacting agricultural lending, warehouse receipt financing frameworks, agri-business receivables certificates, and alternative dispute mechanisms for contract farming.

Strengthening agriculture finance markets : We provide solutions for agriculture lenders to access to long term finance, to digitize and green their services, and to manage agriculture risks, and grow agriculture asset classes. We also provide technical assistance to reform and build capacity of public financial institutions and leverage Fintechs and digital platforms to advance agriculture finance.

Support to financial cooperatives. We operate a special program and a community of practice focused on financial cooperatives, given the importance of these entities as providers of financial services to smallholder farmers, rural MSMEs and households. This program aims to strengthen their performance as well as to enhance applicable regulations and oversight arrangements to better integrate them into their country’s financial system.

Innovative Products: We assist in the design and develop a wide range of instruments, either as a technical assistance or part of lending projects: value chain finance,  innovative credit scoring based on agriculture specificities, partial credit guarantees schemes, digital agriculture platforms linking agriculture value chains and financial institutions, digitalization of agriculture value chains and, capital market solutions (e.g. bonds issuance for agriculture finance suppliers, and agribusinesses, agriculture investment funds),. We also work on developing digital finance, e-commerce & payment platforms to enhance access to finance and reduce transaction costs in reaching farmers and SMEs.

Climate change in agriculture finance: Agriculture production and agri-MSMEs are extremely vulnerable to climate change, which increases the risk in agriculture finance significantly and many financial institutions simply stay away from the sector. On the other hand, the sector presents compelling opportunities to reduce emissions and conserve limited natural resources. We work with our client countries and financial institutions to develop and implement solutions including financial instruments and public-private collaboration. Our interventions aim to facilitate and scale-up climate smart investments for productivity increase and resource efficiency and help financial institutions manage climate risks in agriculture lending portfolio.

Addressing obstacles to agriculture finance. In addition to financial markets issues to expand agriculture finance, we work to address various challenges such as access to markets for agriculture products, lack of proximity of financial institutions, and land tenure as they represent strong barriers to agriculture finance. Some of our solutions include agriculture e-commerce platforms, agent banking, and farmer registry.

Knowledge Management and Community of Practice: Informed by our in-house research and knowledge production, we carry out activities both at the internal level (including community of practices and training programs) and at the external level (global and regional dissemination events, South-South exchange and capacity building for policy reforms, among others). We lead two Community of Practice: one on agriculture finance (co-led with Agriculture GP) and another one specific to financial cooperatives.

Global Engagements and collaboration within the World Bank Group:  We have formed a partnership with Rabobank on financial cooperatives that aims to contribute to the global knowledge on these institutions and their promotion building on concrete experiences. We are one of the core members of CABFIN Partnership “Capacity Building in Rural Finance”, a collaboration effort with FAO, GIZ, IFAD, UNCDF, and EFP aimed at facilitating knowledge exchange and capacity development among relevant public and private stakeholders in order to increase the availability and effective use of financial services in rural areas. We work closely with the Disaster Risk Management team for agriculture risk management and Markets and Technology team in FCI Global Practice for agribusiness development, and also collaborate with CGAP , the Agriculture and Digital Development Global Practices.