20 June 2018

Helping palm oil producers and mills in Colombia to access credit.


Helping palm oil producers and mills in Colombia to access credit.

The agricultural sector has a big importance in Colombia’s economy, with the potential to act as a driving force for generating jobs, increasing farmers’income and improving the livelihoods of those who work within the sector, directly or indirectly. For these reasons, the government works to promote instruments that can finance activities in the agricultural sector.

In Colombia, the Fondo para el Financiamiento del Sector Agropecuario - FINAGRO (or Fund for Financing the Agricultural Sector, in English) is the government’s entity that consolidates the resources from the National Policies and Agricultural Development Titles. With these funds, FINAGRO (a second-tier bank) grants resources to financial entities (first-tier banks) that in turn finance projects in the agricultural sector, among which are the ones from palm oil producers.

With the goal of providing a better understanding of the available financial options and shedding light on a challenging topic, Proforest and Fedepalma have developed a guide that explains in simple terms the existing mechanisms, such as: i) credits and microcredit, ii) warrantees, iii) incentives, iv) risk management, v) special government programs and vi) support to multilateral organizations (including the RSPO Smallholders Support Fund (RSSF). Useful recommendations on putting together a successful project proposal are also provided in this guide.

The guide, a first of its kind in Colombia, was field trialled during three half-day workshops conducted by Fedepalma (with Proforest) in three palm oil regions: Zona Central (Bucaramanga), Zona Oriental (Villavicencio) and Zona Norte (Santa Marta). These workshops included hands-on exercises to help participants grasp some of the concepts and develop an understanding of the available options and mechanisms to finance agricultural activities. These events were also attended by representatives of FINAGRO and financial entities (specially Banco Agrario).

The next steps of this effort seeking to bridge the finance sector with the palm oil producers and mills are currently being planned. Among the planned activities are to continue to promote the Guide and to broaden the audience with the support of mills or nucleos palmeros. It will be important to understand what the producers’ main concerns are and how these can be better dealt with in future workshops that will take place in the second semester of 2018.

To access the publication please check Fedepalma’s website here.