Alternative finance in commodity chains – how small entrepreneurs and farmers

A lack of collateral will normally make a bank less willing to lend to a customer: a collateral safeguards the bank for a loss, be- Factoring is an effective instrument to raise cash for current op- cause in case of non-repayment of the loan the bank can take erations; if factoring was available to vulnerable people it would and sell the collateral instead. [...] After transferred to the lessee from the lessor. Normally, in a finance proving the viability of the model in Tanzania, EFTA now seeks lease agreement, the lessee rents the equipment for most of its to expand it to neighboring countries Kenya and Uganda. [...] The value is calculated based on the state- credit, which solves the ‘cost’ problem in two ways; the storage ment or ‘receipt’ that is issued by the authority managing the costs can be shared by a group of farmers and, consequentially, warehouse, which specifies the value i.e., quality and quantity of because of crop aggregation a selling deal may be easier and the commodities available. [...] 2 I ssuance: The storage operator issues a warehouse receipt 10 Renewal or Cancellation: If the buyer chooses to collect which guarantees the quality and quantity of the commod- the commodities, the receipt is cancelled; if not the ity that has been deposited. [...] Investors entering a and tools to maximise produce, and lack of a reliable buyer to blended finance arrangement need to ensure that projects can purchase the produce at the end of the season.