About CSAF

The Council on Smallholder Agricultural Finance (CSAF) is an alliance of social lending institutions, also referred to as impact-first agricultural lenders, targeting agricultural businesses in the “missing middle” in low- and middle-income countries.

CSAF members convene on a pre-competitive basis to exchange learning, identify best practices and develop industry standards across three areas:

  • Market Growth to meet a greater share of the vast financing need of the world’s 450 million smallholder farmers. In 2013, the founding members of the council disbursed a combined $362 million in loans to agricultural businesses. By 2016, council members target disbursements of $500 million with growth in existing geographies and agricultural crops as well as to a wider range of geographies, crops and financing needs.
  • Responsible Lending Principles promoting market growth that contributes to positive impact on agricultural businesses, the smallholder farmers they aggregate and long-term sustainability of the sector. Council members have drafted a set of Responsible Lending Principles for impact-first agricultural lenders.
  • Social & Environmental Impact for farm households, their communities and the ecosystems on which we all depend. Council members have identified a set of seven impact metrics that they all collect and will share on an annual basis. These metrics will form the basis for deeper impact analysis in the future. Individual organizations complement these impact metrics with more detailed case studies and evaluations.

CSAF does not have a formal secretariat or support staff, but consists of senior leaders and representatives of its member organizations who come together twice a year to collaborate on specific workstreams related to the three priority areas outlined above. CSAF members aspire to apply the lessons learned from microfinance and other movements of financial inclusion to the nascent market for smallholder agricultural finance and to orient this growing market toward socially responsible and environmentally sustainable practices. The council has decided to publicize its collaboration as a way to generate increased interest in smallholder agricultural finance and to engage with other actors operating in this market to work toward industry standards and best practices.

Mission, Vision & Activities

The council’s mission is to:

  1. Facilitate market entry and increase lending to agricultural businesses in the missing middle.
  2. Focus the agriculture finance sector on reaching and supporting the livelihoods of the world’s 450 million small-scale farmers.
  3. Promote responsible lending principles, including social,  environmental and corporate governance standards, among all financial institutions serving this market.

CSAF envisions a thriving, sustainable and transparent financial market that generates long-term economic, social and environmental benefits by meeting the financing needs of agricultural businesses that aggregate smallholder farmers in developing countries worldwide. To realize this mission and vision, social lenders participating in the council exchange lessons learned and work toward defining industry standards and best practices related to over-indebtedness, risk management, fair competition, transparent pricing, and social and environmental impact. For instance, in addition to identifying and committing to reporting the seven impact metrics, council members shared and discussed one another’s social and environmental due diligence tools and approaches, which facilitated improvements and increased harmonization.

Background

In 2012, representatives from Alterfin, Oikocredit, Rabobank’s Rabo Rural Fund, responsAbility Investments AG, Root Capital, Shared Interest Society and Triodos Investment Management identified the need to develop industry standards and best practices for social lenders targeting agricultural businesses in the missing middle in low- and middle-income countries. The missing middle refers to agricultural businesses that require financing in the $25,000–$2 million range (and sometimes higher), which is too large for microfinance and often does not qualify for loans from local commercial banks. These businesses include producer organizations, trading companies and agro-processing companies sourcing from small-scale farmers, as well as input suppliers and other entities that provide goods and services to farmers. Across geographies and industries, there is a spectrum of the missing middle that ranges from businesses that have no access to financing, to those that have some access to financing but whose financial needs are not fully met, to those—mainly larger businesses in particular geographies where agricultural financial markets are most developed—whose needs are increasingly well met by a range of social and commercial lenders. However, regardless of where on that spectrum a particular geography, sector or individual client falls, CSAF members are committed to serving the most underserved segments, such that, to the extent possible, credit that is extended is additional to what a business would otherwise have access to. This concept, referred to as “additionality” is fundamental to CSAF members’ lending strategy. Businesses in the missing middle aggregate several hundred or sometimes thousands of small-scale farmers, linking them to markets for their goods and also providing services such as agronomic training and credit for farm inputs. Millions of farmers globally are currently aggregated into these types of businesses; however, the vast majority of the world’s 450 million small-scale farmers, typically defined as those who farm fewer than two hectares of land, are not. While some smallholder farmers have access to credit through microfinance institutions or buyers, there is a large opportunity to expand the addressable segment of the missing middle by encouraging the aggregation of smallholder farmers and by finding innovative ways to reach disaggregated farmers.