Diagnostic study of the Azeri agricultural sector and opportunities for increasing MSMEs' access to finance

Though agrifinance has increased in Azerbaijan over the last decade, the volume of loans disbursed remains comparatively small, the sector continues to be under-financed, and demand for longer-term funding is still high.

The main objective of the assignment is to help the European Bank for Reconstruction and Development ("EBRD" or the "Bank") obtain a better understanding of the agricultural sector in Azerbaijan, identifying its strengths, weaknesses and development opportunities in support of its plans to develop a specialised Finance Facility, "Azerbaijan Agricultural Finance Facility" ("AzAFF" or the "Facility"), designed to encourage local financial institutions to increase lending to farmers and other entities in the agricultural sector. Under the Facility EBRD would provide on-lending funds to its Partner Banks and MFIs (Partner Institutions ("PIs")). It is envisaged that the Facility would be accompanied by a TC program to strengthen the capacities of PIs for agrilending as well as a First Loss Facility.

In particular, the assignment will assist the Bank8s project team in designing appropriate financing as well as the accompanying TC program and will help in identifying concrete opportunities which can be used to encourage Azeri PIs to participate in the Facility.

EBRD works with a number of PIs in the country and five of them already expressed interest in providing more finance to the agricultural sector. In order to facilitate further interest, they need to be reassured that risks can be mitigated through appropriate design of agrifinance specific products and accompanying TC at both the PI and sub-borrower level.

Specialist consultancy services in the area of agrifinance are required to conduct a diagnostic study which include but not be limited to:

• Identification of the main roles small agricultural enterprises play in the economy and their place in the agricultural sector. Identification of obstacles preventing faster growth and development of small agricultural enterprises;
• Identification of constraints and development opportunities in the agricultural sector, including in the areas where Azerbaijan has comparative advantages;
• Assessment of the access of small enterprises to agrifinance and reasons for gaps in credit supply and demand (including assessment of agrifinance market potential);
• Identification of concrete opportunities for local banks and MFIs to provide agrifinance as well as assessing the sustainability and potential for agrilending.

The study is also expected to highlight strengths and weaknesses for each of the opportunities identified and how these may be leveraged or resolved by dovetailing with existing donor interventions in the sector.

The Consultant may also be required to organise a workshop in Georgia for Azeri PIs and other stakeholders to draw on the results of the Georgian Agricultural Finance Facility ("GAFF").