Financial Solutions for Climate-Smart Agriculture (CSA)

Thematic Area:	Rural & Smart Agri-finance Development
Duration:	2018 – 2020
Client:	Interamerican Development Bank (IDB) Invest
Region:	Latin America and the Caribbean
Country Coverage:	Nicaragua

Project Overview

The objective of this Project was to develop a new financial product for new and existing agricultural SME clients of the Nicaraguan Bank Banpro. Banpro belongs to the banking group Promerica, which primarily operates in the following sub-sectors: coffee, sugar cane, rice, peanuts and cacao. The Project aims to finance investments in climate smart agriculture that will increase SME clients’ resilience to climate change. The climate smart agriculture portfolio to be covered by the IDB Invest guarantee fund should also be defined.

At the start of the Project, Frankfurt School experts carried out a market study to capture the climate risks and vulnerabilities of agricultural SMEs in the target sectors, assess the demand and supply of CSA loans and the identify the existing funding gap. The market study also identified CSA investments that could be financed by Banpro. To conclude the initial assessment, Banpro's strengths and weaknesses for introducing CSA products in their loan portfolio were analysed.

Based on the market study, Frankfurt School experts supported the bank in designing a new financial product (credit line) to finance investments in water reservoirs, drip irrigation, solar irrigation, solar dryers, ecological coffee processing, laser graders, energy efficiency equipment, renewal and introduction of improved plants. This was complemented by the development of a tool that quantifies the costs and benefits of the selected measures. The tool clearly shows the advantages of investing in CSA, the investment amount, the income and the recovery period.

To achieve the long-term sustainability of the product, we supported Banpro in the identification of strategic alliances with local stakeholders (technology suppliers, agroindustry, insurance companies, etc.) and trained the Banpro credit officers and branch managers in climate change topics and the new CSA product.