News & media Closing the financing gap in global agriculture
By Eduardo Nunes
Agriculture plays a key role in the global economy, providing 28% of total employment globally, equating to around one billion people. Collectively, agriculture, forestry and fishing also account for 4% of global GDP. Beyond that, the sector holds a pivotal role in alleviating global poverty, with the World Bank noting that growth in this sector is two to three times more effective in reducing the number of people living below the international poverty line than in other sectors.
Despite this, the agricultural sector faces a significant financing gap. ISF advisors reported that smallholder farmers (around 570 million worldwide) alone were experiencing a USD 170 billion yearly shortfall in 2022, whilst agri-SMEs suffered a USD 106 billion shortfall that year. Taking even a developed region like Europe as an example, the European Commission reported a €63 billion agricultural financing gap in 2022, representing a 33% increase from 2017. Notably, three-quarters of this gap is concentrated in medium to long-term financing, impacting projects related to infrastructure and sustainability, such as advanced irrigation, drought and flood protection measures, organic agriculture practices and renewable energy initiatives. Unfortunately, this funding constraint is systemic, with funding gaps far more severe in other regions, particularly in southern hemisphere markets.
In 2023, approximately 733 million faced hunger, equivalent to one in every eleven people globally. As such, financing agriculture at the scale and speed required is crucial to ensuring global food security, as populations and consumption rates continue to rise. At the same time, targeted financing can also support conservation efforts, improve soil health, enhance water efficiency and protect biodiversity.
The challenges facing mid-market agriculture businesses
Mid-market agricultural enterprises encounter several challenges in accessing long-term financing. Standard loan structures often fail to accommodate the cyclical, and seasonal revenue patterns inherent to agriculture, making it more difficult for mid-market enterprises to meet conventional financing criteria.
Lenders often lack expertise in assessing agricultural risks, such as climate variability and crop diseases, which can lead to conservative underwriting or inappropriate terms. Traditional lenders can also struggle to accurately value agricultural assets, such as land and crops, which can restrict access to adequate financing.
As such, this lack of insight results in less flexible terms, putting repayments at risk or encouraging borrowers to take detrimental actions.
Moreover, mid-market agriculture enterprises often require long-term capital for productivity enhancements and sustainability improvements, but find it easier to access shorter-term working capital.
A need for lenders with long-term investment horizons
These challenges require a different class of lenders who can extend their financing horizons to accommodate investments in infrastructure and technology that yield benefits primarily over the medium to long term.
For example, the transition to regenerative and sustainable agricultural practices, which enhance soil health and deliver productivity gains in the long run, may demand an investment period that can span several seasons or years. In such cases, short-term capital often adds immediate liquidity pressure.
Furthermore, regenerative and sustainable agricultural practices require continuous monitoring and adaptive management, compelling lenders to structure financial products that support iterative, long-term improvement processes.
A hands-on approach is also necessary as these companies balance the adoption of new technologies and production processes while also implementing environmental and governance practices or, in some cases, even the transition from family-owned to professionally managed businesses.
Our experiences supporting the agricultural value chain
Through our support of businesses across the global agricultural value chain, we have developed deep sector expertise, enabling more effective risk management.
The transformative power of long-term lending in agri-business is evident in Cordiant’s track record. For example, Cordiant funded a sugar producer and exporter that had previously been constrained by short-term borrowing. The Brazil-based firm was supported with a USD +50 million structured loan, which aligned with the six-year sugarcane cycle. This approach strengthened the company’s capacity to meet sustained investment goals and reap the benefits of long-term-oriented decisions.
Overseas sugar buyers directly repay the loan through commercial contracts, providing an extra layer of credit improvement through revenue repayment flows. Aligning on hedging and risk management improved long-term cash flow visibility, supported income stability, and increased predictability of investor repayments. While enabling business optimisation through investments in mechanised planting, expanded ethanol and sugar production, and improved effluent treatment.
This example demonstrates how sector knowledge and experienced diligent underwriting can deliver long-term value for both investors and investees. With offices in Montreal, London, Luxembourg and a local team in São Paulo, we supported the business in a way that is aligned with the realities of agriculture.
There are wider examples of transformation through the proper funding across the agri-business industry. For instance, in the coffee sector, companies like Nespresso have implemented pre-harvest financing models tied to long-term offtake agreements, providing farmers with stable pricing and cash flow ahead of harvest.
The ingredients for success are clear; the proper funding structure can create a sizeable impact. However, there cannot be a reliance on traditional lenders, large corporates or governments to plug funding gaps; proactive, specialist investors bring sector expertise and tailored solutions that create positive-sum outcomes for all parties.
A partner rather than a typical creditor
In our agriculture direct lending practice, we see ourselves not simply as typical lenders but as long-term partners, supporting the transformation of agricultural businesses with capital, expertise and long-term vision. Our team combines deep knowledge of private debt and private equity markets, agri-business operations, commodity trading, logistics and sustainability to shape optimised financing solutions that are grounded in our deep understanding of the sector.
By embedding ESG principles and risk management into the structure of each loan, including tailored covenants and measurable environmental and social KPIs, we help businesses strengthen their operations while advancing broader sustainability goals.
In doing so, we aim to contribute to a more resilient agricultural system: one that can meet rising global food demands, while protecting the natural resources it depends on.