The Next Step in our Collaboration with the Gates Foundation: Unlocking Agricultural Finance at Scale

As elaborated in the initial research, we examined global lessons learned in agricultural finance and concluded that addressing the high (perceived) risks of agricultural lending requires understanding agriculture from financial, operational, and environmental perspectives. This could enable financiers to make more informed credit assessments and mitigate risks beyond their typical risk appetite.

To do so, financial institutions (FIs) typically rely on collateral that can be pledged by the borrower and liquidated to recover exposure in case of default. Common forms of collateral in agricultural finance include farmland and equipment. However, in most developing economies, the lack of acceptable collateral is often cited as a key constraint to credit provision, especially before harvest. The use of farmland as collateral is limited by the absence of reliable land titles and accessible land registries. Value chain actors also face challenges in financing upstream due to the risk of “side selling” by farmers. When it comes to equipment, mortgaging or leasing is often unfeasible due to low levels of mechanization or the absence of a legal and regulatory framework conducive to leasing.

Consequently, scaling agricultural finance requires identifying alternative forms of collateral and exploring risk mitigation tools for farmer financing. One example is securing forward crops through a legal instrument known as a crop receipt. In short, a crop receipt is a promissory note issued by a farmer or farmer organization to deliver a certain amount of farm produce - crops or livestock - or the cash equivalent thereof at a future date. Against this promise, a financier advances a specified amount of money or inputs to be settled upon maturity of the note.

This instrument has proven successful in Brazil, where it currently accounts for around 10% of the country’s agricultural finance. However, to make this model work in Africa - where farmers are smaller in scale and value chains are less integrated - crop receipts cannot be implemented as a standalone solution. Instead, they should form an integral part of a broader set of building blocks.

Aligned with the Gates Foundation’s Big Bets Framework - a bold commitment to catalyzing transformative solutions within a 20-year horizon - this next phase focuses on translating the research insights into practical implementation pathways. It will explore three foundational building blocks identified through our earlier work:

1. Collateralization via Forward Crops (Crop Receipts)

Assess how crop receipts can be legally structured, regulated, and scaled within each country’s context. This includes identifying key stakeholders and defining their potential roles in implementation.

2. Enabling Contract Integrity

Identify mechanisms to enhance supply chain transparency and contract enforcement, thereby strengthening trust among farmers, buyers, and financiers. Digital tools and platforms, such as registries and smart contracts - will be leveraged to support this objective.

3. Leveraging Digital Public Infrastructure (DPI)

Analyze how DPI elements, including national digital ID systems and digital farmer profiles, can support the secure issuance, monitoring, and enforcement of crop receipts and forward contracts.

Together, these components will culminate in a feasibility assessment outlining the design of a potential pilot and establishing the groundwork for implementation. The work will focus on three African countries with strong pilot potential: Ethiopia, Nigeria, and Rwanda.

We look forward to engaging collaboratively with public and private stakeholders in these countries to operationalize these insights - laying the foundation for scalable, sustainable agricultural finance systems that expand access to credit and strengthen smallholder resilience.