The $500,000 grant is to be disbursed over a 3 year period to Umati Capital and will be channeled to it’s Supply Chain Financing (SCF) product which allows farmers to sell to more professional buyers who offer better prices but have delayed payments as opposed to selling to informal traders who pay cash on delivery but offer low prices.
According to Ivan Mbowa, Umati Capital co-founder, “Our investors see a great opportunity in the agricultural sector which contributes US$ 16.6 billion to GDP. However, the sector has a credit gap of US$1.8 billion unserved by traditional financiers. To bridge this gap, the funding will advance Umati’s goal of financing and providing associated technology to increase the productivity for smallholder farmers.”
With this funding, smallholder farmers can streamline their cash flow and receive much needed financial cushion during the waiting periods. AGRA’s grant to Umati Capital aims to reach over 50,000 smallholder farmers with a Supply Chain Financing product that seeks to increase farmers’ productivity and net income over the next three years.
“Agriculture is the next installment of the Africa rising narrative. However, access to finance continues to be a major hindrance. We believe that through public-private partnerships and engagements such as this partnership, we can support farmers to contribute to economic growth by linking them to better and less risky finance options such as Umati Capital’s SCF product,” said Dr. Agnes Kalibata, AGRA president.
“We are grateful to our friends at the MasterCard Foundation who have made this possible through the Financial Inclusion for Smallholder Farmers in Africa Project implemented by AGRA,” Dr Kalibata added.
The Supply Chain Financing product will allow a smallholder farmer (supplier) to access 80% of the invoice value at any time before the supplier is paid by the buyer in full. Umati Capital can process the SCF loan without additional requirements of collateral in near real-time after sale or within 24-48 hours. Repayments are received directly from the buyer on behalf of the supplier with funds being transferred via integration with bank or mobile money systems.