The very nature of agriculture makes agricultural lending a risky business. Weather conditions, diseases, but also market access and price fluctuations make harvests and income and consequently the repayment of loans uncertain.
A good reason for financial institutions to avoid lending to farmers and most banks and MFIs still do not lend for agricultural purposes or only on a limited scale. However, agricultural production is becoming increasingly important.
The global population is expected to grow from 7 billion people today to 9 billion people by 2050, resulting in a rising demand for food and the need for increased agricultural productivity.