Credit Risk Management In Financing Agriculture
Source: The World Bank
Agriculture is an inherently risky economic activity. A large array of uncontrollable elements can affect output production and prices, resulting in highly variable economic returns to farm households. In developing countries, farmers also lack access to both modern instruments of risk management - such as agricultural insurance, futures contracts, or guarantee funds - and ex post emergency government assistance. Such farmers rely on different "Traditional" coping strategies and risk-mitigation techniques, but most of these are inefficient. Formal and semiformal arrangements - such as contract farming, joint-liability lending, and value-chain integration - have arisen in recent decades, but they too are limited and can be very context sensitive.