How can Agricultural Value Chain Finance (AVCF) help expand financial access for smallholder agrifood chains in Southeast Asia?

Abstract

All agricultural production is risky, but products with higher value (such as fruits, vegetables, and animal source foods) often involve additional risks, and farmers that decide to grow new crops or attempt to attain specific qualities in their crops are exposed to new forms of risk.• When additional risks are present, incentives to spread them through contractual relationships increases, whether they be through direct contracts or AVCF relationships.• That said, contractual relationships also create risk among purchasers, particularly if they lack market power. Farmers can decide to break contracts and sell to others for higher prices if they become available.• For perishable products, value chain actors beyond the farm gate take on spoilage risk along with delivery, so timing of transactions is important.