Page 126 - STRATEGY FOR SUSTAINABLE AGRICULTUR AND RURAL DEVELOPMENT IN THE PERIOD 2021-2030 AND VISION TO 2050

71. The Strategy mentions promoting “value chain financing” to improve
credit efficiency, so what is “value chain financing”, and how to
encourage lending for the agriculture value chain?

Value chain lending is a comprehensive (including suppliers of input materials or
approach in which the direct borrower and procedures such as fertilizers, chemicals,
the analysis and forecasting process for each milling, dewatering, refrigeration; equipment
specific period select loans according to stages suppliers, wholesalers; and service providers
and components in the value chain. According such as storage, truck drivers, etc.); and
to FAO (2010), value chain lending was small and medium enterprises in agricultural
defined as capital flows invested in different production or processing for export. Lenders
stakeholders in a value chain. In other words, include financial institutions (commercial
it includes financial products and support banks, non-banking financial institutions,
services that fund a value chain to address microfinance institutions, savings, and loan
the needs and problems of its participants in credit unions) and credit suppliers in selling a
the chain. There might be financial needs to product or service. The main lending products
secure sales, purchase products, reduce risk are short-term credit (< 12 months), medium-
and/or improve efficiency in the chain. The term credit (from 13 - 60 months), long-term
stakeholders in the chain can also invest in credit (more than 60 months) and financial
different stages of the chain. leasing products.
Borrowers, lenders and lending products In the value chain, the lending cash flows
will join the lending process along the value will flow in two directions, depending on the
chain. Borrowers include farmers engaged specific value chain and/or region or the
in agricultural production (which can be characteristics of the companies and actors
small and medium-sized households, an involved. For example, in the rice industry,
organized production group, an association large wholesalers often lend money to traders
or a cooperative); entities involved in so that traders can finance the producers.
all aspects of the agribusiness process On the other hand, the processors receive

126126 Guidelines for the Strategy for sustainable agriculture and rural development
in the period 2021-2030, and vision to 2050