STRENGTHENING AGRICULTURE AND FOOD SYSTEMS BY PROMOTING ACCESS TO FINANCE PROJECT

dropped

Failure

The country has been experiencing supply and demand shocks to the economy, generating negative impacts on firms, employment, and households. Limited access to finance is a bottleneck for growth and poverty-reduction in the country. This shortcoming is even more pronounced in the poorer states of the country (in the south and central areas), and the rural finance gap remains large, including the traditional shortcomings in access to commercial credit, especially by micro, small and medium enterprises (MSMEs).Rural agri-food systems development could provide an opportunity for addressing jobs and economic growth. Agriculture employs a significant share of the population (nearly 13 percent of total employment is in primary agriculture) and has maintained growth rates comparable to other sectors in recent years. Integrating adequate financial products and services into agri-food systems can also help improve the socio-economic conditions of small/medium food producers.The proposed Project aims to promote financial inclusion and the development of sustainable and climate-resilient agri-food systems by supporting Banco de Mexico, acting as a Trustee of the Special Fund for Agricultural Financing (FEFA, for its acronym in Spanish), the implementing entity, to: (a) expand access to finance for productive purposes through a credit line intermediated by FEFA to Participating Financial Intermediaries (PFIs) for on-lending to Agro-industrial Enterprises (AEs); and (b) improve the quality and availability of information and financial instruments for PFIs, AEs, and agricultural producers through the development of a new digital Agri-Tech Platform.The main direct beneficiaries of the Project under the credit line component will be FEFA, the PFIs, and the AEs; and, indirectly, the agricultural producers making advance sales of their harvest to AEs. Under component 2, the Agri-Tech Platform will benefit PFIs, AEs and agricultural producers by operating as center for information, knowledge, and access to financial services. The Project will be demand-driven and operate at a national level; however, priority will be given to the southern, southeastern, and western regions of Mexico.The proposed Project is aligned with the World Bank Group’s Mexico Country Partnership Framework (CPF) for FY2020-2025, which in turn supports Mexico’s National Development Plan (2019-2024). Among the three focus areas of engagement of the CPF, the Project is strongly consistent with two focal areas, including the first area, related to supporting inclusive growth and its objectives to (i) foster financial inclusion, and (ii) reduce structural impediments to productivity growth. The Project is also consistent with the third focus area of the CPF of promoting inclusive and sustainable development and its objective to provide more inclusive and sustainable infrastructure services.

FY17 - Agriculture, Fishing and Forestry,FY17 - Industry, Trade and Services

World Bank Group

Project

Manufacturing (Industrial), Raw Materials, Government, Commercial