FUCEC develops an innovative financing approach to meet the needs of agricultural value chain players in Togo 

28 March 2024
man holding a fruit

©Marbos Productions

Agriculture in Togo: an unproductive sector that lacks financing 

In Togo, agriculture is an important part of the economy. However, the sector lacks financing because it is perceived as risky and financial services adapted to farming remain underdeveloped. Most agricultural produce is grown for self-consumption, and productivity is low. Agricultural producers also struggle to find a profitable market in which to sell their products. 

To meet these challenges, ADA has backed Faîtière des Unités Coopératives d’Épargne et de Crédit du Togo (Togo cooperative savings and credit association - FUCEC), the country’s largest microfinance institution, to develop financial services specifically adapted to agricultural activities (production, processing, storage and marketing), strengthen the capacity of its existing staff for managing agricultural value chain financing risks and bring on board credit agents with agronomics expertise. 

A three-way contract to improve productivity and ensure market access 

FUCEC has implemented several solutions to strengthen the agricultural sector, a key one being the three-way contract mechanism. ADA’s support enabled FUCEC to develop an innovative mechanism for financing value chains, particularly for cocoa, soybean, pineapple and horticultural products. This mechanism is based on a three-way contract involving FUCEC as financer, the producers and the buyers (or aggregators) and clearly specifying each participant’s responsibilities. 

On the one hand, the buyer plays a key role in this mechanism by committing to: i) provide producers with the technical support to produce more and better, to meet the buyer’s raw material needs; and (ii) purchase these products.  

On the other hand, FUCEC finances production loans for producers covering inputs, sowing, weeding and harvesting. In certain cases, it finances campaign loans for buyers at harvest time to provide them with the cash they need to buy crops from producers. All this allows FUCEC to reduce loan repayment risk, since it provides producers with income from crop sales with which to repay their debt. 

Lastly, it gives producers access to the means of production and ensures they have a path to market to sell their crops – at a fair price agreed in advance with the buyer through the contract. 

This holistic approach helps to facilitate access to finance for small Togolese producers and thus promotes financial inclusion in the country. In 2022 it improved living conditions for more than 8,000 smallholder farmers. 

Lessons learnt from the project 

Drawing on this experience, ADA has learnt much from the project, one lesson being that the customer-centric approach is a key success factor in agricultural finance. We know this because in order to tailor products as closely as possible to its customers’ needs, FUCEC has taken care to actively involve them at every stage of the agricultural product development process. 

Jean Yao Assogba, Head of the Agricultural Sector Support Department, FUCEC Togo:

“The secret of our success is adapting the service to our customers’ needs – and monitoring. Financial institutions invariably tend to view farming as a high-risk sector. But we have found that in nearly 80 to 90% of cases, the main cause of default lies in an adaptability issue – i.e., analysing and responding to demand.” 

In addition, the organisation of regular discussion between value chain players and funders contributes to the success of such three-way mechanisms. FUCEC now organises a meeting for all agricultural players (producers and aggregators) each year to assess the year gone by and identify both what worked and the needs that FUCEC was unable to meet. This exchange makes it possible to establish a climate of trust between the various stakeholders, to better understand each one’s perspectives and needs and to identify the relevant actions and services to be implemented. 

Nadia Ouriemchi, Project Manager, ADA Luxembourg:

“FUCEC has met with resounding success in standardising this approach and expanding it at scale. It stands out for the number of smallholder farmers that it has assisted and financed and who have gained secure market access for their products. This was made possible by the implementation of an agricultural value chain financing approach based on building relationships of trust and win-win partnerships between the various stakeholders.” 


Watch a video on FUCEC's funding mechanism for the pineapple value chain (in French):