Improving access to finance through product innovation and the value chain finance approach

Agricultural lending is seen as risky and costly. Banks shy away from the high transaction costs and risks related to agriculture such as crop failure, diseases, market price fluctuations and frequent fragmentation of smallholder farmers and agribusinesses.

An assessment of the rice, maize, Irish potato, tea, coffee, dairy, poultry and horticulture value chains in Rwanda showed that their key needs were around access to working capital, capital for acquisition of assets and trade finance.

Improving Market Systems for Agriculture in Rwanda (IMSAR), aims to address the financing needs of Rwandan farmers and agribusinesses by developing innovative financial products and adopting a value chain finance approach. It seeks to overcome the high transaction costs, risks, and collateral requirements that hinder agricultural lending. By introducing tailored financial products and focusing on the entire agricultural value chain, the programme aims to increase access to finance, enhance productivity, and support the growth of the agriculture sector in Rwanda.

In order to develop new lending approaches for the agriculture sector, IMSAR partnered with Equity Bank Rwanda (EBR), a lead commercial bank in Rwanda. This brief describes EBR's approach, the results achieved and the lessons learnt.

Intervention description

Specific interventions included developing four categories of financial products: commercial agriculture working capital loans (Zamuka Muhinzi), investment loans (Igire Muhinzi), agriculture funded trade finance facilities, and non-funded trade finance products. Training and coaching were provided to EBR staff to enhance their capacity to serve the agriculture sector.

The project successfully engaged key market actors, including farmers, cooperatives, and agribusinesses, with positive feedback and adoption of the new financial products.