Undertaking commercial financing of the agri-food sector | Additional news

On May 1, 2024, Republic Bank Trinidad and Tobago launched a new financial product designed for stakeholders in the agri-food value chain. The news has raised expectations ranging from excitement to uncertainty. For institutions like the Inter-American Institute for Cooperation on Agriculture (IICA), this can only be seen as a positive development not only for stakeholders in the local agri-food value chain, but also, hopefully, and ultimately, for their peers in other Caricom countries, where Republic Bank operates.

Even if this only applies to Trinidad and Tobago, it has implications for broader efforts to expand the participation of the commercial financial sector in the agri-food industry in Caricom. Caricom is already attracting strong interest, especially as the terms of the loan are designed to meet the needs of small farmers, processors, distributors and others in the value chain.

The call to involve more commercial financial institutions in agricultural financing has its roots in the late 1970s Caricom Regional Agricultural Transformation Program (RTPA). In each subsequent Caricom agricultural development strategy, “limited financing and investment in agriculture” and “lack of private sector involvement” recall chronic diseases negatively affecting the transformation, innovation and competitiveness of the agri-food industry. One of Caricom’s subsequent strategies, the 2002 Jagdeo Initiative, led by Guyana’s then president, emphasized that in a changed global environment, “the agricultural sector was not providing food security or earning foreign exchange to cover the rising bills for food imports from “Caribbean”.

Fast forward to 2024, fifty-one years after the 1973 Treaty of Chaguaramas that gave rise to the RTPA, the global environment has changed even more fundamentally, in every possible dimension of human sustainability. Media reports at national, regional and international levels warn of excessive heatwaves, frequent and perpetual wars and civil unrest in almost all corners of the globe, plastic pollution going beyond the problem of polluting ecosystems and becoming a reality of human health due to microplastics, worsening on always a broader spectrum of chemicals in the food safety challenge.

There are also very clear signs that the private sector in Caricom is becoming more involved in financing, investment and development of the agri-food sector. Through the Caricom Private Sector Organization, concerted efforts are being made towards the latest regional 25% x 2025 goal of reducing dependence on extra-regional food imports. They established priorities for 19 agricultural industries in Caricom countries. They also recognized the important role of the often overlooked collective contribution of the extensive Agricultural Micro and Small Enterprises (AgriMSE) sub-sector. To meet these expectations, AgriMSEs across the agri-food chain will need financing.

Traditionally, governments in Caricom have established special purpose entities to provide development finance and business services to agri-food stakeholders. However, there is still a funding gap. Increasingly, this funding gap is seen not so much as a lack of available finance, but rather as a barrier to accessing available finance. As competition for financial and development resources intensifies to meet the broader social, health, educational, economic and infrastructure needs of developing countries, changing development financing dynamics are inevitable. While necessary and helpful, relying on project, donor and development financing is not sufficient or sustainable for the individuals, companies and industries in the agri-food value chain that provide employment, income opportunities and livelihoods. This applies especially to AgriMSE enterprises.

The agribusiness loan from Republic Bank is therefore timely. Through two online information sharing sessions organized by IICA, one for those providing technical support for the transformation and development of the sector and the other for potential AgriMSE customers, the important features of this product were explained. There are only two main exceptions – this loan product does not cover the purchase of agricultural land or AgriMSE start-ups. In addition, Republic Bank has confirmed that all persons operating in the agri-food value chain in Trinidad and Tobago will have the opportunity to apply for this loan. Access requirements are designed to meet the applicant’s specific business purpose and operations. This will make available financing for agricultural purposes more accessible.

This agribusiness loan also provides a platform to match access to financing with access to technical support and services. A number of technical agencies, including IICA, CABA, MAFAS Ltd., i.e. non-financial/non-donor entities, have committed in principle to work with national state entities and other collaborators to support the risk mitigation process by providing technical, business and marketing support in order to strengthen the profitability of the company and ultimately ensure good performing loans.

IICA looks forward to working with the champions at Republic Bank, led by P. Vic Salickram, Group Vice President of Republic Financial Holdings Limited and Vice President of Republic Bank Limited. We will continue to work closely with our key collaborators to help build and maintain the institutional ecosystem necessary to ensure that this loan is both financially sound and business-relevant for AgriMSE’s potential customers.

The size of the gap in financing the agri-food sector may take into account many entities in the financial sector. From the perspective of encouraging greater commercial participation by the financial sector, it is important that the Republic Bank Agribusiness lending product initiative in Trinidad and Tobago is a success. This success serves the benefits of all stakeholders in the agri-food value chains, maintaining the importance of entities supporting the development of agriculture and, as a result, the transformation of agriculture in the region, including the goal of reducing extra-regional agri-food production and imports by 25% by next year, i.e. 2025.