Financial service providers like commercial banks, non-bank financial institutions, cooperatives and microfinance institutions are front-line couriers of loans in local currencies to agricultural SMEs in sub-Saharan Africa. Given their wide coverage in local markets, financial incentives such as guarantees or first loss facilities that are meant to entice them to extend more loans to these enterprises are growing in popularity. But what level and types of incentives work best for banks in Africa? Which other incentives have worked elsewhere that may be applied in the region? Will financial incentives change their behaviour in the long term? The third and final session of ‘Backing the Middle’ will unpack these questions.
