ABSTRACT
Few farmers, or other agribusinesses, however, are in that fortunate position. Most agribusinesses are already indebted and do not have diversified investments. A lender’s policies and procedures should also address risks posed by individual loans as well as aggregate agribusiness portfolio risk. Lenders gain by decreasing their risk exposure, as they have collateral which is easier to enforce and usually recognised by central banks operating the Basle or other capital management systems as low risk, in turn enabling lower pricing. The loans against agri-collaterals are typically short term, self-liquidating, and one of the most secure products in a bank’s portfolio. A key point of differentiation between farms, in particular, is the potential availability of grants or subsidised loans, usually from government but sometimes from international agencies and donors, which can dramatically reduce the cost of capital for a production agribusiness.
