COVID-19 and perceived effects on agricultural financing in Africa: Evidence and policy implications

This study examines the potential effect of COVID-19 on agricultural financing by drawing lessons from past global crises and their link to agricultural financing. With significant impact in multiple sectors, COVID-19 has caused significant liquidity shortage in the banking and financial institutions sectors that led to widespread business failure. Analysis at the macro, sectoral, and farmer levels confirms the decline in the financing allotted to the agricultural sector in Africa, which could exacerbate the existing structural gap in agricultural financing. Many policy responses and stimulus packages designed to address the negative effects of the crisis are found not to be enough. At the farmer level, findings indicate that many farmers are finding it more difficult to access credit than before the COVID-19 crisis. For individual governments, a better understanding of the magnitude of the agricultural sector financing and investment needs to propose appropriate complementary responses is lacking. We suggest that, in the face of such a crisis, while in the short term the agricultural sector needs emergency funding, in the medium and long term, greater financial support is required, including long-term resources at concessional rates, guarantee funds, and more suitable insurance products combined with social safety nets.