What Makes a Farmer Organization Investable?

Unlocking Finance for Farmer Organizations

Access to Finance: The Hidden Catalyst for Agricultural Transformation
Access to finance is a vital lifeline for farmer organizations (FOs) [1]and therefore an integral part of the AgriGRADE approach on professionalizing farmer organizations and linking them to finance and markets. Finance fuels the ability of FOs to perform as aggregator of services to and from members, scale operations, adopt technology, and strengthen value chains. Yet, for many FOs, the doors to formal financial systems remain closed, leaving them unable to secure the capital they need to thrive. The question then becomes: What makes a farmer organization investable?

SCOPEinsight: Measuring Professionalism and Financial Readiness

For the past 16 years, AgriGRADE founding partner SCOPEinsight has been at the forefront of systematically assessing and monitoring the management performance of FOs. At the heart of the SCOPEinsight approach is a robust assessment methodology that evaluates the level of professionalism of FOs across eight critical dimensions:

 

Dimension	Description
Internal management	How an organization manages, governs, and plans its business to achieve its objectives.
Financial management	Planning, directing, monitoring and controlling the financial resources of the organization
Sustainability	The organization’s performance related to social and environmental practices and the way it actively tries to reduce negative environmental and social impact and increase the positive impact
Production-base	Production base focuses on the management of the farmer base to ensure timely and sufficiently delivery of quality produce to the organization
Operation	All processes from the collection of the produce from farmers up to the delivery of the produce to the clients, including quality control and the transformation (processing) of the agricultural produce into the desired product.
Market	Market dimension focuses on the organization’s understanding of and ability to access and operate in a competitive market and anticipate market risks.
External risk	This dimension focuses on the awareness of biological, climate and social and politically related risks and the capacity of the assessee to mitigate these risks.
Enabling environment	The enabling environment is defined as a set of policies, institutions and support services that collectively improve or create a conducive business climate for the organization to develop and thrive. This dimension analyzes to what extent the assessee effectively relates and gets access to the services and opportunities presented

What Makes an FO Investable? Access 2 Finance insights from SCOPEinsight’s Data

To answer this question, SCOPEinsight analyzed its extensive dataset of over 6,500 assessments conducted across 51 countries and 27 agricultural sectors to understand the relationship between management characteristics and access to finance. Our research focused on:

• Levels of professionalism as (re-)measured by SCOPE assessments.
• Types of financing accessed (e.g., working capital, trade finance).
• Terms of financing (e.g., loan size, interest rates).
• Providers of financing (e.g., banks, microfinance institutions, donors).

Using advanced analytics, including machine learning, we validated the critical connections between management practices and financial outcomes. The results are clear: better-managed FOs secure better financing—both in volume and quality.

Key Insights on Access to Finance from the Data

1. Loan Size Increases with Professionalism:
   • Level 1 FOs (minimal professionalism): Average loan size of $10,600.
   • Level 4 FOs (high professionalism): Average loan size of $263,300—a 25x increase.
2. Turnover Growth Reflects Maturity:
   • Level 1: Average annual turnover of $160,000.
   • Level 4: Average turnover of $3.4 million.
3. Reduced Risk and Better Repayment:
   • Higher professionalism correlates with lower default rates and greater lender confidence.
4. Tailored Financing Needs by Level:
   • Lower levels prioritize input financing.
   • Higher levels seek trade, export, and working capital finance.

Additionally, the data shows that as FOs improve their professionalism, they attract financing from more competitive sources like commercial banks, reducing dependency on grants and subsidies.

At the heart of this approach lies the Access To Finance (A2F) Score—a standardized, validated measure of an FO’s bankability. This score is created through extensive research and analysis, including interviews with lenders and industry experts and the evaluation of data from over 2,000 agribusinesses. The score assesses key drivers of financial readiness, such as governance, management capacity, and financial performance, using advanced machine learning techniques for validation. The A2F Score provides a reliable indication of an organization’s finance eligibility and is strongly correlated with loan sizes. This scoring system allows financial institutions to identify high-potential FOs and prioritize their pipeline efficiently during pre-due diligence, ultimately saving time and reducing origination costs.

“At Oikocredit, we are proud to be one of the founding partners of AgriGRADE, dedicated to support agricultural cooperatives and their communities. With approximately 75% of agricultural cooperatives in Africa experiencing the challenge of being unbanked, underbanked, or reliant on generic financial products that do not suit their needs, our focus is on delivering inclusive and tailored financing solutions. By empowering these cooperatives, we foster socio-economic and climate resilience, drive impactful change in rural economies, and enhance the livelihoods of smallholder farmers, paving the way for a more sustainable agricultural future. AgriGRADE is an important step for us to streamline the process of capacity building and enhance our impact.“

Hans Perk, Director Specialised Finance & Community Building 

Why This Matters

In practice, the A2F Score offers tailored functionality for financial institutions, technical assistance providers, and other stakeholders. Financial institutions may use the SCOPE Portal to access the A2F Scores of assessed organizations, enabling them to match their risk appetite with eligible FOs quickly. For providers of technical assistance to FOs, the A2F Score highlights areas needing improvement, guiding targeted technical assistance to increase the bankability of the FOs. Moreover, the score enhances transparency and creates a “common language” between lenders and FOs, aligning expectations and improving efficiency in the financing process. For FOs, understanding their professionalism level offers a clear pathway for growth, helping them unlock larger loans with better terms.

Turning Barriers into Opportunities

The journey to unlocking finance for FOs begins with understanding what makes them investable. SCOPEinsight’s data-driven approach provides the insights and tools needed to bridge the gap between FOs and financial institutions.

The data is clear: professionalizing FOs isn’t just the right thing to do—it’s the smart thing to do.

Gain valuable insights into financing strategies and success stories. Don’t miss this opportunity to shape the future of agricultural finance!

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