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Agriculture Is A Powerhouse of Economic Growth in Ethiopia

Agriculture is crucial to Ethiopia's economy, contributing 40% of GDP and employing 75% of the labor force, but faces challenges like limited finance and technology access. Implementing a supply chain financing model in the Malt Barley value chain can address liquidity issues for aggregators, ensuring timely payments to farmers and stabilizing the supply chain. This intervention is essential for enhancing productivity and supporting the livelihoods of smallholder farmers.

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Geremew
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39 views1 page

Agriculture Is A Powerhouse of Economic Growth in Ethiopia

Agriculture is crucial to Ethiopia's economy, contributing 40% of GDP and employing 75% of the labor force, but faces challenges like limited finance and technology access. Implementing a supply chain financing model in the Malt Barley value chain can address liquidity issues for aggregators, ensuring timely payments to farmers and stabilizing the supply chain. This intervention is essential for enhancing productivity and supporting the livelihoods of smallholder farmers.

Uploaded by

Geremew
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Agriculture is a powerhouse of Ethiopia’s economy, contributing a remarkable 40% of GDP

and 80% of exports while employing about 75% of the labor force. However, despite its
critical role, the sector grapples with formidable challenges, including limited access to
finance and technology, distorted market systems, inefficiencies across the entire value
chain due to inadequate infrastructure, and a lack of integrated stakeholder collaboration.
These challenges stifle sustainable development and undermine productivity and potential.

To unlock the full promise of this vital sector, developing a robust supply chain financing
model is essential. Such a model has the potential to revolutionize productivity and elevate
the livelihoods of smallholder farmers, ultimately fueling the growth and resilience of
Ethiopia's agricultural landscape.

Rationale for Implementing Supply Chain Financing in the Malt Barley Value Chain

The Malt Barley value chain in Ethiopia faces significant challenges, particularly during the
aggregation phase of production. This phase involves three key actors: farmers, local aggregators
(which may be cooperatives or private sector entities), and off-takers, primarily malt barley
processing firms. A critical issue arises when aggregators collect produce from farmers and
subsequently supply it to off-takers. Often, the off-takers delay payments to aggregators, creating a
liquidity trap that hinders the aggregators' ability to purchase sufficient quantities of barley from
farmers during peak season.

This delay not only strains the financial stability of aggregators but also adversely affects farmers.
When aggregators are unable to make timely payments, farmers may become reluctant to sell their
produce, leading to a reduction in supply and ultimately driving down prices. This challenge in a
single season can have lasting implications, as it influences farmers' decisions regarding crop
planting in the next season. Such instability threatens the sustainability of the Malt Barley supply
system as farmers may opt to shift to more reliable crops, undermining the entire value chain. As a
bank, we recognize the urgent need to intervene in this situation. By implementing a supply chain
financing model, we can provide aggregators with timely access to capital, enabling them to fulfill
their purchasing commitments to farmers without delay. This solution will enhance liquidity,
stabilize prices, and strengthen relationships among stakeholders, ultimately creating a more
efficient and resilient Malt Barley value chain.

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