Financing of agricultural marketing: case studies from Asia

This study looks at how traders of grains and horticultural produce in Asia finance their activities and how they use that finance. It examines the financial needs of traders, including seasonal variables, and explores formal and informal financial relationships.Traders covers activities from large-scale paddy milling to small-scale rice retailing, and from small-scale rural assembly of horticultural produce to large urban wholesalers. The study was carried out in 2001 using country case studies of Cambodia, India, Myanmar, Nepal, Pakistan, the Philippines and Vietnam.The main conclusions of this paper include:lack of working capital is not a major constraint to the functioning of agricultural marketing systems in Asia. That is not to say, however, that some actors on the marketing chain could not benefit from additional working capital sourceslack of investment capital does appear to constrain both entry of new participants and expansion by existing participants, particularly processors such as paddy millersone reason why the availability of working capital does not appear to present too many problems is the existence of many vertical financial linkages within marketing systems. These pivot around millers in the case of staples, and wholesalers in the case of horticultural produce. Both millers and wholesalers lend to traders who buy from farmers and these traders may, in turn, make both production and consumption loans to farmers. Wholesalers and millers also lend in the opposite direction, to distributors and retailersfarmers are significant providers of finance to the marketing system, by being prepared to accept short-term deferred paymentlinkages seem to be generally non-exploitative and serve primarily to secure supply, guarantee markets and reduce transaction costsany proposals to address perceived problems within the production-marketing system through financial interventions need to recognise the complexity of existing financial relationships and the implication of changes on all stages of the marketing chain. An injection of resources into the marketing system could only be successful if traders are able to utilise those resources within their own network of trusted trading partners[Adapted from Author]