Baku: The International Finance Corporation (IFC) has embarked on a new project aimed at increasing agricultural financing in Azerbaijan, in collaboration with the Swiss State Secretariat for Economic Affairs (SECO), according to IFC’s communication with APA-Economics. This four-year advisory project is designed to enhance access to finance for agricultural producers by addressing the financial barriers that hinder the productivity of farmers and agribusinesses.
According to Azeri-Press News Agency, the agricultural sector in Azerbaijan employs 37 percent of the population yet contributes only 5.5 percent to the nation’s GDP. The limited access to finance, due to factors such as lack of collateral and the perceived high risk of agricultural lending, remains a significant challenge for the sector’s growth and the creation of high-quality jobs.
The IFC’s Crop and Warehouse Receipts Project aims to tackle these challenges by introducing innovative financial tools that can facilitate access to both pre- and post-harvest finance. These instruments are expected to improve the risk profile of the agricultural sector and encourage financial institutions to increase their lending to farmers and agribusinesses.
Crop receipts, in particular, will allow farmers to use their pre-harvested crops as collateral, thereby gaining access to capital needed for purchasing quality seeds, fertilizers, and other inputs. This move is anticipated to not only boost productivity but also widen the creditor customer base. Meanwhile, warehouse receipts will enable farmers to use stored goods as collateral for loans or receive payment upon delivery to a warehouse, offering a post-harvest financing solution.
The introduction of digital crop and warehouse receipts is seen as a pivotal step towards enhancing financial inclusion and sustainability. However, a supportive regulatory framework is necessary for scaling these innovations. IFC’s role will include establishing the legislative, regulatory, and policy frameworks needed for these financial instruments, alongside their digitization. Once these frameworks are in place, the focus will shift to building the capacities of both the financial sector and farmers, while also promoting public awareness of these financial tools through campaigns.
Since joining IFC in 1995, Azerbaijan has benefited from approximately $900 million in investments across nearly 60 projects in various sectors, including financial services, infrastructure, and manufacturing. IFC has also played a significant role in advising on improvements to the business environment, financial sector development, corporate governance, and the strengthening of small and medium enterprises as well as the agribusiness sector.
The IFC, as a member of the World Bank Group, stands as the largest global development institution focusing on the private sector in emerging markets. Operating in over 100 countries, IFC leverages its capital, expertise, and influence to create markets and opportunities in developing regions. In fiscal year 2024, the corporation committed a record $56 billion to private companies and financial institutions in developing countries, mobilizing private sector solutions to aim for a world free of poverty on a sustainable planet. For more information, visit www.ifc.org.