Tripartite Financing Arrangements
Lenders seeking to directly finance smallholders face high transaction costs, risks, and asymmetric information. In this presentation from the AgriFinForum, Cententary, a bank operating in Uganda, details their use of tripartite financial arrangements to provide loans to smallholders through farmer associations and aggregators. They key features of tripartite financing arrangments highlighted in the presentation are:
•Small holder farmers under their Farmer groups/association produce maize under contracts signed between them and the aggregator.
• The Bank finances the association on the basis of contracts executed between them and the aggregator.
•Under the tripartite agreement signed between the farmer association, the aggregator and the Bank, the aggregator agrees to make payments to the association through their account held with the Bank from which association loans are retired.
•The aggregator receives financing for working capital to purchase all maize produced, bulks and sells to the off-taker.
•The off taker alo makes payment to the bulker through their account held with the Bank from which the existing loan is retired.