The World Bank has launched a risk management tool that it says could help food consumers and producers in developing countries gain better access to financial products and instruments that can protect them from price volatility.
The Agriculture Price Risk Management product, or APRM, will be initially rolled out by the International Finance Corp. and JPMorgan Chase. IFC says it expects to partner with other banks in the future.
Under its partnership with JPMorgan, IFC will commit $200 million worth of credit exposure to clients using specific price hedging products. JPMorgan will also provide credit exposure of at least the same amount, according to a World Bank news release. The bank says these investments would mobilize up to $4 billion in price protection for agriculture producers, consumers, cooperatives and local banks that will meet a set of predetermined requirements.
“With this new tool, we can help farmers, food producers, and consumers protect themselves against price swings, strengthen their credit position, and increase their access to finance,” World Bank President Robert Zoellick said. “This tool shows what sensible financial engineering can do: make lives better for the poor.”
The launch of the instrument comes a day before agriculture ministers from G-20 countries meet in France to discuss ways to address global food price volatility and its impact on development.
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