The SDC funded PAFAI project changed the landscape of agricultural finance and insurance in Georgia. The key to this success lay in forging new partnerships and facilitating long-term cooperation.
Unity creates strength
Strong partnerships are crucial for achieving impactful and long-lasting results. The Swiss Agency for Development and Cooperation (SDC) funded Promoting Access to Finance and Agricultural Insurance (PAFAI) project, which operated between May 2015–April 2017, developed rich partnerships between over 20 stakeholders. This deep cooperation contributed to the successful implementation of measures to improve access to both agricultural finance and agricultural insurance for Georgian farmers.
Access to Insurance
PAFAI’s agricultural insurance component helped prepare the sector for future growth through improving the technical capacities of insurance companies and working with the Government of Georgia to make the insurance process more efficient for Georgian farmers. Key outcomes included the training of 118 loss adjusters, the development of crop-specific loss adjustment guidelines, and an 18,795 increase in the number of farmers using agricultural insurance. PAFAI partnered with Agroseguro, a prominent agriculture insurance organization from Spain, for the development of loss adjustment guidelines. Agroseguro worked closely with PAFAI to create the loss adjustment standards and conduct comprehensive trainings, while also collaborating with insurance actors to ensure the standards were tailored to Georgian needs.
Field training in apple loss adjustment. Shindisi (Mtatsminda region of Tbilisi); September 22, 2016.
Access to Finance
On the finance side, PAFAI worked with Georgian financial institutions and agribusinesses to create financial products that would increase the productivity and income of farmers. This resulted in the launch of six Value Chain Finance (VCF) schemes, the training of more than 700 financial institution staff in agriculture lending, and a 72.5% increase in staff productivity (number of loans disbursed per loan officer per month). PAFAI built partnerships between Georgian FIs, agro input suppliers, service providers, processors, and primary producers to facilitate the creation of these mutually beneficial financial products. These VCF schemes have proven to be popular among both farmers and financial institutions, with 1,200 VCF loans worth 540,000 USD being disbursed over the course of the project. Smallholder farmers have seen particular improvements to their operations, with many now being able to purchase essential agricultural inputs with an effective 0% interest rate.
If you give a man nuts, then give him something to crack them with
PAFAI also facilitated the establishment of the first warehouse receipt financing scheme to be used in Georgia. This was achieved through cooperation with other development projects and with the support of the Ministry of Agriculture. A warehouse receipt scheme works by providing farmers with loans using their produce as collateral. Farmers can then safely store their produce in optimal longevity conditions, allowing them to sell their produce when the market is offering a high price. The cost of renting space in the warehouse is then paid out of the sale of the stored produce, which helps to reduce farmers’ upfront expenditure. The scheme is currently being piloted in the hazelnut sector, but warehouse receipt financing could be adapted to benefit many other agricultural value chains in Georgia.
Further strengthening cooperation between the project’s key partners, PAFAI organized a study tour to Romania with Georgian financial institutions, government officials, and agribusinesses. The main goal was to study the role of finance and government in the evolution of Romania’s agricultural sector, returning with lessons for Georgia’s future development.
Meeting with Deputy Minister Giorgi Chkheidze, APMA Director Mamuka Kvaratskhelia, and BoG AgroBusiness Manager Revaz Chubinidze at the Romanian Agency for Payment and Interventions in Agriculture. Bucharest, Romania; March 9, 2017.
While the PAFAI project has officially concluded, the partnerships and the benefits of the project will endure for years to come. Georgian agriculture has a bright future, and it will be exciting to see it flourish through the continued collaboration of passionate stakeholders.