This report presents findings from the 18-month SEEP Network Practitioner Learning Program in “Strategic Alliances for Financial Services and Market Linkages in Rural Areas.” The action research presented here identified practical ways that financial institutions, practitioners supporting value chain development, and agribusinesses in the value chain and farmers can come together to reduce the risks and costs of lending to small farmers and capitalize on the benefits.
The following are the main findings of this research on developing risk-sharing models:
- Analyzing and mapping value chains are a critical first step to forming risk-sharing models.
- Developing the profile of each potential partner of the risk-sharing model is important for both financial institutions and market facilitators when selecting partners for risk-sharing models.
- Gaining commitment from all stakeholders and structuring all the operational details and contingencies is vitally important in the beginning and may require an investment of time and resources.
- Dynamic and organized value chains offer more possibilities for forming risk-sharing models with agribusinesses in the value chain, but they are not required.
- Pilot tests are necessary before replication is attempted.
- Market facilitators can be catalysts for linking farmers to formal financial sources.