Strengthening Agrifood Value Chains Through Working Capital Finance

Working capital finance emerged as the “missing fuel” of agrifood systems at a high‑level workshop on “how to boost working capital finance for agrifood systems in low- and middle-income countries” convened on 18 March 2026 in Brussels by the European Commission Directorate General for International Partnerships (DG INTPA), EDFI Management Company (EDFI MC) and the FAO Investment Centre (FAO-IC). About 100 participants from development finance institutions (DFIs), commercial banks, impact funds, agrifood companies, EU institutions and FAO discussed the challenges associated with access to adequate working capital finance, shared experience, lessons learned and potential solutions. This was a follow-up to the Sustainable Cocoa Initiative scale-up session organised by the European Union at the Global Gateway Forum last October, where participants highlighted recurring difficulties in financing working capital needs in the cocoa sector. Building on new analytical work by FAO-IC, the workshop aimed to clarify the nature and scale of working‑capital needs across different commodities and to explore the design of more effective tools to address them. Moderated by Viwanou Gnassounou, Chair of Africa Political Outlook and former Deputy Secretary‑General of the ACP/OACPS, the event combined opening statements from DG INTPA and EDFI MC management, a presentation of FAO-IC findings, and a roundtable discussion with a mix of public and private practitioners active in the cocoa, cashew, coffee and dairy value chains.

Financing agrifood systems in low- and middle-income countries is critical to reducing poverty and achieving broader social development. Unmet financing needs of small farmers alone are estimated at around USD 170 billion per year across South and Southeast Asia, sub-Saharan Africa and Latin America[1]. Transforming agrifood systems to address climate change, protect biodiversity, and promote healthier diets requires an estimated USD 300-350 billion in additional annual investments[2]. The shared goal of industrialization among many of these countries and the objective to transition from being agricultural commodity exporters to agrifood processors adds a layer of financing needs specific to processing activities.

In response to these financing needs, an ecosystem of policy makers, supply chain operators and financing institutions including commercial banks, microfinance institutions, development finance institutions, and impact funds has emerged over the past decades with the aim of increasing financing for the agrifood sector. While funding needs remain high before all agrifood financing requirements are met, significant progress and a few success stories attest to the dynamism of this ecosystem. One example is Côte d’Ivoire, already the world’s leading cocoa producer, which has successfully attracted more than a billion dollars in capital expenditures (capex) investment to also become the leading cocoa processor globally in terms of capacity.

Recent studies show that, in addition to the undeniably critical issue of the volume of funding raised, there are equally fundamental issues regarding the nature of that funding. Raising long-term financing to finance the construction of a factory can be a challenge. But raising adequate working capital finance to run this factory can be equally difficult. Working capital needs are a liquidity metric corresponding to the amount of money a company requires to finance its operational cycle: pay suppliers to source agricultural products, store and eventually process these products, and continue operating while customers pay their invoices. If a factory was a car, working capital would be the fuel running this car. And as we all know, a car without fuel does not drive you far away.

Indeed, Capex investment comes along with growing working capital needs. In the absence of funding, an exporter of agricultural commodities often has some flexibility to pause its operations (up to a certain extent, because of the perishable nature of agricultural products). But a processor cannot afford to halt its factory. Industrial facilities should maintain robust utilization rates to cover fixed costs. Processing equipment and machinery can quickly deteriorate when not utilized.  Ideally, plants should operate continuously over the year. For this, processors need to be able to source a stable supply of raw materials. Which requires financing, especially in seasonal value chains like cocoa or cashew. Depending on whether it is readily available or in short supply, the financing of working capital is either the key or the lock for thriving agrifood systems.

Desperately seeking working capital financing

On the short term, commodity price volatility, coupled with strong structural seasonality has recently shed light on the challenges faced by farmers, aggregators, traders and processors to finance their working capital needs. On the mid-term, FAO and OECD project the global consumption of agricultural commodities to grow by 13% in the next decade. Almost all of the expected increase is anticipated to occur in low- and middle-income countries. In constant prices, this will translate into higher working capital needs, which will require fit-for-purpose financing. The need for adequate working capital remains however largely unmet, resulting in funding gaps for farmers and sub-optimal use of processing equipment for processors.

Most Development finance institutions (DFIs) however have typically prioritised capex over working capital. In some cases, this may be due to limitations in their treasury systems, which prevent them from offering revolving credit facilities. In other cases, their strategic focus tends towards funding capex through long-term financing, perceived as more ‘additional’ and ‘impactful’ than working capital needs. There are a number of factors that explain why working capital financing is central yet somehow neglected. For a start, financing working capital requires significant human resources. Working capital needs spike around harvests and fluctuate with prices and volumes, requiring fast reactions, many disbursements and frequent credit‑committee decisions. It requires sectorial expertise to follow market developments, as well as a strong emphasis on monitoring for an efficient collateral management and as use of proceeds are more difficult to track compared to project finance. Lack of liquid collateral, data gaps and high transaction costs add to the challenge.

But the Brussels workshop showed that DFIs, impact funds, local financial institutions and agrifood companies are building on their respective experience to improve their knowledge and capacity to address these challenges. Their experience is invaluable, and the lessons they have learned and shared can pave the way for concrete progress. Inspiring examples abound of cases where agribusinesses and traders have stepped in to provide pre-financing directly to farmers and cooperatives when appropriate banking products were not available. Some agrifood companies couple these schemes with technical assistance. Others have contributed to the set up of facilities providing small seasonal loans to farmers aligned with the crop cycle, supported by commercial banking partners and donors. Some blend pre‑financing, certification support and technical assistance, taking on risks that traditional lenders are reluctant to assume. Logistic operators could capitalize on their fixed assets and physical control over inventories stored in their warehouses to mobilize innovative financing along the supply chain. The banking sector is also actively seeking solutions. Some banks position themselves as coordinator of entire value chains, leveraging their large customer base starting from exporters, to gradually finance their suppliers up to farmers. Dedicated impact funds show how specialised teams and systems can efficiently deliver hundreds of small seasonal loans in partnership with cooperatives. Financing working capital can be a challenge, but it’s a challenge that can be overcome.

Building on the lessons learned in working capital financing

The different approaches to working capital financing point to the following key takeaways.

• Firstly, working capital finance should be perceived as the rich cousin, not the poor parent, of finance. It is very complex and highly strategic for the well-functioning of supply chains. Its importance justifies the intervention of the development community (DFIs, impact funds, donors etc.). This old problem receives periodic attention, usually at the peak of price cycles. But in many low- and middle-income countries, the challenge is structural. The recent decline in cocoa and coffee prices should be seen as an opportunity to strengthen these value chains and their financing, to be better prepared before the next price shock.

• Secondly, working capital in agrifood systems is a systemic constraint requiring a systemic response and that no single actor can resolve it in isolation. The success stories have limitations in terms of the scale of operations involved and their replicability at a large scale. Agrifood companies have sectorial expertise but cannot meet all the farmers’ needs on their balance sheet alone. Managing an ad-hoc credit facility is not their core business and requires significant capacity for last‑mile delivery, credit assessments and monitoring. Lending is the job of financial institutions, which in turn lack value chain expertise.
• Thirdly, tools for measuring and mitigating risks are critical for commercial lenders, which is an issue in the absence of data because probability‑of‑default cannot be reliably calculated. But risk-sharing mechanisms like guarantees, first‑loss capital and other solutions can help commercial financial institutions to lend to first-time borrowers, build data and a track record.  
• Fourthly, more risk sharing mechanisms could be part of the solution. Working capital financing could be scaled up within triangular schemes, in which a DFI could provide a credit line to a local bank. The bank would on-lend this line to the suppliers of an aggregator. The aggregator would offer off-take contracts to suppliers and share its knowledge and data with the bank and the DFI. The risk of this portfolio would be split between the DFI, the local bank and the aggregator.

The way forward

Participants in the workshop, recognise that access to adequate and scalable working capital finance is a critical precondition for resilient and inclusive agri‑food systems in low‑ and middle‑income countries. Building on the analyses and experiences shared during the workshop, participants committed to deepen collaboration along value chains and support the deployment of tailored financial solutionsalong the following lines.

Fostering collaboration between the public and private sectors. Public and private sector stakeholders are complementary and need to exchange more at both value‑chain and country level, in line with the EU’s Global Gateway and partner‑country priorities. These discussions may benefit from a facilitation by “honest brokers” (e.g. the EU, EDFI MC and FAO-IC). More could be done in terms of sharing information, disseminating lessons from past projects and consulting different stakeholders when designing solutions.

Investing in data systems, digital public infrastructure and capacity building for banks, cooperatives and agribusinesses would help to generate and share more data to inform better investment and lending decisions.

Broadening the knowledge base would strengthen the business case for working capital lending. Agrifood systems are extremely diverse. The value chain knowledgeof lenders could be improved, to understand the seasonality, risks and opportunities of each value chain. Financial instruments and monitoring should be adapted accordingly. DG INTPA could provide technical assistance building the value chain expertise of commercial banks, funds and DFIs. With support from DG INTPA, FAO-IC could improve lenders’ value chain expertise, contributing to a more refined diagnosis of working capital needs and the documentation of good practices and impacts.

De-risking and concessional funds (first-loss or subordinated capital, guarantees etc.) are limited and precious. The public sector should talk to the private sector at design stage, early enough in the process to receive inputs and optimize the allocation of a scarce resource.

Setting up pilot programs. As a follow-up, EDFI MC, DG INTPA, FAO-IC, interested DFIs, banks and agrifood companies will explore pilot structures in selected countries and value chains, testing innovative working‑capital solutions aligned with Global Gateway and partner‑country priorities. The conclusions will inform upcoming dialogues on agrifood systems, development finance and Global Gateway implementation at regional and global level.

[1] ISF Advisors and the Mastercard Foundation Rural and Agricultural Finance Learning Lab (2019). Pathways to Prosperity: Rural and Agricultural Finance State of the Sector Report. https://pathways.isfadvisors.org/

[2] The Food and Land Use Coalition (2019). Growing better: Ten Critical Transitions to Transform Food and Land Use. https://www.foodandlandusecoalition.org/global-report/

[3] Huertas, C., Kaufmann, A., Nedelec, D., Side, C., Voituriez, T., Zoungrana, M. (2025). Financing opportunities for cocoa processing in Côte d’Ivoire. FAO Investment Center K4I Brief.