A study carried out by the United Nations Capital Development Fund (UNCDF) and United Nations Development Programme (UNDP) has found that farmers in Liberia are trapped in subsistence farming because most financial institutions in the country have not developed specifically targeted loan products suitable to the needs of the country’s farmers.

The study found that farmers have extremely limited access to finance, and that the typical loan products available on the Liberian market are charging interest rates beyond what farmers can afford. The products also fail to take into consideration cropping cycles in repayment plans. Additionally, most loans require farmers to put down key productive assets like land, as security for loans, making it extremely difficult for farmers to access credit required to upgrade their activities.

“Agricultural growth has the potential to reduce rural poverty rates fast and effectively. One vehicle to achieving growth in the sector is to make financing opportunities regularly accessible to farmers. Unfortunately, most financial institutions do not have the appropriate risk mitigation products and financial instruments to meet the needs of farmers. This then deprives the farmers of the resources needed to adopt better technologies and to purchase agricultural inputs that can improve farming efficiency,” said Stephen Rodriques-Resident Representative, UNDP.

“Access to financial services can equip farmers with the resources they need to upgrade from subsistence to semi-commercial farming. We believe the potential of Liberian farmers far exceeds the current capacity and yield of daily subsistence if leveraged through access to financial resources,” said Christel Alvergne, UNCDF’s Regional Advisor for Central and West Africa.

The Government of Liberia and UNDP commissioned the Study conducted by the UN Capital Development Fund (UNCDF), with the objective of exploring mechanisms for financing the agricultural sector.

UNCDF undertook the study from July to October 2021 to design a sustainable financing facility for agricultural MSMEs, particularly those for youth, women, and People with Disabilities (PWDs).

The Government of Liberia has identified the agricultural sector as a key driver of national economic growth, a key source of employment and poverty reduction.

The study confirmed that agro-processing and value addition present low cost and simple employment/income opportunities for farmers and enterprises on operations like cleaning, sorting, grading, slicing, and drying of agricultural produce.

“Agriculture is indeed a sound engine for economic growth, poverty eradication and job creation for people involved in activities across its entire value chain including farm to retail outlets. We remain committed to working with the government and other stakeholders to unlock the full potential of agriculture in Liberia,” said Stephen Rodriques, UNDP Liberia’s Resident Representative.

UNDP is working in partnership with the Ministry of Commerce and Industry, as well as the Ministry of Agriculture to support the Government’s efforts to strengthen business and enterprise development services for MSMEs by promoting access to finance, capacity building and innovation.

UNDP’s five-year Livelihood & Employment Creation project is providing the assistance. The MSMEs Financing Study is one of the key deliverables of the Project.

On 10 December 2021, the government and a wide range of stakeholders drawn from various financial institutions and farmer organizations are validating proposals for developing financing products and mechanisms adapted for the unique needs of farmers.