How are Development Interventions in Agriculture Value Chains Financed? An Exploration of Macro and Meso Level Factors

This paper develops and tests hypotheses that influence the choice of financing instruments that are used in agricultural value chain development interven-tions. Using data from ninety-four agricultural value chain interventions in de-veloping countries, the research explores macro-economic variables, namely financial market sophistication, business regulatory environment and level of economic development. As well, as variables at the meso-economic level such as type of upgrade, stage of intervention, main intervener, source of funds, end market, institutional structure, the next process that the product feeds into, type of product and time of the intervention. The study focuses on exploring the underlying conditions of the value chains to establish whether an association exists with different financing mo-dalities, that is, the use of asset based finance, group collateral based finance and grants/subsidies. Evidence from these ninety-four value chains showed minimal influence of macro level factors, possibly due to a long relationship link. Instead, select meso-economic factors showed association with the fi-nance instruments, especially with grants and subsidies. These findings suggest that innovative and heterogeneous forms of value chain finance, especially as-set based finance, are more adaptable to a range of external and internal value chain conditions.