Tripartite Financing Agreements

What is this guide and why does it matter?

This guide contains actionable steps on how to design and implement a Tripartite Financing Agreement. Smallholder finance is often seen as a key enabler for improving smallholder livelihoods, but many organizations (including agribusinesses and financial service providers) struggle with offering finance in a commercially viable manner. We discuss this further in our publication, Towards Market Transparency in Smallholder Finance: Early Insights from Sub-Saharan Africa. We believe Tripartite Financing Agreements have the potential to accelerate access to finance, but evidence of their impact is rather limited. Nonetheless, the information in this guide is based on the evidence and direct experience of companies who have implemented Tripartite Financing Agreements in a range of contexts.

This guide is for companies implementing or looking to implement Tripartite Financing Agreements in addition to development or support organizations that help companies in strengthening their business models.

What is a Tripartite Financing Agreement?

A tripartite financing agreement is an agreement involving three or more parties to facilitate the provision of credit to smallholder farmers. Typically, such agreements include the farmer (or farmer group), an off-taker and a financial service provider. Central to the tripartite financing agreement is guaranteed off-take between the farmer and off-taker that is used as collateral to secure the loan. In many cases, the financial service provider incurs all the credit risk. However, risk sharing can be included into the structure of the tripartite financing agreement.

In addition, tripartite financing agreements often include an input provider (or other service providers) as a signatory. This is especially the case where credit is provided in the form of inputs rather than cash.

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As we gather more evidence, we’ll continue to build out this guide. Stay tuned for more insights in the coming weeks