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Key Issues and Policy Recommendations on Agricultural Finance





Issues: Access to finance for farmers and SMEs is difficult and costly, and many are unable to provide sufficient collateral for loans. Long term lending for agricultural development is non-existent. Microfinance solutions are inadequate for the characteristics of agricultural development.
Policy Recommendations:


  • Financing for agriculture must be long term and comprehensive. MAFFS should work with the Bank of Sierra Leone in the design of the Financial Sector Development Plan.




  • A financing vehicle for long term lending to the agricultural sector, such as the proposed agricultural finance bank, should de established as a matter of urgency. Such a finance institution should provide subsidised lines of credit for farmers and smallholders.




  • An export credit guarantee scheme should be designed and established in the medium term to provide support to exporters of traditional and non-traditional export commodities.




  • In the long term, insurance companies should be encouraged to develop packages of crop insurance for farmers and SMEs in agricultural production.




  • Other long term solutions include establishment of credit unions to encourage savings, provision of trade finance, and development of long term bonds by the finance institutions.


COMPLEMENTARY MEASURES TO SUPPORT INDUSTRIALISATION

There are a number of policy measures ancillary to the development of productive capacities in the agricultural sector in Sierra Leone.



Intellectual Property Rights


  1. Despite the fact that SMEs and smallholder producers in Sierra Leone have low innovative capacity, it is worth exploring the role that intellectual property rights (IPRs) could play either as a direct incentive for innovation or as an indirect incentive enabling knowledge generation and spillovers (through various technology transfer mechanisms such as licensing, imports of equipment or government-firm technology transfer). IPRs have application not merely in agro-processing but also in plant breeders’ rights; access to genetic resources for use in cosmetics and pharmaceutical products; and agricultural research. In other developing countries, IPR strategies are an important part of industrial policy and commonly include the following types of interventions:

  • Provision of access to patent information systems and databases for researchers and businesses.

  • Awareness raising activities on the value and uses of IPRs for universities and the private sector

  • Subsidized IPR registration services for small enterprises to encourage acquisition of patents and trademarks;

  • Provision of business advisory services to small enterprises on integration of IPR management strategies within the business model and marketing plans (e.g. use of trademarks to support brand development).




  1. The Ministry of Trade and Industry has developed an IPR policy and from that, a few pieces of legislation on patents, copyrights and trademarks have been drafted. It is imperative that this draft legislation is enacted without delay. Further policy and legislation will also be needed on protection of plant varieties and plant breeders’ rights, geographical indications and access to genetic resources. Moreover a specific strategy to promote innovation and creativity through IPRs systems for agri-business is warranted.



Competition Policy


  1. Sierra Leone does not yet have a competition policy or regime. Yet, many market failures such as restrictive business practices or collusion and cartels are symptoms of the absence of a competition law and institutional framework. To reduce the incidence of the abuse of dominant positions or other types of monopoly behaviour in agriculture and to provide protection for smallholders and farmers, legislation on competition should be enacted.



Environmental Policies


  1. Environmental management is vital for the sustainability of agricultural yields and productivity. There are a few key areas where Sierra Leone may be vulnerable and needs to take action.



Climate Change


  1. Although Sierra Leone does not suffer from severe weather and natural disasters, agriculture nevertheless will be affected by climate change in a number of ways, some of which are direct, while others are more indirect. Direct effects are loss of forest cover, soil erosion, increasing semi-arid conditions, water scarcity, increased prevalence of pests and change in weather patterns (such as longer or unpredictable rainy season). The indirect effects are loss of soil productivity, reduced agricultural land, loss of species, ecological stress, food insecurity, hunger, malnutrition, exacerbation of income and economic inequalities, and generally the non-achievement of the Millennium Development Goals. This scenario means that it is imperative for GoSL to develop a comprehensive climate change policy which includes mitigation and adaptation measures, as well as using carbon-off sets and carbon credits to address the looming climate change crisis. A comprehensive planning policy which includes well developed warning systems is also critical for the agriculture sector.



Issue: Climate Change could negatively affect Sierra Leone’s prospects of using agriculture as an engine for socio-economic growth, by reducing agricultural productivity, disrupting land use patterns, and increasing food insecurity.



Policy Recommendation: Develop a comprehensive policy on climate change together with regulations on use of carbon credits to encourage reforestation and afforestation.

Biodiversity and Forest Resources


  1. Sierra Leone is rich in plant and animal life, as well as being well endowed with diverse natural ecosystems. Agricultural production and other human activities have increasingly impacted on the natural ecosystems and their biodiversity. With nearly 28 categories of protected areas in representative ecosystems, the area still represents less than 4 percent of the total land area of the country.44 Most of these protected areas suffer from inadequate protection in law, due to a number of constraints relating to human, technical and financial resources. A number of Sierra Leone’s agricultural commodities are tree crops, which need to be coordinated closely through management of forests. In addition, Sierra Leone’s agro-biodiversity assets consist of some 70 crop species, including edible fruit trees, oil palm and other crops with economic value. The maintenance of biodiversity is therefore specifically linked to agricultural productivity and diversity. The NSADP should therefore include specific reference to Sierra Leone’s National Biodiversity Action Plan which has been developed by the Department of Environment in the Ministry of Lands.



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