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Elaboration of an action for the development of contract farming and supply chain financing

Océan Indien

Elaboration of an action for the development of contract farming and supply chain financing

Madagascar

Inclusive value chains

Ongoing project

Donors : UNDP

Duration : 3 months

Budget : 16 180 euros

Context

The informal sector and agricultural jobs dominating the country’s employment structure have suffered the most from the COVID 19 crisis. Indeed, 9 out of 10 jobs are in the informal sector, 75% of which are in informal agricultural enterprises. Thus, in a country where 80% of the population lives from agriculture, it seems essential to focus recovery efforts on this sector, in order to strengthen the resilience and capacity of individual entrepreneurs and MSMBs to recover. Urban areas also have a high share of informal employment, particularly in the areas of handicrafts, trade, transport and tourism.

The high level of informality of employment in the country, where related economic activities do not contribute to GDP, makes the prospects for recovery of the national economy even more difficult. Among the initiatives to counter the socio-economic effects of the crisis in the country, the Multisectoral Emergency Plan (PMDU) has been adopted by the government. The latter provides for actions and measures based on three axes:

• Strengthening the governance of the fight against the pandemic
• Strengthening social protection measures
• Supporting economic resilience (particularly in the agricultural sector) and supporting the private sector

It is in this context that PPI offers its services to develop a strategic action plan for the development of contract farming and reverse factoring in order to accompany the project to support the recovery of the informal sector in the face of COVID-19’s impact, with the aim of supporting the 3rd axis of the PMDU.

Goals

The objective of the mission is to carry out a study to address the issues of market opportunities and access to finance in the agricultural sector in Madagascar. More specifically, the study will focus on contract farming, which allows for a better organisation of commercial production, as well as on reverse factoring, which reduces payment delays and thus contributes to securing the cash flow of entrepreneurs.

The overall objective is to reduce the barriers in financing and contracting between informal and formal sector entrepreneurs in their response to local, national, and international market needs.