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Agricultural finance and the youth: Prospects for financial inclusion in Uganda

F&BKP Office — Fri, 18 Sep 2020 09:17:35 +0000

This paper (PDF) by FAO aims to provide a comprehensive assessment of the current state of financial inclusion of the rural youth in Uganda, with a specifc focus on their engagement in the agricultural sector and the financial services that are available to them to pursue their business ventures in this area. A number of recommendations result from the study and are key enabling elements with the most direct and promising channels to foster the financial inclusion of rural youth in Uganda are: 1) Leverage the potential of Youth Savings Group and solidarity lending, since they can be essential entry point to provide financial services and mitigate lending risk. 2) Expand the range of available options in terms of digital financial offers, such as mobile payments. 3) Develop new lending approaches that do not exclusively rely on traditional colleteral, since young entrepreneurs often lack “conventional” forms of guaranteers that are required. 4) Foster the expansion of agent banking in the country, which will allow format financial institutions (FIs) to extend their outreach to rural youth. 5) Leverage the expertise on youth-focused provision developed at Ministry level by engaging the formal financial sector in a shared reflection on youth-tailored financial provision. 6) Jointly foster basic education and mobile penetration to further increase digital financial inclusion, for examply through public campaigns and subsidy programmes. 7) Eliminate policy barriers to youth access, for example related to managing bank accounts and identity documents. 8) Foster youth-specific financial offer among formal FIs by promoting internal restructuring. 9) Tailor and focus the financial offer of formal FIs to the needs of under-18 clients, since they face the greatest variety of access constraints. 10) Improve data collection practices in the agricultural finance sector to monitor progess of the sector. 11) Improve the perception of agriculture as a profitable and appealing business among young entrepreneurs.

Limitations of inclusive agribusinesses in contributing to food and nutrition security in a smallholder community: A case of mango initiative in Makueni county, Kenya

F&BKP Office — Wed, 29 Jul 2020 10:26:15 +0000

This paper (PDF) in the Sustainability journal explores the potential food and nutrition security contribution of inclusive agribusinesses in Makueni county, Kenya. Inclusive agribusinesses have been championed as a key strategy to address local constraints that limit smallholders’ participation in regional and global value chains, thereby enhancing their livelihood, and food and nutrition security, accordingly. Mango farming is the primary source of livelihood in the region, but market access for the produce is a major challenge, leading to heavy post-harvest losses and, ultimately, income losses. The setting up of an “inclusive” fruit processing and marketing business, presents a critical opportunity to improve smallholders’ incomes, and ultimately local food and nutrition security. Although all the smallholder farmers in the community share similar needs that the business set out to address, participation is not inclusive of all smallholders in the community. The results show that participation in the inclusive agribusiness favors smallholder households with relatively higher production capacity in terms of better physical capital (land and number of mango trees, financial capital), access to loans, and human capital (age, education, and family size). Following income improvement, the participants’ household food security situation is significantly better than for non-participants. However, participation does not improve household dietary diversity, implying that improvement in income does not necessarily lead to better household nutrition security. To address the limitations of inclusive agribusiness, the authors propose policymakers and development actors to critically explore the contextual background prior to intervention design and implementation, and accordingly devise a broader approach for more inclusivity of the very poor and marginalized, and better food and nutrition security outcomes as a result. Given that not every smallholder could benefit from inclusive agribusiness for their food needs due to resource scarcity, alternative livelihood supports, including social protection programs and safety net plans, should be considered.

This article is linked to the Global Challenges Project ‘Follow the Food‘.

“Inclusive business” in agriculture: Evidence from the evolution of agricultural value chains

F&BKP Office — Thu, 11 Jun 2020 14:05:24 +0000

This review paper in the World Development journal explores published evidence on the structural factors shaping agricultural value chains and their implications for social inclusion. Sustained interest by the business community in commercial agriculture in the global South has been welcomed for its potential to bring capital into long neglected rural areas, but has also raised concerns over implications for customary land rights and the terms of integration of local land and labor into global supply chains. In global development policy and discourse, the concept of “inclusive business” has become central in efforts to resolve these tensions, with the idea that integrating smallholders and other disadvantaged actors into partnerships with agribusiness firms can generate benefits for national economies, private investors, and local livelihoods. The study develops a typology of seven agricultural value chains, and use this to select a sample of crops in specific world regions for an analysis of how structural factors in value chain relations – from crop features, to market dynamics and policy drivers – affect social inclusion (and exclusion). Such an approach allows us to ask whether inclusive agribusiness is a realistic goal given the broader structuring of agribusiness and the global economic system. Thestudy finds that while the characteristics of specific crops and supply chains exert a strong influence on opportunities and constraints to inclusion, the overall trend is towards more exclusive agribusiness as governments scale back support to smallholders, more stringent standards raise barriers to entry, and firms streamline operations to enhance competitiveness. This raises questions about the feasibility of this goal under the current political economic system. Findings point to the need to re-consider the policy choices behind these trends, and how we deploy the fiscal, legislative, and gate-keeper functions of the state to shape agrarian trajectories.

COVID-19 and smallholder producers’ access to markets

F&BKP Office — Mon, 04 May 2020 12:03:36 +0000

The aim of this brief (PDF) by FAO is to inform policy makers on options to mitigate the effects of COVID-19 on food and agriculture with attention to smallholders’ access to markets. The COVID-19 pandemic is substantially affecting smallholder producers’ access to markets. Immediate impacts tend to be more severe for high-value commodities (perishable products), which are often produced by smallholder farmers. This brief builds on lessons learned in 2014 Ebola virus disease (EVD) epidemic and during the 2007–2008 global food prices volatility crisis. 1. The first challenge is the temporary movement restrictions hindering smallholder producers’ access to markets. A lesson learned from the EVD epidemic is the importance of establishing safe trade corridors based on public health mitigation measures along market chains. 2. The second challange is the changing deman and consumer behaviou, affecting smallholder producers. It is therefore imporant to stabilize the supply, absorb the surplus and reduce losses. It is therefore important to develop and communicate health prevention measures to enable traders to collect agricultural products and promote local public procurement of food. 3. The closure of schools and other public places, restrictions for the operations of supermarkets and/or closure of farmers’ markets leads to significant food outlets being blocked and to a loss of sales. Some policy options include supplementing cash transfer programmes, take-home rations, food vouchers, using schools or community facilities as feeding centres providing take-home rations and public procurement of food from smallholder producers. 4. Movement restrictions created challenges to smallholder producers in some countries where migrant seasonal work is crucial for agriculture. A lesson learned from the EVD epidemic was the need to develop and communicate health prevention measures to encourage farmer group activity. It is crucial to maintain agriculture within the list of essential businesses and services. 5. Value chain disruptions creating financial and access to services challenges for smallholder producers. As a response to the food prices volatility crisis of 2007–2008, there has been an increase in national public investments in agriculture.

Towards demand-driven services? The role of feedback mechanisms in agribusiness-based advisory services for smallholder farmers

F&BKP Office — Tue, 14 Apr 2020 08:39:40 +0000

This paper (PDF) in Enterprise Development and Microfinance explores the extent to which agribusinesses provide demand-driven services based on farmer feedback and how they integrate and learn from such feedback, based on a study of 29 agribusinesses providing advisory services to farmers in developing countries. agribusinesses are highly engaged in providing services to smallholder farmers, including agricultural advisory services or extension. As private service providers depend on farmers’ choice, farmer feedback and farmers’ demands. However, little is known on whether and how agribusinesses operationalize the idea of demand-driven service provision. The study shows that agribusinesses provide focused advisory services to diverse farmers in developing countries, which are often farmers’ main source of technical advice. While generally attaching considerable importance to farmer-specific information to improve business strategies and target services and products, this study suggests that agribusinesses pay relatively little attention to mobilizing systematic feedback from farmers on their advisory services. To understand the effectiveness and performance of such services, most agribusinesses rely on data collected for general business purposes, such as on volume and quality of produce sold to sourcing companies, or type, quality, and volume of products bought from input suppliers. There are, however, important limitations in using such data to assess their advisory services. This paper has shown that there is considerable potential to improve feedback systems, especially by using direct feedback mechanisms on why farmers adopt or do not adopt advice and relevant technology, which knowledge gaps farmers still exhibit, which products work well and why, and which services farmers need. In other words, agribusinesses can make their services more targeted, with the potential to increase effectiveness and relevance of service provision.

This article is related to the Agribusiness-based advisory services (ABAS) project. You can find more information about the project here.

Understanding agriculture fintechs’ business models: Agri-Wallet service delivery model case study

F&BKP Office — Mon, 23 Mar 2020 15:16:37 +0000

This blog by the Mastercard Foundation Rural and Agricultural Finance Learning Lab and the Sustainable Trade Initiative (IDH) evaluated Agri-wallet’s business model and identified opportunities for Agri-wallet to scale sustainably while creating positive returns for its farmer, small and medium enterprises customers, and investors. Agri-wallet is an innovative agriculture fintech in Kenya that provides supply chain finance to insure that all actors in the value chain can access the resources they need to grow and scale. Four key learnings are: 1) By reducing the cost and risk of financing and strengthening the value chain, Agri-wallet’s digital supply chain finance model is expected to generate positive returs for its customers and its investors. 2) Buyers are the key entry and leverage point to scale Agri-wallet’s business and strenghten the value chain, but need to be selected carefully to optimize financial performance. Understanding the drivers behind buyer performance can help guide a more targeted approach to buyer acquisition, onboarding, and customer care to create a buyer mix that maximizes overall profitability. 3) Achieving financial sustainability requires Agri-wallet to continue to scale rapidly using the right capital structure to finance its operations and lending. Thereby, achieving scale also depends on the balance between local vs. foreign currency denominated debt, debt to equity ratios, and Agri-wallet’s ability to fundraise successfully and reach its customer target 4) An optimal pricing strategy will need to balance increased captial costs for Agri-wallet and returns for buyers, input providers and farmers. An optimal pricing strategy will need to take into account the returns of buyers, input providers, and farmer. This is particularly important for vulnerable clients, like smallholder farmers and small agri-SMEs, where sudden or brisk price increases could risk eroding their income gains to a level that renders Agri-wallet uncompetitive.

Inclusive agribusiness models in the Global South: The impact on local food security

F&BKP Office — Sun, 15 Mar 2020 10:41:49 +0000

This paper (PDF) published in the Current Opinion in Environmental Sustainability argues there is little evidence that shows inclusive business initiatives improve the food and nutrition security (FNS) of many. Private business is increasingly presented as a leading agent of development in policy, also in the pursuit of developmental goals beyond business, such as food security (SDG2 in particular). It is argued that the private sector is more effective and efficient in raising investment capital and targeting goals than entities of the public sector and civil society. This has spawned inclusive business models — ways of doing business that benefit the poor as producers or consumers. This contribution seeks to position this inclusive agribusiness approach in its political-economy context and assess its merits in pursuing food security through impact pathways such as availability and access (income). While there is literature on inclusive business and food security, its scope tends to be limited to participating smallholders while overlooking other community members. Limitations of the inclusive agribusiness approach: Firstly, an increasing income does not automatically change in better FNS. Secondly, inclusive business models are selective in favour of resource-rich farmers. Thirdly, most inclusive business programmes are set up with donor resources that run out once the startup period is over. Then, a shakeout may occur, weeding out marginal participants. Thus, the approach tends to increase inequality in the community. To conclude, strategies based on promoting inclusive agribusiness should be accompanied by policies targeting the poor in both social services (health, education, skills training) and alternative employment opportunities beyond farming.

Access to agricultural finance in Jordan

F&BKP Office — Wed, 26 Feb 2020 09:07:05 +0000

This report (PDF) by Palladium Europe BV is an advisory piece with recommendations towards facilitating access to suitable financial services for smallholder farmers to improve their livelihoods and break the cycle of indebtedness. Small farmers are characterized by overproduction of many of the prevalently grown crops and low farm-gate prices and compete with previously exported crops produced by medium and large-scale farmers. The study yields ten key gaps on small farmers and their access to finance in Jordan: 1) Cycle of indebtedness needs to be neutralized before small farmers should be venturing into scaluping up and out. 2) Most small farmers do not have a bookkeeping system. 3) The business case for farmers is weak. 4) Access to credit is only desirable if it is likely to result in increased income. 5) Mobile payment and account services are not widely used. 6) Colleteral requirements and interest rates are high. 7) There is no registration in place for farmers with the Ministry of Agriculture. 8) The current market system for agricultural procude is inefficient. 9) The Credit Reference Bureau mostly has information from banks and selected MFIs. 10) No lending mechanisms are in place to favour smaller ticket sizes and to deal with higher risk of the agricultural sector. A three-step approach is recommended to develop the agri-finance landscape. First, small farmers’ business cases need to be strengthened, with access to markets being the main bottleneck. Second, patient investments in designing and deploying financial services that make farmers more resilient are required, starting with saving and payment services. Third and last, a risk sharing financing methodology and related mechanism(s) should be developed, involving multiple or all value chain actors benefitting from agricultural production. The application of a holistic approach that focuses on access to markets, access to finance and capacity building is required for sustainable improvement of small farmers’ livelihoods using financial services.

Zooming in on informal savings mechanisms in Zambia

F&BKP Office — Tue, 04 Feb 2020 15:08:27 +0000

This study (PDF) by Savings at the Frontier and Financial Sector Deepening Zambia (FSDZ) was conducted on informal savings mechanisms (ISMS), and their users in three provinces in Zambia. The aim was to provide new insights in users of ISMs, how they percieve their groups and formal financial service providers (FSPs), and what drives their decisions to use one service rather than another. Key findings include: 1) Anyone approaching ISMs should expect a variety of groups. Many ISMs are formed not by NGOs, but by people who have learned the approach and gone on to form groups on their own. 2) ISM members also vary greatly. They include the very poor, as well as the not-poor-at-all. 3) ISM users are intelligent consumers who mix and match products from different providers to meet their needs, and an increasing number of Zambians use both formal and informal financial products. 4) ISMs offer a strong value proposition. ISMs provide commitment savings with an annual payback to the saver, quick access to loans, flexibility in repayment, transparency, social support, a feeling of community, networking opportunities, esteem within the community, and proximity. 5) While users appreciate their ISMs, it is rare for ISMs to meet every need of all their users, and they do not find ISMs perfect. One of the greatest unmet needs of many groups is better security. 6) Perceptions and reputation matter significantly. Many of the ISM users have a high opinion of mobile money agents and banking agents because of their proximity and transparency. Many ISM users also carry around unfavourable attitudes about FSPs, especially concerning FSP transparency and social distance.

Partnering for inclusive business in food provisioning

F&BKP Office — Wed, 08 Jan 2020 10:39:52 +0000

This review (PDF) published in the Current Opinion in Environmental Sustainability aims to unravel how partnering processes relate to processes of inclusion in the context of food provisioning. In food provisioning, inclusion has two key dimensions: the inclusion of (low-income) consumers to increase levels of food security, and the inclusion of smallholder producers to promote inclusive economic growth. This review discusses both dimensions and shows that the tandem of inclusive businesses and partnering processes reconfiguring the terms under which social groups at both sides of the agri-food chain are included is largely uncharted terrain. The paper ends with three promising areas for further research, which require a further integration of different literatures and perspectives. Firstly, to allow for a deeper understanding of how partnering shapes the terms of inclusion at both ends of the value chain; Research should both focus on how business models of lead firms include low-income consumers, and on qualifying the process of inclusion, rather than treating inclusion as an in or out affair. Secondly, to enhance our understanding of the contribution of partnering processes to systemic change; Research should look at both the terms of inclusion of suppliers of food and the terms of inclusion of purchasers of food as well as the inclusion of marginalized stakeholders in other parts of the value chain. Thirdly, to assess whether and how partnering processes influence and reshape the terms on which upstream and downstream actors are included in food provisioning; Research should integrate processual perspectives in cross-sector partnership literature with a contextual understanding of terms of inclusion in aligned business practices.

Improving smallholder inclusiveness in palm oil production: A global review

F&BKP Office — Mon, 02 Dec 2019 10:40:19 +0000

This review (PDF) written by Tropenbos International and Wageningen University & Research brings together 19 articles and 5 interviews from around the world that look at means of improving smallholder inclusiveness in palm oil production. The nine key-lessons learned are: 1) “Inclusiveness” is interpreted in different ways and a common definition is needed. This range of interpretations leads to different approaches and measures of success, and to difficulties in how to compare them. 2) Empowering smallholders is an essential prerequisite for increased inclusiveness. This is achieved through cooperatives, training, and external support from extension services, NGOs and companies, as well as support from governments that promotes enabling conditions. 3) Increased uptake of certification schemes is correlated with improved smallholder inclusiveness. Challenges remain, however, in upscaling certification (RSPO and organic), especially for independent producers. 4) Smallholders benefit when they can take on more roles in the supply chain (e.g. co-owning mills). In doing so they gain decision-making power and increase their share in the benefits generated in the value chain. 5) Diversifying livelihood options through intercropping or other means is important for smallholders. The benefits of intercropping are supported by research, but more evidence is needed to identify appropriate crops, systems and markets. 6) Companies must consider smallholder producers more as partners and co-investors. This requires truly transparent, reciprocal and participatory processes and regular consultation, not just a nominal “seat at the table” or one-off meetings. 7) Build trusting relationships with smallholders is crucial, and patience is paramount. For effective partnerships, smallholders must be involved from the outset and through every step of the process. Engagement must be long term. 8) Inclusive palm oil production requires innovative technological and business models. However, current models rarely address both, and further integration is required. 9) Policies at all levels have key roles in creating enabling conditions to stimulate inclusive businesses. Local, national and international policymakers all have important contributions to make.

Pathways to prosperity: Rural and agricultural finance

F&BKP Office — Thu, 14 Nov 2019 10:53:41 +0000

This report (PDF), by Mastercard Foundation, Rural and Agricultural Finance Learning Lab and ISF Advisors, analyzes the changing landscape of rural agricultural finance. The understanding of challenges faced by rural clients has expanded and there has been a rapid acceleration in technology-driven innovation. Thereby, more diverse financial services are available, and the capital market for rural finance has grown. However, there continues to be a persistent gap in smallholder an agricultural small- and medium-sized enterprise (SME) financing. With these changes comes an urgent need to develop improved frameworks for understanding the state of the sector. To do so, the authors introduce new frameworks to drive the rural finance agenda forward and understand how rural clients, financial service providers, and the capital markets can effectively work together. The Rural Pathway Model urges a dynamic view of rural households livelihoods pathways , which can help funders channel capital more efficiently towards rural service provision. This can guide rural agricultural transformation in an inclusive direction. The Service Delivery Model reflects the dramatic changes in service provision and enables us to analyze differences, challenges, and opportunities for specific financial service provides.The authors believe that there are four agenda-defining needs that the sector must address moving forward: 1) The need to think dynamically and long-term through a rural pathways lens, which should result in more tailored products, bundled offerings, and better communication with clients. 2) The need to get serious about “smart” subsidy, by utilizing the models introduced in this report to get clearer about service delivery, profitability profiles, and outcomes. 3) The need to realize the digital promise, by translating early experimentation into proven, scalable solutions. 4) The need to continue to innovate around how capital comes to market, by building more effective connections between capital need and right-fit capital supply.

Inclusive business models in agri-food value chains: What safeguards for whom?

F&BKP Office — Sun, 10 Nov 2019 10:32:52 +0000

This article published in the Journal of African Business describes the way in which inclusive business models are promoted as unique opportunities to combine profitability for firms needing reliable supply from small-scale farmers with market inclusion for those farmers. In environments with weak public institutions, such agreements may be conducive to sustainable income, yet costly or even impossible to enforce. They rely on firms willing to provide investment while being exposed to high appropriability hazards. This paper explores the relationship between investments, appropriability hazards, and safeguards based on ten African case studies. Results suggest that in environments in which commitments are hard to secure, the business model chosen is largely determined by safeguarding against side-selling. When alternative markets are present, opportunities for side-selling push firms implementing IBMs either to make very limited investments or to implement tight control through diversified safeguards. The former situation prevails when farmers are already familiar with the product and the product is of relatively low value. The latter dominates if products have high value and there exist a local market. When alternative markets are absent, appropriability hazards fall substantially and investments increase accordingly, conditional to products requiring such investments. Thus, ideally, more efficient public enforcement mechanisms, such as well-defined property rights, contract law, and efficient courts, should provide adequate safeguards. However, building adequate institutions is a long-term, costly, and uncertain process. In the short term, the success of inclusive business models will continue to depend on the ability of parties to develop cost-effective modalities of governance with mutually acceptable ‘private’ safeguard mechanisms. At this stage, the most important role for the public sector may therefore lie in facilitating the effective dissemination of information on best practices.

Boosting farmer incomes in agricultural supply chains

F&BKP Office — Mon, 21 Oct 2019 10:04:52 +0000

This review, by Standfords Social Innovation Review, examines how to take major, structural steps forward on farmer income by analysis nine high-performing cases. The review exposed three patterns that help explain the succes of these cases: 1) Greatly strenghtening farmer market position. Farmers’ participation in markets offers greater stability, negotiating power and choice so that farmers have greater control over when and where to sell, for what prices. For example by strengthening farmers’ organizations or making direct connections between farmers and buyers. 2) Businesses playing an important role, but not through business as usual. Companies can have a serious positive impact on farmer incomes, if they design and manage their business models to serve farmers’ interest as well as their own. 3) Tapping into growing domestic markets. In more and more countries, population growth, urbanization, and economic development are rapidly expanding domestic food demand, and fueling the rise of modern supply chains serving domestic food companies and retailers. Most of the cases reviewed emphasized some degree of selling into these domestic supply chains. These patterns suggest three takeaways for global food and agriculture companies that aim to improve farmer income in their supply chains. First is to work with farmers as strategic business partners and understand what farmers need to thrive in the business of farming. Secondly, revisit the purchasing practices. Re-examine the way commodities grown by smallholders are bought and the way you engage with your direct suppliers. Lastly, the researchers urge to not wait. The private sector is hailed as nimble, innovative, and entrepreneurial, and it’s time to use these qualities to eliminate poverty in global supply chains.

Financing agribusiness and value chain development in the Pacific

F&BKP Office — Tue, 08 Oct 2019 14:07:48 +0000

This article (PDF) from CTA suggests that several policy actions are required to improve the performance of the agri-food system in the Pacific Island Countries to a more organised and efficient way of producing, processing, marketing and trade, from farm to plate, and a wider view of the opportunities for diversifying diets and incomes. CTA states that this suggests the need for mobilising significant financial investments, including for the development of infrastructure such as transport networks and ICTs, markets and services. Currently, agriculture receives limited funding from government sources and only a fraction of total lending from banks and other financial institutions. The cost of doing business is very high, especially for agro-based small- and medium-sized enterprises (MSMEs). Addressing this situation comprehensively will require changes in the policy environment for agriculture, MSME development and financial sector, and a clear emphasis on the provision of innovative inclusive financial services by development financial institutions (DFIs) and commercial lenders. It also calls for the application of a value-chain approach to finance, as well as the development of public-private partnerships and innovations in financial technologies to bring currently un-banked farmers and agribusinesses into the traditional financial sector. Farmers’ organisations – currently underdeveloped in the Pacific Island Countries but growing in strength – will have a key role to play in raising the financial literacy of members and agribusinesses and in increasing the uptake of new technology and services to boost agricultural-led sustainable economic transformation.

Africa Agriculture Status Report 2019: Hidden middle

F&BKP Office — Tue, 10 Sep 2019 11:52:07 +0000

The Africa Agriculture Status Report of 2019 (PDF) by AGRA highlights the trends and progress, as well as challenges and constraints of private sector firms in the upstream and midstream/downstream off-farm components of the agri-food system. The report start by revealing that although 70-80 percent of people in rural Africa work on their own farms, this work is often part-time, and comprises only 40 percent of total labor time in rural areas. Meanwhile, 60 percent of rural labor time is spent off the farm, and about 40 percent of this non-farm labor time is in agri-food system work such as wholesale, logistics, processing and retail. The private sector has a major role to play in the transformation of African agriculture. In particular, small and medium enterprises (SMEs) will be vital to the continent’s long-awaited green revolution. Currently, SMEs are the key employers in this sector, intertwined with rural family farmers. This interdependence makes their survival and growth even more crucial, with women and youth particularly benefiting. But small-to-medium sized agribusinesses often lack the collateral, resources and support they need to realize their potential. As such, they make up the ‘hidden middle’; an overlooked cohort of essential but unrecognized workers and enterprises. The volume found that the private sector is a dominant and dynamic force in Africa’s food economy today. It is especially the output and input processors, traders of crops and inputs, and logistics firms that are the life blood and driving force of agricultural transformation. This is because these millions of small and medium enterprises (SMEs) and emerging swath of large enterprises are the “support system sandwich” enveloping small-scale farmers, and the agents linking farmers to downstream markets and to upstream input suppliers. These linkages in turn set the conditions for—and the incentives to—farmers to invest in farm productivity and crop and animal product diversification.

Also see this related blog, with as well a link to a video of the panel dicussion during the launch of the report.

Using satellite data in financial inclusion

F&BKP Office — Tue, 03 Sep 2019 08:43:16 +0000

This guide (PDF) by CGAP explains foundational concepts of machine learning and how financial services providers can apply those methods to leverage information contained in satellite images for the purpose of credit scoring. It focuses on smallholder farmer finance, but providers may find it useful for other applications as well. Financial services providers that see an opportunity to reach financially excluded people in rural areas can use new technology to remotely gather and analyze data on potential customers. High-quality satellite data are becoming increasingly available. By leveraging advances in machine learning (the ability of computers to analyze data quickly and at scale), providers can gain valuable insights into customers’ economic, environmental, and demographic characteristics. This guide strives to: 1) Introduce remote sensing and its potential for financial inclusion and smallholder finance. 2) Explain in simple terms how these methods work and clarify both the abilities and limits of current techniques. 3) Present use cases where computation techniques applied to satellite imagery can help organizations better serve smallholder farmers. 4) Equip organizations interested in exploring these methods with clear and actionable roadmaps that outline data prerequisites, problem scoping guidelines, and advice on getting started with research and development efforts. The guide focuses on financial services providers (FSP) that serve smallholder famers, non-FSP organisation that have smallholders farmers as customers, and development organizations and public sector. This guide can be used as a tool to help apply technologies, processes, and data analytics and machine-learning methods to improve the delivery of financial services to low-income segments.

Assessing the effectiveness of private finance blending in ensureing that small-scale farmers are not left behind

F&BKP Office — Tue, 20 Aug 2019 12:37:58 +0000

This paper (PDF) by Oxfam International identifies the policies and systems needed to ensure that private finance blending at the least does no harm and in practice plays a positive role for small-scale producers. To boost agricultural development in developing countries, donors are increasingly resorting to blended finance: the practice of combining public development funds with private resources. Blended finance may open opportunities to inject more resources into the food and agriculture sector, but the assumptions that blended finance is inherently beneficial for agricultural development and that it is an efficient way to finance smallholder agriculture, are not supported by the evidence currently available. The paper argues that private finance blending should be used with caution in rural development until donors can demonstrate the merits of blending using evidence-based results, in particular the added value of blending for development impact. This is especially important given the obligations of donors to make progress on the reduction of social, economic and gender inequalities. The increasing focus on private finance should not obscure the vital role of public finance in promoting inclusive agricultural transformation that benefits small-scale farmers. Oxfam International provides a number of recommendations to ensure that blended finance is done in a way that strengthens local agriculture and food sectors and works for rural communities and economies: 1) Prioritize public funding in development aid to agriculture; 2) Ensure that blended finance in agriculture aims for and achieves development impact; 3) Promote country leadership and democratic ownership; 4) Demonstrate additionality; 5) Ensure accountability and translate principles into practice; 6) Improve data and transparency; 7) Prevent de facto tied aid.

The paper is also available in French.

Smallholder households: Distinct segments, different needs

F&BKP Office — Wed, 17 Jul 2019 09:24:07 +0000

This paper (PDF) by CGAPS identifies three segments of smallholder households and provides information to strategize how to reach and serve smallholder households. Understanding the distinct profiles of smallholder segments can help financial services providers, government bodies, and agricultural development partners better identify and serve their most relevant smallholder households, reducing costs and driving scale. Data from nationally representative surveys of smallholder households in Mozambique, Uganda, Tanzania, Côte d’Ivoire, Nigeria, and Bangladesh, is used to idenfity smallholders crop and livestock sales, amount of agricultural land, and smallholder livelihood profile. Three smallholder segments are identified: 1) Commercializing segment, is the primary market for financial solutions related to agricultural goals; 2) Diversifying segment, is in transition and generally values the standard portfolio of financial services; 3) Subsisting segment, is more vulnerable for which partnerships, technology and comprehensive approaches to financial and nonfinancial services are key. Agriculture exerts a strong influence on the identity and income of smallholder households. But their financial inclusion is not primarily determined by their agricultural livelihood profile: in all six sample countries, there is only modest variation between the three segments, despite their distinct livelihoods and the varying roles of agriculture. Farm and nonfarm aspects of their livelihoods need to be considered to help each segment of smallholder households effectively build resilience and capture opportunities. This wider lens is essential to understanding the financial, economic, and social exclusion of rural households and in striving for their inclusion.

Fintechs and financial inclusion

F&BKP Office — Tue, 04 Jun 2019 08:28:07 +0000

This paper (PDF) by CGAP aims to explain finance innovations in a detailed way and generate insights on whether the services work as stated, create value for underserved customers, and ease age-old pain points in delivering financial services to underserved customers. A key finding of the paper is that fintechs are bringing innovation to every part of the financial services sector, often through new value propositions, including flexible products and better ways to address the financial challenges faced by low-income customers. They are making financial services more affordable and accessible, are improving customere experience and accelerate use and engagement. Five innovation areas display the potential for fintechs to impact financial inclusion: 1) Interactive customer engagement, e.g. by using SMS to reduce the cost and effort of engaging with customers; 2) Smartphone-based payments, thereby reducing account dormancy and expanding use cases for payments; 3) Connection-based finance, to build customer creditworthiness and offer finance for low-income people; 4) Location-based finance, by using satellite data and machine-learning techniques to analyse physical location and offer insurance or credit; 5) De-risked nonproductive finance, by helping low-income people pay sizable or unexpected expenses while using unique features to reduce risk for the financier. A separate set of case studies for each of the innovation areas, “Fintechs and Financial Inclusion: Lessons Learned (PDF)”, describes for each pilot the service that was piloted, the nature of our testing, and emerging lessons. Funders have a role to play in supporting early-stage fintechs. Without support from investors, many early-stage fintechs struggle even though they may have potentially game-changing ideas. Supporting these fintechs could unlock innovation and produce relevant lessons for the entire financial services market. Fintechs face a universal set of internal challenges, including the development of a clear value propositoin, assembling the right human and technological resources, balancing digital and in-person customer interaction and forming strategic partnerships.

Redefining finance for agriculture: Green agricultural credit for smallholders in Peru

F&BKP Office — Mon, 20 May 2019 12:46:30 +0000

This report (PDF) by Global Canopy helps identify gaps and opportunities to support and scale up green agriculture, smallholder agriculture and financial inclusion. It explores the state of lending and investment, the farmers’ views on barriers to sustainable agiruclture and explores the role of financial access within it. The report finds that farmers agree that the financial sector could be a critical enabler of the shift to sustainable agriculture if provided credit that responded to the needs of farmers. This would mean; longer payback periods, lower interest rates and the provision of finance for packages that include a combination of irrigation systems, pest management, and agroforestry. The financial institutions (FIs) were interested in using credit as a tool to incentivise sustainable agriculture, but highlighted that there were barriers which made this difficult. The sector is inherently risky with no clear functional risk transfer alternatives in Peru. A number of recommendations are: 1) Access to sources of capital with reduced costs and longer payback periods is a requirement; 2) Develop guarantee funds and insurance products for farmers; 3) Develop new, green, products in partnership with FIs and enhance their internal capacity to channel resources towards sustainable agriculture; 4) FIs need to be committed to the green finance agenda; 5) Alliances with organisations that have the ability to engage with farmers and build their capcity is key to ensure benefits of the transition to sustainable agriculture reach the farmers and mitigate risks; 6) Provide geographical information about borrowers to support implementation of green agricultural credit; 7) Government participation and gurantee funds that are designed together with the financial institutions is key; 8) FIs all consider gender when developing credit products.

Base of the pyramid marketing and distribution

F&BKP Office — Thu, 16 May 2019 13:47:52 +0000

This thematic paper (PDF) of 2SCALE focusses on marketing and distribution to the base of the pyramid (BoP) and the way of working of this approach. The BoP is quite a different consumer segment compared to others and therefore requires a different approach of marketing. Instead of looking at the product, price, place and promotion (4Ps), the program focusses on acceptability, affordabililty, awareness and availability (4As). This approach provides an opportunity for a more in-depth and consumer-centric analysis of what it means to market products with and for the BoP. During the program, lessons learned were collected: 1) There is a real market opportunity in terms of serving the BoP with nutritious quality foods; 2) The cnsumer-centered approach was new but embraced by all successfull champions; 3) Practical and actionable insights were usefull for champions and acted as a catalyst for progress; 4) A transformation of the business champion is needed; 5) Activating the market is a must, from the market product lauch to the related promotional activities; 6) Critical for success is that champions have the right machinery; 7) Meeting the safety requirements for product approval and certification is of importance; 8) To prevent adverse environmental effects, opportunities should be explored for environmentally friendly packaging and recyling of waste streams; 9) Measuring the impact of the activities on a consumer level is critical. Next steps should be to focus on sector transformation, ensuring thath the impact goes beyond individual partnerships and transforms the entire sector. Futher, more focus should be on the actual marketing towards BoP and nutrition. Finally, the importance of parnerships should not be forgotten.

Achieving Sustainable Development Goals in the global food sector: A systematic literature review to examine small farmers engagement in contract farming

F&BKP Office — Tue, 14 May 2019 14:37:19 +0000

This study (PDF) in the Business Strategy and Development Journal aims to identify the factors that drive smallholder participation in contract farming. Contract farming is touted as a triple‐win proposition: 1) it helps food sector companies economically by providing them access to valuable land resources; 2) it helps small landowners in generating stable income by providing them access to mainstream markets and; 3) it helps mitigate some of the negative environmental impacts of agriculture production. Contract farming is a common strategy among multinational companies in the global food sector. However, it largely depends on whether or not small farmers can participate in contract farming programs, which has been a major issue globally. In cases where smallholders dominate the agrarian context, there is evidence of smallholder participation in contract farming. When the agrarian context contains both large and poor smallholders, the latter remain excluded from participating in contract programs. In addition, the review finds that smallholders with more assets and formal land tenures are likely to participate in contract farming. The results point to a two‐pronged strategy for improving smallholder participation in contract farming programs. First, for poor farmers already in contract farming, the patterns of smallholder integration in contract farming need to be examined to understand when smallholder participation in contract farming leads to decreased poverty levels and increased societal benefits. Second, there is a need to examine when asset endowment is important for smallholder participation in contract farming. Therefore the need for more comprehensive methodologies to examine small farmer participation in contract farming is suggested. Overall, a better understanding of how changes in the design of contract farming can incentivize or disincentive smallholders from participating in contract farming is timely. In the meantime, the global food sector companies must consider these factors as they develop plans toward achieving SDGs.

Innovative finance opportunities for inclusive agribusiness: Understanding the emerging opportunities

F&BKP Office — Wed, 17 Apr 2019 09:32:26 +0000

This report (PDF) by iBAN and BoP Innovation Center offers guidance and describes in depth 8 different financing instruments with specific example cases of its application to inclusive agribusiness. Agribusiness have a huge business opportunity and a chance to contribute to the SDGs. Financing opportunities for inclusive agribusiness are growing. The financing instruments are: 1) Public-private partnerships, a long-term contractually based mutual cooperation between public and private sector aimed at the provision of public services. 2) Project finance, which mainly targets large-scale and long-term projects and it protects the undertaking company in case of failure. 3) Blended finance, a mechanism that uses public and philanthropic funds to leverage private capital in order to meet the financing needs of an inclusive business. 4) Result-based financing is used by developing country governments, or states or donor agencies, in cooperation with the private sector, to incentivise the provision of goods or services to create or expand markets, or to stimulate innovation. 5) Thematic bonds, a sustainable investment option that is beginning to attract a new generation of investors. 6) Agricutultural value-chain finance is financing provided to an actors in the chain by a financing source outside of the value chain or by another actor in the value chain. 7) Crowdfunding, brings together multiple private investors to fund a project for a specific cause, usually start-ups with the desired impact as main reason why investors choose one proejct over another. 8) Impact investment funds, curate a selection of carefully vetted businesses, which seek funding towards an impact area or around a regional focus.

A webinar about the report is available, including its slideshow.

Inclusive businesses in agriculture: Defining the concept and its complex and evolving partnership structures in the field

F&BKP Office — Mon, 01 Apr 2019 15:06:24 +0000

This paper in the Land Use Policy Journal aims to provide a more precise insight into Inclusive Businesses (IBs), from a conceptual perspective and from a more practical one when implemented. IBs, signifying sustainable and equitable commercial operations linking low-income communities and smallholder farmers with agri-businesses in order to facilitate the former’s market integration, are considered to comprise an essential tool for raising smallholders, across the developing world, out of poverty and for stimulating overall rural development. Although often promoted based on anecdotal evidence, IBs are little analysed and understood from a conceptual perspective, nor are they scrutinised when implemented in the field. This paper proposes a new, flexible typology for the institutional set-ups of IBs, which accommodates the complex structures observed in the field. These innovative and hybrid arrangements, explained by a holistic framework that combines aspects of Resource Dependence Theory, Transaction Costs Economics and Agency Theory, are presented as unique combinations of the standard instruments of collective organisation, equity, lease/management contracts, mentorships, and supply contracts. Results show that whereas multiple-instrument IBs do obtain improved inclusiveness of low-income communities and smallholder farmers in commercial value chains, issues related to corporate control over resources, lack of knowledge transfer and marginal benefits remain. The assessed IBs are dynamic in their set-up, however, and allow for adaptations to overcome these issues. The State, which plays an important role through establishing a stimulating policy framework and financial contributions, together with third party engagement, can counter the potential corporatisation under IBs – emphasising that IBs alone cannot constitute the expected panacea for agricultural transformation and rural development.

Access to rural credit markets in developing countries, the case of Vietnam: A literature review

F&BKP Office — Fri, 29 Mar 2019 10:08:57 +0000

This article (PDF) in the Sustainability Journal focuses on the characteristics of rural credit markets, the determinants of farmer access to markets, the socio-economic impacts of credit access in Vietnam and comparing those of some developing countries. The agricultural sectors play an important role in the process of economic development of a country, especially in developing ones. Vietnam is known as an emerging market, which depends directly on agriculture-related activities for their livelihood, in which the issues or rural credt access still remains a confounding problem. Rural credit markets in developing countries often include both formal and informal markets, that can complement each other. Many socio-economic factors have an impact on farmers’ credit accessibility. Social capital is also seen as the invisibile one affecting houholds’ access to credit. In the paper, an overview of Vietnam rural credit markets and its characteristics of limited market participation, government intervention, and segmentation have been clearly indicated. Although positive relationship among credit access, output production, productive efficiency, and total household income are found in most papers; credit also has positively significant impacts on only non-farm income. The poor farmers with their main income from agricultural activities are likely to be excluded from formal markets. For housholds, the main solution is to expand the lending network of financial institutions through local socio-political associations as guarantors and borrowers that gathered in groups. Financial institutions need to change their mind-set about target clients. Banks should allocate capital to agricultural sectors, enhance loan procedures and reduce lending costs. Policy makers should ensure that government interventions in rural credit markets should be determined to ensure market competitiveness. Subsidized credit is likely to be increasingly ineffective in fast-growing economies. Future research is recommended on comparative studies of the markets in other developing countries in terms of characteristics and components of the markets.

Crop receipts: A new financing instrument for Africa

F&BKP Office — Wed, 06 Mar 2019 12:26:52 +0000

This study (PDF) by FAO, GAFSP and IFC aims to enhance knowledge about Crop Receipts (CRs) and provide guidance to stakeholders engaged in agricultural finance in Africa on how CRs might be adapted for and introduced in Africa. A CR is a bond issued by a farmer or farmer organization to deliver a certain amount of farm produce (crop or livestock) or the cash equivalent thereof at a future date. Against this promise, the buyer or financier advances a certain amount of cash or inputs to be settled at maturity of the bond. The bond can be issued to a processor, an offtaker, an input supplier, a bank, or a financial investor that provides pre-harvest finance against it. The value proposition of CRs rests on three key features; 1) Additional Collateral: CRs create an additional type of collateral by allowing farmers to pledge their future agricultural production, thereby addressing a key ‘access to finance’ challenge; 2) Strong Legal Standing: CRs have a stronger legal basis compared to loans or prepaid forward contracts; 3) Liquidity: CRs are endorsable and tradable, which increases liquidity for the initial buyer or financier. For these features to translate into increased pre-harvest finance, CRs need to be accepted by market actors, which in turn requires certain enabling conditions to be in place. Concerning the enabling legal conditions, the legal framework should be flexible enough to allow the creation of CR-inspired products and structures through existing financing and security instruments. Diﬀerent commercial entry points for CRs have been identified. They could be further explored through pilots and be eventually integrated into a larger CR portfolio. The way forward in the short-term should include country-pilots and policy and regulatory support. In the medium-term an African Pre-harvest Finance Facility should be established to support pre-harvest financing structures and products which would include at least one of the key features of CRs.

Determinants of the competitiveness of smallholder African indigenous vegetable farmers in high-value agro-food chains in Kenya: A multivariate probit regression analysis

F&BKP Office — Wed, 27 Feb 2019 09:22:50 +0000

This study (PDF) in the Agricultural and Food Economic journals aims at determining the main role of households’ capitals, institutional, and access-related factors in conditioning the decision of smallholder farmers of African indigenous vegetables (AIVs) to access pillars of competitiveness in high-value market chains (HVMCs). Smallholder farmers are excluded from efficient and effective participation in high-value agro-food market chains due to major competitiveness constraints and several market failures along these chains. The results suggest that about two thirds of smallholder AIV farmers had access to at least one pillar of competitiveness in HVMCs. The model results show the presence of inter-dependency of household level decisions to access multiple pillars of competitiveness in HVMCs. Furthermore, coping with shocks, coupled with access to information on market prices and warnings of unexpected events, contract farming, certification and modern irrigation technologies are the main conditioning factors to the access of the pillars of competitiveness by smallholder farmers. A policy recommendation is that the promotion and implementation of a well-founded mobile phone-based information access platforms, to enable smallholder farmers to easily access real-time information and banking services, is of critical importance towards overcoming the major competitiveness constraints along high-value agro-food chains. Furthermore, access to the price information, institutions and relevant resources would lead to an increase in the number of smallholder farmers accessing pillars of competitiveness. Finally, the importance of accessing contract farming and certification in smallholder farmers’ decisions to access pillars of competitiveness suggests that there is a need for policies that support farmers securing direct supply contracts from HVMCs.

Protecting growing prosperity: Agricultural insurance in the developing world

F&BKP Office — Thu, 14 Feb 2019 13:56:40 +0000

This report (PDF) by ISF Advisors and Syngenta Foundation for Sustainable Agriculture highlights the current status and future development of agricultural insurance for smallholder farmers around the world. In the past ten years, the field of smallholder finance has grown in both size and complexity. Historically, smallholders have had limited access to risk-management options, but increasingly, formalized agricultural insurance is offering them a chance to avoid devastating financial losses and securely invest in their own productive capacity. ISF estimates that globally less than 20% of smallholder farmers currently have agricultural insurance coverage, a number that is less than 3% in sub-Saharan Africa. This coverage gap results from both low demand for and low supply of, agricultural insurance products in developing nations. ISF’s agricultural insurance landscape assessment paints a picture of an industry that shows great potential but is struggling to achieve the required scale and product-level refinements to graduate from the donor funding that has carried it to this point. There are four primary ‘leverage points’ that can accelerate the development of the insurance crucial market: 1) Governments engaged and equipped to drive the agenda. 2) A new step change in product effectiveness. 3) Product linkages that change the distribution and adoption game. 4) Coordinated global action. The authors believe that agricultural insurance for this market likely requires another five to ten years of product, process, and technology innovation to break down complexity and continue to expand the realm of the possible. However, we believe the foundation is now in place to create a more connected, sophisticated, and visionary global agenda. Formal insurance can truly become a shared-value market where millions of smallholder farmers benefit from a multi-sector collaboration that brings the best of our global financial system to bear on some of the most complex development agendas facing our world.

Agriculture Finance in Zambia: How can smallholder inclusion be deepened?

F&BKP Office — Mon, 11 Feb 2019 09:01:04 +0000

This working paper (PDF) by the Indaba Agricultural Policy Research Institute (IAPRI) sought to identify ways in which smallholder agricultural finance inclusion in Zambia can be deepened. Agricultural financing remains one of the critical enablers to facilitate within sector growth
commensurate with achieving poverty reduction, food, and nutrition security, and employment creation through Small and Medium Enterprises (SME’s). Yet access to agricultural financing, let alone commercial cash loans to the sector, remains poor in most developing countries. Zambia also suffers from undersupply of agricultural financing, especially from commercial sources. However, the results indicate that Zambia has made considerable progress in addressing financial exclusion; a number of risk mitigation measures are in place to reduce the asymmetric information in the financial sector, to the extent that the getting credit ranking for Zambia is among the best in the world. The major finance sources include contract farming, private firms, friends/ relatives/informal moneylenders, and farmers’ unions/cooperatives. Lending from commercial loan sources remains very poor and is likely done in partnership with other firms such as those leasing equipment to own, or out growers. There are a number of notable gaps that could foster increased finance flows, like the absence of a credit registry that includes the unbanked and the failure to recognize movable assets as of good quality by bank supervision guidelines in relation to immovable assets. A large number of recommendation are given to deepen smallholder agricultural finance inclusion. For example, technology that will reduce cost of financial service delivery should be embraced, legislation that bars agent exclusivity among mobile money operators should be enacted and cooperatives should strengthen and be used as a financial inclusion tool.

Land governance and inclusive business in agriculture: Advancing the debate

F&BKP Office — Mon, 21 Jan 2019 12:51:39 +0000

This report (PDF) by the Overseas Development Institute (ODI) reviews the state of the global debate on inclusiveness in agricultural investments and analyses what ‘inclusiveness’ means to different value chain actors. According to stakeholders, five pillars on the meaning of inclusive business in agriculture are: 1) Effective arrangements for voice and representation; 2) Inclusive fair value chain relations; 3) Respect for land rights and inclusive tenure arrangements; 4) Employment creation and respect for labour rights; 5) Contribution to food security. A cross-cutting approach that looks at the key features of value chain relationships enables the evaluation of inclusiveness within each business, and allows for more nuanced recommendations on how to enhance inclusiveness. Furthermore, rigorous assessments of inclusiveness need to consider the five pillars both in their process and outcome dimensions, since good procedures are the foundation of any inclusive business. The five pillars provide a framework for assessing and enhancing inclusiveness. However, trade-offs can arise between the pillars. There are inherent opportunities and challenges for enhancing inclusiveness in different value chains due to the characteristics of the crop and wider market trend. Without an understanding of how crop and value chain traits and market trends shape opportunities and constraints, it is difficult to advance inclusiveness in practice or develop effective public policy and programming. At the same time, evidence shows that effective public action can make a considerable difference in promoting inclusiveness in a given commodity sector and geographic context. Land governance is central to inclusiveness – control over land has a bearing on each of the five pillars of inclusive business. Supporting value chain relation sin which small-scale rural producers retain control over land is an important part of strategies to promote inclusiveness that relies less on the goodwill of individual companies, and more on institutional frameworks that make inclusiveness the preferable business choice.

An executive summary of the report can be found here.

Digital platforms for smallholder credit access: The mediation of trust for cooperation in maize value chain financing

F&BKP Office — Wed, 16 Jan 2019 16:31:04 +0000

This article (PDF) by the Wageningen Journal of Life Sciences aims to asses to what extent information and communicative mechanisms of digital platforms facilitate trust building for value chain credit cooperation in smallholder maize farming in Ghana. Maize production is of critical importance to smallholder farmers in Ghana. Various factors limit the productivity of smallholder maize farming systems undergirded by the lack of capital for critical investments both at farm and national policy levels. Using a value chain approach, this study explains how a complex configuration of actor interaction within an institutionally and agro-ecologically challenged value chain leads to the enduring absence of maize farming credit support. A cycle of credit rationing resulting from value chain challenges such as agro-ecological uncertainties was found. This condition is sustained by an interplay between mistrust, insufficient information across the value chain and inadequate control strategies in the maize credit system. Digital Platforms (DPs) show potential to help overcome some information and communication gaps that impede traditional value chain credit arrangements. This is promising in terms of aiding awareness and coordinated responsiveness to agro-ecological farm conditions and the development of farming records databases. Thus, DPs could generate new networks and cooperation in the maize value chain in this regard. As a tool for mediating trust in value chain credit cooperation, strategic use of these DP contributions could help initiate an entry point for recalibration of trust perceptions. Significant considerations and improvements are however needed to harness DPs effectively in mediating trust for maize credit provision, not least being farmer digital inclusion in DP implementation, effective intermediation and network governance arrangements and digital contributions towards cost-effective agro-ecological controls in the erratic maize farming context. This approach to trust building should therefore not be viewed as a quick fix but as a process of trial and error, and learning by doing.

Effect of market access provided by farmer organizations on smallholder vegetable farmer’s income in Tanzania

F&BKP Office — Thu, 27 Dec 2018 13:44:05 +0000

This paper (PDF) by Cogent Food & Agriculture evaluates the effect of market accessed through farmer organizations on household income in Tanzania. Limited market information and market access are two major obstacles to increased farmer’s income in Tanzania. Formation of a farmer organization is one way to overcome these challenges by improving access to markets while reducing transaction costs. Except for gender of the household head, average farm size owned, distance to the market, and transportation cost, there were no statistically significant differences between vegetable growers who belonged to a farmer organization and those who do not. Market access has a significant positive and robust effect on farm income. Smallholder vegetable farmers with an average farm size of 0.5 acre who had access to the market provided by farmer organization have more income per season than vegetable farmers who did not belong to the group membership. Also, the cost incurred for transporting vegetables to the market and the distance was different between farmers who belonged to a group and those who were not members. So, farmer organizations can benefit farmers by increasing their incomes and providing a good platform for the provision of farm inputs and marketing of produce, which can immensely enhance farm productivity and increase farmers’ incomes. Thus, to successfully increase market access and farmers’ incomes through active participation in farmer organizations, there is need to enact enabling policies that will strengthen these farmer organizations’ capacity in sourcing, disseminating market information and searching for produce markets. This is important because strong farmer organizations will effectively bridge farmers towards market access, thereby improving their access to high-value markets and improving their livelihoods through increased incomes and enhanced nutrition. This will assist in sustainably transforming smallholder vegetable farming as a viable business venture through increased productivity and incomes.

Improving the availability and effectiveness of rural and “Micro” finance for small-scale irrigation in Sub-Saharan Africa: a review of lessons learned

F&BKP Office — Mon, 17 Dec 2018 12:25:09 +0000

This paper (PDF) by the International Water Management Institute (IWMI) reviews the evidence available on the provision of financing for African smallholder farmers to purchase irrigation equipment such as pumps, pipes and drip irrigation systems. It sets the scene by first reviewing the literature on experiences with providing microcredit and other microfinance services as a poverty reduction strategy. Based on both case studies and several systematic reviews of the literature, it finds that the outcomes and impacts on poverty, gender equity and broader economic development are mixed at best. Microcredit is not a silver bullet solution to poverty, but it can often help poor households improve their lives. The paper then reviews the demand for and supply of financing for smallholders to purchase irrigation equipment. In surveys, farmers express a strong demand for equipment such as pumps, but often point to the lack of affordable and appropriately designed credit as a critical impediment to gaining access to such equipment. Even where microfinance institutions offer agricultural credit, it is usually short-term seasonal credit to purchase seeds and fertilizer. Credit on these terms is not useful to purchase equipment costing several hundred dollars. Focusing on programs specifically aimed at enabling farmers to purchase irrigation equipment, no credible detailed studies were found documenting the impacts and lessons learned. However, there are currently (as of 2018) numerous promising pilot studies and small projects offering a variety of approaches to enable smallholders to make such purchases. The paper reviews what information is available on these. Several promising models were also identified under pilot testing – including one called “Uber for the farm” or potentially “Uber for irrigation” – and formulated a set of lessons learned to help improve the availability and effectiveness of this and other options. A major recommendation of this paper is that a research project should be designed to carry out studies of these various experiments to identify what works under what conditions, as a basis for scaling out programs to offer financial services aimed at assisting smallholders to gain access to small-scale irrigation equipment.

An empirical evaluation of policy options for inclusive dairy value chain development in Nicaragua: A system dynamics approach

F&BKP Office — Wed, 14 Nov 2018 13:32:33 +0000

This research in the Agricultural Systems Journal tested and evaluated the short-, medium-, and long-term impacts of specific interventions and policies in the Matiguás dairy value chain with the goal of strengthening the competitiveness and inclusion of small- and medium-scale producers. Achieving inclusive value chain development is a challenging task due to the complex and dynamic nature of interconnected value chains and their social, economic, and ecological dimensions. The interventions of this research centered on improving the feeding systems, which was identified by stakeholders as the critical constraint to competitiveness. The policy analysis reveals that both improved pastures and increased use of concentrates raise producer milk productivity by 5% and 11%, respectively in the long run, but are also expensive strategies for smallholder producers, leading to a reduction in profits relative to the baseline by 1% and 3%, respectively. Consequently, policymakers should identify strategies that help to reduce concentrate costs and support producers with investments in improved pasture, while also promoting training in pasture management skills. Indeed, in the long-run, model results reveal that investment and training in pasture management results in a 30% and 35% increase in milk production during the wet and dry season, respectively. Simulation results further highlighted that intensifying the feeding system to improve cow milk yields is mainly profitable in the long term, and thus requires a longer-term perspective by policymakers. The model provides a deeper understanding of the complex and dynamic nature of the Matiguás dairy value chain and the interactions between markets, coordination aspects, biophysical phenomena, and income. The system dynamics approach to value chain analysis further addresses a major analytical shortcoming in value chain analysis and provides decision makers with an improved platform for planning and policy formulation.

Financing and public-private partnerships in water, sanitation & agri-food sectors

F&BKP Office — Mon, 12 Nov 2018 14:12:46 +0000

This exploration (PDF) by PPPLab discusses the financing of development projects in food security and water primarily form the perspective of the commercial financier. Private investors are increasingly asked to take up a role for the SDGs and fill the funding gap. In some sectors the private sector is very active, but in the water, sanitation and agri-food sector, the interest of private investors is limited. Why is this? Reaching the SDGs requires substantial inflow of commercial finance. For this, revenue mechanisms should be included in businesses and projects to repay commercial financing. Private commercial money will need to be unlocked, but commercial finance only focuses on bankable propositions. Impact investors are commercial investors with a specific focus on creating impact. However, they still want their money back. Despite the urgency of the SDGs, commercial investors have problems filling pipelines with projects that fit their criteria. Compared to other sectors, the food security and water sector are not seen as attractive to commercial investors, with as important reason their embedding in the public domain. Moreover, the food security and water sector are generally not considered commercially viable, on account of the lack of a convincing and stable business case. Some approaches that can overcome these bottlenecks are: service delivery models that can scale; partnerships between private companies and governments; blended finance mechanisms whereby grants or public money are used to mobilize commercial financing. In-country financing is becoming more important as source of financing including for funding the SDG. In practice, SDG projects compete for scarce private funding. Commercial financiers prefer sectors other than food and water. Financial instruments blending grants and commercial financing are emerging. Stakeholders need to work together, requiring a change of thinking and perhaps of mandates.

Super platforms: Connecting farmers to markets in Africa

F&BKP Office — Thu, 08 Nov 2018 14:53:25 +0000

This blog by CGAP is on super platforms that are pushing the boundaries of financial inclusion around the world, creating million of new jobs and stimulating trade, especially in rural markets. These “platforms of platforms”are typically thought of as connecting customers and merchants but they are also connecting farmers to markets, potentially increasing farmers’ incomes by 50 percent or more. Mercy Corps’ AgriFin Accelerate Program inventoried models from around the world with a focus on agricultural markets and smallholders, which showed that digital platforms link the smallest of agricultural businesses to an expansive and ever-growing market of buyers, often bypassing middlemen and resulting in better prices for goods sold. When they operate at scale, these platforms also greatly reduce transaction costs related to aggregating and moving goods and making payments. Six strategic decisions are identified that companies make when developing and scaling their market platform for agriculture: model, crops, buyers, transport & logistics, farmer engagement, financial services and payments. Research shows that logistics are usually a major cost driver of digital market development. Robust logistics networks are a key constraint across Africa. Platforms are also experimenting with disaggregated logistics, leveraging underused logistics capacity. Data scarcity and data management are another major cost driver. Platforms that invest in data see major benefits in improved farm-to-market logistics, more tailored customer support, investment and increased sales. Converting farmers to digital marketplaces will require trust built on strong customer experience. So what needs to happen for models to grow and scale in Africa? As Africa’s population doubles by 2050 and the demand for food and rural jobs escalates, the transformative power of super platforms becomes a strategic imperative.

What works to increase smallholder farmers’ income? A landscape review

F&BKP Office — Fri, 26 Oct 2018 09:52:28 +0000

This report (PDF), by Dalberg and Wageningen Centre for Development Innovation is a first step in answering the question: “What are the most effective actions that lead buyers can take to enable smallholder farmers in global supply chains to meaningfully increase their incomes?”. Results showed that it is possible to raise farmer incomes through existing interventions to a degree. Across the most successful interventions and case studies identified, the researchers noted four critical success factors. These success factors include bundling services, connecting deeply with farmers, customizing interventions, and partnering with governments, civil society actors, and peers. Lead buyers can consider incorporating these factors as they seek to reinforce and enhance the success of their strategy. However, this landscape review did not identify any interventions that performed strongly across all four of our selected criteria – a step-change in income, sustained over time, and reached male, as well as female farmers at scale. Across the interventions examined, three were found to raise incomes more than 50% across contexts. Although these increases are of value, in many markets, farmers may need increases of 100-200% to achieve a decent income. Going forward, further exploration and action is needed in a number of areas, in particular: 1) Better understanding and more successfully addressing the systemic barriers farmers face, which the unique sector and supply chain dynamics at a systems level and the role they play in influencing farmer incomes and the unique constraints and potential of female farmers in driving the necessary change. 2) Creating actionable tools that enable lead buyers and their partners to diagnose the relevant barriers and systemic dynamics in a given supply chain and to identify and activate the most appropriate strategy and portfolio of interventions with the highest potential to drive desired impact in a given context.

A project page of this research can be found here.

Inclusive PPP’s: Emerging best practices

F&BKP Office — Wed, 17 Oct 2018 13:13:08 +0000

This report (PDF), commissioned by the Netherlands Enterprise Agency (RVO) has the goal to gain more insight and better understanding of inclusiveness in the public-private partnership (PPP) project portfolio of the Netherlands Sustainable Water Fund (FDW) and the Facility for Sustainable Entrepreneurship and Food Security (FDOV). This will contribute to increased insights into specific characteristics of the beneficiaries and target groups and possible trickle-down or indirect effects. There are 7 best practices to reach inclusiveness to be learned from the study: 1) Access to finance should be made inclusive. 2) There should be dedicated steering towards inclusiveness results. 3) Projects should be tailored to specific target groups throughout the project cycle. 4) Sustaining capacity-building efforts for low-income groups who cannot afford capacity building on their own. 5) The strength of the broader community should be used for better inclusiveness. 6) Composition of the right partnerships with a genuine interest in inclusiveness. 7) Getting the message across and the target group on board to secure their interest and cooperation. Measuring indirect effects receives little to no attention during project implementation. The logic of these effects remain implicit and is often not articulated in a theory of change/results framework. A recommendation concerning the portfolio of FDW and FDOV would be to lower the “entry barriers” to submitting an application, and carefully look at the role of private and public partners in such setting. Recommended is to use a set of indicators for change (sings of inclusiveness) that provide a framework to understand how PPPs can provide their products, services or practices in an inclusive way, while also making business sense. This frameworks consists of 5 A’s: Affordability, Awareness, Availability, Acceptability and Advantage. Good practices can be found in the following areas: the design of the technical approach, shaping the implementation arrangement and the management of interventions. Each ‘best practice’ has to be tailored to the specific nature and context of the individual intervention.

To ensure the best practices identified are not only shared in the report itself, but get a broader reach, a webinar was organized by BopInc highlighting the key observations from the report, illustrated by some of the project examples from the report. A recording of this webinar can be found here.

Big data could mean big opportunity: Why we should stay excited for data analytics in smallholder finance

F&BKP Office — Thu, 11 Oct 2018 08:00:19 +0000

This brief (PDF), by the Mastercard Foundation and Rural and Agriculture Finance Learning Lab, aims to provide a high level understanding of how data analytics is used for smallholder farmers, introduce a new framework to understand the economics of data analytic investments, and highlight key innovators in the space. The gap in smallholder financing remains wide and financial institutions by and large continue to find smallholders farmers a difficult and cost segment to serve. The authors of the brief believe there are ways to transform the underlying economics to serve farmers profitably and at scale – and that data and technology could be fundamental drivers of this shift. On one hand, the progress made is encouraging: the use of data analytics for credit scoring is maturing, and other use cases are emerging, the value proposition for financial service providers (FSPs) seems compelling, there is better insight into what data is useful and what is not, and the interest and investment in the sector remains healthy. However, the use of data analytics to expand access to credit for smallholders is still in its infancy. Outstanding questions center on proving the nature and strength of the business case for FSPs to invest in data analytics; how FSPs can build the capabilities they need to leverage data analytics effectively and; how FSPs can gain access to useful data at a reasonable cost. The best way to advance this field is for FSPs and data service providers (DSPs) to work together on a commercial scale to prove the business case and develop blueprints of success. DSPs are actively innovating and FSPs are beginning to buy into the potential. Smartly deployed philanthropic funding can reduce cost and risk and help to mobilize private sector players.

Opportunities for digital financial services in the cocoa value chain in Côte d’Ivoire: Insights from new data

F&BKP Office — Thu, 20 Sep 2018 14:53:30 +0000

This research (PDF) by The Mastercard Foundation and IFC focuses specifically on mobile money accounts and discusses, first, how these have already expanded financial inclusion in Côte d’Ivoire and, secondly, how mobile money could help deliver products to cocoa farmers that meet their needs. Managing money can be particularly challenging for farmers since they receive the majority of their income during the harvest and this needs to cover their expenses for the rest of the year. Cacao farmers had relatively high annual incomes, but very few had bank accounts because of the perception that “banks are not for them”. However, various digital financial services (DFS) offered by mobile network operators does not have such constraints and have a high level of adoption (53%). Farmers who save money (35%) are better able to feed their families throughout the year. Encouraging good financial practices, by providing easily accessible remunerated savings, and enabling the associated credit scoring to support formal lending, would be of great benefit to many cocoa farmers. These services are more likely to have high adoption levels if they are delivered by DFS, because of convenience, acceptance, and the current widespread usage of DFS by farmers for more basic transactions. There are several types of DFS that may be used to service cocoa farmers’ latent demand for financial services, for example by expanding the range of services offered by mobile money providers, possibly in parnership with banks or microfinance institutions. There is also an obvious opportunity for formal financial institutions to introduce agent banking services and suitable entry/level accounts to penetrate rural areas.

Exploring blockchain applications to agricultural finance

F&BKP Office — Thu, 06 Sep 2018 12:54:28 +0000

This brief (PDF) by CGAP set out to understand how the emerging technology of distributed ledger technologies (DLT), also known as blockchain, could enable broader and more inclusive markets for agricultural finance. DLT is build around he concept of a ledger and provides a mechanisms for creating a shared record of transactions among several institutions or individuals in the absence of a trusted arbiter. There are a number of barriers to using DLT: the technology is still nascent, there is a lack of trust in and of itself and of the data written to the ledger. Further, poor connectivity , lack of computing power, low penetration of devices that can interact with DLT among smallholders are obstacles. However, several features of the technology emerge particularly relevant. The transparency and shared control are benefits of DLT. Disintermediation can help overcome barriers to agricultural finance and the use of DLT to verify the identity of smallholders is fundamental. Cases where DLT could be used in agricultural finance are: 1) The collateralization of assets could enable smallholders to access financing; 2) Supply chain management by data on smallholder agricultural production; 3) Recording smallholders’ borrowing and repayment histories and; 4) Posting contractual agreements. So agricultural finance offers several potential applications. However, several obstacles need to be overcome before DLT can be deployed at scale to unlock financing along agricultural finance chains. Trusted actors is paramount, even in a system designed to operate without third-party intermediation. Governments would need to put in place appropriate legal and regulatory frameworks that recognize the use of digital ID. Any DLT solution to agricultural finance should be as simple and straightforward as possible and should not pretend to have eliminated the need for some degree of shared trust among participants.

Launching into space: Using satellite imagery in financial services

F&BKP Office — Thu, 23 Aug 2018 09:09:56 +0000

This case study (PDF), by Caribou Digital and the Mastercard Foundation, offers insight into the method behind how FinTechs integrated earth observation technology (satellite imagery) into their financial services. Innovative companies are testing whether earth observation data can be converted into data that financial service providers can use in credit scoring models that assess a farmers creditworthiness. Satellite imagery, in combination with demographics, financial, agronomic, geospatial and psychometric data, provides sufficient detail on clients without established credit history, to make lending decisions. Leveraging satellite imagery meaningfully requires specific tech skills and infrastructure, investment, capital, and data to train machine learning models. FinTechs incur major costs in the process of turning the raw data into critical, analytical insights that can be used for lending purposes. Further, required skills of scientists are key to building the infrastructure to support the processing of thousands of images, but they are not easily found. The FinTechs also needed to raise the investment capital necessary to start their company operations and absorb the initial risks with equity rounds, grand resources, and/or angel investment. Providing the value of earth observation data in lending requires constantly experimenting with data-driven models – data that can only be collected infrequently and can present statistical challenges. Despite challenges, initial testing with satellite imagery has been positive, indicating significant predictive power in terms of generating features relevant to credit models. Customer acquisition is the most challenging aspect in reaching scale and profit. To harness innovation in financial services, digital finance providers should collaborate with FinTechs. The key takeaway is that financial service providers must have a clear vision of why they want to leverage satellite imagery and ensure they have the in-house capacity to leverage it as well as realistic expectations of what the technology can achieve.

Linking smallholder vegetable producers to markets: A comparison of a vegetable producer group and a contract-farming arrangement in the Lushoto District of Tanzania

F&BKP Office — Mon, 20 Aug 2018 08:30:45 +0000

This study, in the Journal of Rural Studies, compares a farmer-based organization and a contract farming approach, as ways to link smallholder vegetable producers to markets. It is investigated: (a) how both approaches tackle the same problems, constraints and shortcomings; (b) which structural weaknesses limit their performance in linking smallholder farmers to formal markets; (c) what support measures may facilitate the sustainability of those approaches; and (d) which approach is more suitable to respond quickly to changing market conditions? For several decades there has been a growing interest in institutional arrangements to link smallholder farmers to markets. In particular, registered farmer organizations and contract farming arrangements have been very common approaches that have been used to integrate smallholder farmers into agricultural value chains. The analysis concentrates on four critical factors (group homogeneity, size and ability to cope with “free-riding” behavior; supplier-buyer contract enforcement; access to external services; and the supportive role of the government and NGOs). The registered tight farmer-based organization benefits from a high degree of trust among members enabling them to purchase joint assets, remain independent from single buyers, and maintain an informal quality control system. The advantage of the contract farming approach lies in the formal quality control mechanisms, which reduce the necessity for high group cohesion and allows them to include resource-poor farmers as members. Conversely, formal quality control requires high start-up funding that cannot, in most cases, be borne by the group members and thus requires investment from single buyers, governments or donors, which can create dependencies. Government interventions in terms of capacity building programs for second-tier organizations could allow farmer groups to share the costs associated with input provision, capacity building and extension services. Public-private partnerships providing certification at lower costs may allow farmer groups to reduce dependencies on single buyers

The business advantage: Mobilizing private sector-led climate actions in agriculture

F&BKP Office — Tue, 14 Aug 2018 10:12:29 +0000

This report (PDF) by IFAD examines how public funds can mobilize private resources for climate change adaptation, how much impact is generated through public-private partnerships, and how such impact is delivered to the farmer households. Scaling up and channeling private capital is crucial in limiting climate change. However, on the adaptation to climate change by smallholder farmers, little in known about private financing flows. The Adaptation for Smallholder Agriculture Programme (ASAP) grant of IFAD operates as a de-risking or insurance instrument to incentivize the private sector to invest in adaptation investments for smallholder farmers. ASAP grants have been successfully used as a tool to lower the level of investment risk and thereby encourage the private actors at all levels to participate in adaptation actions. In addition to contributing financial resources, beneficiaries are empowered, gradually gain independence from public support and build trust with other stakeholders in communities. Existing engagement mechanisms in ASAP have delivered positive economic returns on investment. Evidence of social returns was also documented, including reduced malnutrition and improved skills of farmers. Furthermore, the investment schemes with the private sector have also generated modest positive environmental returns. Benefits generated are distributed in large part to smallholders farmers. In addition to financial gains, their skills have been augmented and they have been empowered in dealing with buyers. There are four different engagement strategies for private actors: development of new enterprises; enhancement of existing micro, small or medium-sized enterprises (MSMEs); leveraging investment of non-MSMEs; and leveraging resources of microfinance institutions and commercial banks. In conclusion, when incentives targeted at the right needs, public funds can be used to harness the resources from private sector and aid national efforts to address multiple Sustainable Development Goals (SDGs).

Driving innovations in smallholder engagement: Insights in service delivery and finance

F&BKP Office — Tue, 07 Aug 2018 13:54:27 +0000

This report (PDF) by IDH presents findings and best practices from their innovating partners; empowering farmers through service delivery, while generating sustainable returns to their businesses. Currently, approaches towards farmer engagement are isolated and not embedded into structures and not leverage with sustainable financing. However, agriculture offers significant opportunities for both business growth and sustainable smallholder livelihood gains. Through serving smallholder needs, new commercial business opportunities can be developed. IDH highlights how smallholder engagement is changing and how this is affecting the way services are being offered to smallholders. An increasing number of service providers have shifted their approach to farmers, dealing with them more as clients. Smallholders need access to more complete service packages that are tailored to their needs. This requires smarter strategies for service providers on what to offer farmers, at what scale, and with what type of funding strategy. Service delivery models have increased attention on financial sustainable models. The information gap between service providers, development financial institutions (DFIs) and impact investors need to be closed, to created a common understanding. There are aspects of the enabling environment that can either limit or facilitate the performance of service delivery models. The public sector can influence how much farmer receive in price and has large influence on markets and regulations. More conductive enabling environments need to be developed that allow service delivery models to expand, have greater impact and become more efficient and sustainable. Technology and innovation play a vital role in decreasing costs, increasing impact at farmer level, and supporting evidence-based insights and behavior. ICT lead to more cost-efficient service delivery. Technological solutions should be embedded in traditional service delivery model structure and cannot replace them fully.

A related news item can be found here.

Agricultural input subsidies for improving productivity, farm income, consumer welfare and wider growth in low- and lower-middle-income countries

F&BKP Office — Sat, 28 Jul 2018 09:53:59 +0000

This systematic review (PDF) by Campbell Collaboration evaluates the impact of input subsidies on agricultural productivity, beneficiary incomes and welfare, consumer welfare and wider economic growth, in low- or lower-middle-income countries. Overall, the evidence base is limited with a disproportionate focus on subsidy programmes in sub-Saharan Africa and on fertilizers and seeds. Results show that subsidized fertilizers and seeds are associated with increased use of these inputs, higher agricultural yields and increased income, but evidence of effect on poverty is limited. There is no association between subsidy size and agricultural outcomes. Subsidy vouchers do not always reach farmers, and when they do reach they are not always used. There is much evidence that subsidy schemes are prone to inefficiency, bias ad corruption. Introducing or increasing subsidies generally results in positive effects for consumes and wider economic growth. However, the way subsidies are funded, world input prices and beneficiary targeting, all have important influences in determining the effectiveness of input subsidies. Since the evidence base is relatively small, more research is needed. This research is especially needed on a wider number of countries and on a wider set of contexts where subsidies are used. Impact evaluations can explore different levels of subsidies for different beneficiaries. Simulation models studies should make more use of rigorous evidence in determining coefficients used for household behaviour and micro-economic effects of subsidies. Furthermore, including multiple simulations may be of more use to policy maker than simple comparisons. Researchers should more clearly report methodological approaches, statistical information and type and size of input subsidy implemented or modelled.

Understanding agribusiness-based advisory services: Findings of a learning trajectory

F&BKP Office — Thu, 26 Jul 2018 12:48:12 +0000

This report (PDF) by KIT, Agriterra, Moyee Coffee and the Food & Business Knowledge Platform focuses on the functioning of agribusiness-based agricultural advisory services to small-scale farmers. Advisory services offered by agribusiness are potentially important mechanisms for small and particularly medium farmers to improve the way they farm, increase the volume and quality of production and enhance their livelihoods. There is great diversity in how agribusinesses operate and organise their advisory services. Furthermore, they pay relatively little attention to mobilizing systematic feedback from farmers on their advisory services. All agribusiness underlined the importance and benefits of the advisory services, without being able to compare these with the costs incurred. An important limitation of the advisory services relates to their reach; they cover only specific geographical areas and work only with already market-oriented farmers (men and women). Another limitation is their focus; the attention is often on only one of a few commodities, ignoring (impacts on) other parts of the farming system. Overall, agribusinesses can improve their agricultural advisory services by making service provision – the delivery mechanisms, their quality, adoption, costs and impact – an explicit agenda item. This means moving beyond the assumption that their advisory services work, to develop a basic but solid theory of change and related business plan for the advisory services, and monitoring these to improve them further. Furthermore, there is a need for independent studies on the development outcome of agribusiness-based advisory services in terms of their link with the overall commercial operations of agribusinesses.

An executive summary can be found here.

Access to finance in agribusiness partnerships

F&BKP Office — Thu, 26 Jul 2018 09:53:04 +0000

This paper of the 2SCALE project shares the successes and lessons learned to improve access to finances (A2F). A2F enables smallholder farmers to invest in crop protection and farm inputs to improve yield and quality and help them integrate into commercial markets. The first lesson learned is to integrate functional and technical capacity development. This helps SMEs and producer organizations to reflect on their own business model and situation. The use of an external assessment methodology can provide structure and attention to detail. The second lesson is to understand specific value chain dynamics and specific needs of each farmer segment. It is critical for banks to understand specifics of crop or livestock and the implications of A2F. Furthermore, it is important to understand different dynamics and needs of different farmers. Lesson three are the benefits of value chain finance: it is not limited to tripartile agreements (farmers, aggregator, financier), but includes other downstream partners. Moreover, input suppliers are more likely to offer credit value when they are part of the partnership and involved in capacity strengthening activities. Furthermore, value chain financing minimizes costs for farmers. The fourth is the importance of facilitating linkages. Farmers need help navigating through terms and conditions of the lender, and the lender is more likely to lend when farmers and upstream processors have close relationships. Lesson five is to use ICT to support A2F innovations. It can reduce transaction costs and close information gaps. The sixth lesson is the importance of pilot testing new financial products and services, to ensure that products or services meet the needs of the beneficiary group and is feasible to implement for the financial institution. The seventh lesson is building financial literacy, by tailored training to the needs of the target group. Financial institutions should be involved form the start in designing and implementing the training.

Partnering for value: Lessons from Public Private Producer Partnerships (4Ps) in practice

F&BKP Office — Wed, 20 Jun 2018 14:13:29 +0000

This paper (PDF) by SNV outlines factors that are important for successful Public Private Producer Partnerships (4Ps) business cases. The first factor is size of the private enterprise. While large enterprises are more likely to reach scale, small and medium enterprises (SMEs) are usually more impact driven. For pro-poor impact, it is recommended to set up 4Ps with SMEs that are locally rooted in the area where the producers are located. The second factor is the structure of the market. Some market dynamics are less suitable for a 4P, as is often the case with saturated, unregulated or unstable markets. When there is a stable market and clear investments are needed to meet a certain market demand, there is a clear rationale to build long-term 4Ps. The third factor is focusing on raw materials versus value adding activities. A strong motivator to start a 4P when partners are interested in taking up market functions related to value addition. In contract, when the focus is on raw materials without further value adding activities, there is usually less incentive to invest in each other and start a long-term cooperation. In such cases, it is recommended to look for more open, flexible set-ups where partners jointly explore in which they can still support each other. The last factor is the level of co-ownership and equal participation by all partners; which should be a continuous priority during 4P brokering for success. To achieve a real meaningful partnership, capacity building if often needed for all partners. A major conclusion is that there is a sound basis for the role of 4Ps in rural development. Long-term 4Ps can contribute to development of agricultural value chains. However, many factors should be take in into account to increase the likelihood of success and benefits for all partners.

Agricultural investment funds for development

F&BKP Office — Mon, 18 Jun 2018 09:42:21 +0000

This report (PDF) by FAO explores agricultural investment funds as a vehicle for financing agricultural businesses and projects. Investment is essential for the growth of the agricultural sector. The major sources of capital need to come from private investors, since public investment cannot meet the needs. Public investment can however be effective in stimulating and leveraging private investment in the sector. Private sector investment funds are expected to increasingly benefit from investments in the agricultural sector because demand for food and other agricultural products is expected to continue to increase. Agricultural investment funds, which help mitigate investment risks, increasingly contribute to the agricultural investment growth, as manifested by the proliferation of funds set up to target the agricultural sector. The funds analysed show similarities in some of their structures and management processes. Most investments occur in agribusiness further downstream along the value chain, where investment, expertise and market linkages of investors can have an optimum effect. Analysis shows that agricultural investment funds can play a strong role in fostering agricultural development in developing countries, contributing to growth, productivity increases, poverty reduction and, hence, sustainable development. Most private and public funds were able to invest their resources well. Investment funds offered the possibility to create a common portfolio of investments in agriculture to achieve both financial returns and development impact. Public-private partnerships can be a valuable tool to increase access to finance for the agricultural sector due to its specific characteristics and risk. public capital can play an important role to attract private investors who otherwise might not be willing to risk investment in agriculture. Governments and international donors in agricultural investment funds should carefully consider how to best stimulate investments.

Digital access: The future of financial inclusion in Africa

F&BKP Office — Fri, 08 Jun 2018 10:07:33 +0000

This report (PDF) by the International Finance Corporation and Mastercard Foundation highlights the phenomenal success of digital financial services (DFS) in sub-Saharan Africa. Chapter 10 focuses specifically on digital financial services in relation to agricultural value chains. In the cocoa sector in Ivory Coast, cash payments pose a number of problems for farmers; harvest payments often arrive late and there is a risk of theft. An alternative is paying farmers through DFS, which can be used to enable a full suite of financial services to rural farmer communities. While there is a fairly wide usage of mobile phones and farmers are willing, there are still a number of challenges, for example the poor digital infrastructure in rural areas. Extending the use of DFS for rural and agricultural purposes could bring many benefits to the entire value chain and daily lives of farmers. DFS platforms could be used to link farmers with input suppliers and agricultural buyers. Another article also focuses on farmers in Ivory Coast. Managing income can be particularly challenging for farmers, since they typically receive most of their income during one or two harvest per year, but need to cover expenses throughout. Therefore, it is important for financial service providers to understand seasonal patterns that govern incomes of smallholder farmers. Substantial minority of farmers save, however this has a profound impact on farmers’ ability to budget for the entire year; a poorer farmer who saves has greater chance of feeding the family than a farmer who is better of but does not save. This indicates that encouraging good financial practices, for example by providing easily accessible remunerated savings, would be of great benefit to many farmers. It is more likely to have high adoption levels if they are delivered by DFS, because of convenience, acceptance, and widespread usage of DFS by farmers for more basic transactions.

Future of food: Maximizing finance for development in agricultural value chains

F&BKP Office — Tue, 22 May 2018 13:58:56 +0000

This paper (PDF) by the World Bank provides important details on maximizing finance for development in agricultural value chains. It highlights financing gaps, identifies a range of potential funding sources, and suggests possible actions to help crowd-in more private investment, while optimizing the use of public resources. Current levels of investment in agricultural value chains are insufficient to achieve key development goals including ending poverty and hunger, boosting shared prosperity through more and better jobs, and better stewarding the world’s natural resources by 2030. Crowding-in private investment to help achieve these goals and optimizing the use of scarce public resources will be needed, as will the continued promotion of good governance and environmental and social sustainability. Increasing private sector investment and associated financing will require identifying and understanding market failures currently leading to the sub-optimal private provision of goods and services needed to achieve key development goals. Where the private sector is already investing in agricultural value chains, promoting responsible investment can help increase development impacts. Crowding-in more private investment requires increasing the space for private sector activity, improving the policy and regulatory environment, and considering options for using public financing to improve private incentives and to reduce transaction costs and risks, including blended finance solutions. While these actions can help induce more private investment, there is still a critical need for public resources to finance essential public goods and services such as human capital, agricultural research, and complementary public infrastructure.

Turning farmers into business partners through value co-creation projects: Insights from the coffee supply chain

F&BKP Office — Wed, 09 May 2018 13:41:22 +0000

This study in the Sustainability journal examines the empowerment of low-power, vulnerable stakeholders of global, complex supply chains as one effective strategy to increase value co-creation and to moderate the vulnerabilities that threaten supply chain resilience. Results show that empowerment that is addressed to such a stakeholder group can be a means to develop specific skills, capabilities, and knowledge that favor stakeholder participation in value co-creation projects and can therefore serve to moderate some of the vulnerability factors typical to the coffee supply chain. The study brings two theoretical contributions. First, a theoretical framework of empowerment dimensions was designed. This framework identifies four dimensions of empowerment that can be utilized for a qualitative evaluation of value co-creation projects. Second, the author conceptualized a direct link between empowerment, value co-creation and supply chain resilience. It was demonstrated that empowerment actions are key enablers for increasing the partnership creation within value co-creation projects, enhancing their outcomes and augmenting the resilience of the supply chain. Furthermore, the research provided two outcomes for practitioners. The framework proved to be a useful tool for early qualitative evaluation and can therefore be adopted and adapted by the management of firms and NGOs that interact with vulnerable stakeholders in similarly global and complex agri-food supply chains characterized by power uncertainties and relational complexities. Also, a managerial empowerment model was developed that can be utilized by practitioners to more effectively design empowerment initiatives addressed to increase the outcomes of value co-creation projects and supply chain resilience.

Getting smarter on subsidy: The role of grant funding in smallholder finance

F&BKP Office — Mon, 07 May 2018 13:26:15 +0000

This briefing (PDF) by the Rural and Agriculture Finance Learning Lab aims to bring clarity to the area of grant funding by donors to accelerate the growth of an inclusive smallholder finance market. In smallholder finance, subsidy play a crucial role in accelerating the development of an inclusive market. Grant-based funding is key for market development to offset high real and perceived risks. Currently, there are roughly 25 significant grant funders that contribute grant-based subsidy to develop the global smallholder finance market. These significant grant funders’ strategies all have a series of underlying agendas that drive the granting activity for smallholder market development. Since grant resources are both important and scarce, the authors come up with a set of recommendations. Firstly, donors can increase coordination, cross-learning, and shared initiatives. With each funder pursuing an individual agenda, there needs to be more active conversation about what is being learned, what is still needed, and where collaborative investments can achieve more than the sum of individual actions. Secondly, grants can be structured to reduce transaction costs and re-focus efforts toward long-term, strategic market building activities. Actively working to reduce the burdens on grant recipients will ultimately allow donors to make more progress toward achieving their underlying agendas. Thirdly, donors can further support market development by actively linking short-term catalytic subsidy to long-term subsidy and investment. Grants are important to catalyze market development, but will not be sufficient to meet the longterm subsidy needs of the market.

Critical capital for African agrifood small and medium enterprises

F&BKP Office — Wed, 25 Apr 2018 09:24:02 +0000

This study (PDF) by ICCO cooperation, Rabobank Foundation, AgriProFocus and the Food and Business Knowledge Platform focuses on agrifood small and medium enterprises (SMEs) that form the ‘missing middle’: too large for micro-finance and too small for mainstream banks and private equity firms. The study evaluates the access of risk capital by agrifood SMEs. SMEs are key for establishing sustainable food systems, since they occupy critical positions along the value chains: as input suppliers, off-takers, processors, distributors or otherwise. They constitute a pull factor, aggregating smallholder farmers into the value chain and upgrading the quality and efficiency of farming, leading to a more sustainable food system. At the same time SMEs face difficulties to access capital. A major conclusion is that there are very few investment funds that meet the financing needs of agrifood SMEs; the need for funding is usually under 250.000 USD, whereas most funds start investing from 1M USD. Such smaller investments are tedious and costly for investment funds, even for those set up with the explicit goal to stimulate the development of the agrifood sector. The main recommendation for policy makers is to promote the development of a deliberate graduation strategy by investment funds, that allows them to offer an assortment of services to agrifoods SMEs that match their development stage. Governments and international development agencies can contribute to such a strategy by reorganising their own investment vehicles; giving them a wider mandate and access to relevant – low cost – financial resources to invest in the missing middle.

Financing agriculture for a more profitable rural economy

F&BKP Office — Mon, 16 Apr 2018 09:18:55 +0000

This policy brief (PDF) by CTA discusses the Brussels Development Briefings on finance for agri-value chains. Throughout Africa, concerted efforts have been made to achieve structural economic transformation in agriculture, moving from basic, low-skilled production to diversified, higher value, more sophisticated and competitive production. Yet commercial lending to agriculture is still limited; farmers must still obtain loans from informal sources, with their associated challenges and risks. Value-chain finance (VCF) is the flow of funds to and among various links within the value chain. VCF creates a triangular relation between the buyer, seller and financial institution in the value chain by encapsulating financial service across the three dimensions. However, the benefits VCF present is hindered by, e.g. unfavourable legislation on land and property rights. Potential gains made by the agricultural sector through VCF, to achieve agricultural transformation, can only be realised if there is a sufficient enabling policy environment. Hereby governments and policy-markers need to work together with farmers’ organisations and financial service provides to develop effective, comprehensive solutions. Several policy actions to realise this are needed. An example is the development of agricultural and finance policies that are complementary and address finance from a whole-value-chain perspective. Another is that legislation and regulations should be revised, such as land ownership rights, to reduce duplication and the coast of compliance for parties.

Social entrepreneurship in an inclusive business model: A new business model for sustainable agroforestry

F&BKP Office — Thu, 12 Apr 2018 13:14:01 +0000

This case study aims to identify critical factors for the implementation and management of an inclusive business model, which is presented by Mark-Herbert and Prajer in the book “Entrepreneurship: Development Tendencies and Empirical Approach“. These factors are contextualized at regional and local level in an emerging economy setting as part of an ongoing agro-food project. A number of independent factors are identified that influence the implementation of a new business model. These factors can be seen as a phase in a process of developing an alternative business model, as well as a process of internal acceptance of alternative corporate governance. The first factor is corporate commitment, which requires changing fundamental parts of the existing business model aiming for sustainable development. The second factor is identifying key resources for the development of a new business model, which should be managed not only on a corporate level but requires a local and national connection as well. The third factor is the inclusion of stakeholders in a dialogue to develop an understanding of shared values to enable access to a network. The identification of shared values is not only a strategy of developing the business model itself, it may also offer access to an inclusive network from other sectors and serve as grounds for legitimacy. The most critical factor is related to social entrepreneurship. The involvement of a social entrepreneur enables an effective identification of the most crucial point of intersection between the company and the community. Furthermore, they ensure the inclusion of various stakeholders in the process, aimed at benefiting the local community. Lastly, an evaluation method that takes into account the future values generated through the inclusion of social issues and the values associated with reputation and brand image. Taking these indirect values into account is a critical factor for the continued development of inclusive business models.

The fine line between trusting and cheating: Exploring relationships between actors in Ugandan pineapple value chains.

F&BKP Office — Tue, 20 Mar 2018 10:18:15 +0000

This article by The European Journal of Development Research examined the creation and maintenance of business relationships as well as challenges faced based on semi-structured interviews with farmers, brokers and traders. Inclusive food value chain development is particularly challenging when numerous smallholders engage in production and trade of non-standardised food products within spatially dispersed systems. Drawing on the concept of human activity systems with an emphasis on purposefulness, a situated account of the activities and relations that shape the pineapple value chain in Uganda is provided. Findings show how trust unfolds to mediate exchange relations that structure chain organisation. Reflecting the uncertain business environment and vulnerability of actors, trustful relationships are simultaneously threatened by opportunities for short-term gain, referred to as “cheating”. Embracing the importance of trust-based relational exchanges for sustaining local economic systems can provide critical leverage for development that puts smallholder farmers and other small-scale value chain actors at the centre.

Sell low and buy high: Arbitrage and local price effects in Kenyan markets

F&BKP Office — Tue, 20 Mar 2018 09:32:25 +0000

This paper (PDF) by University of California, Berkeley explores the role of financial market imperfections in contributing to farmers’ apparent inability to exploit arbitrage opportunity. Large and regular seasonal price fluctuations in local grain markets appear to offer African farmers substantial inter-temporal arbitrage opportunities. These opportunities remain largely unexploited: small-scale farmers are commonly observed to “sell low and buy high” rather than the reverse. A field experiment in Kenya shows that credit market imperfections limit farmers’ abilities to move grain inter-temporally. Providing timely access to credit allows farmers to buy at lower prices and sell at higher prices, increasing farm revenues and generating a return on investment of 28%. Significant effect of the credit intervention on seasonal price fluctuations in local grain markets are revealed. Furthermore, general equilibrium (GE) effects shape individual level profitability estimates. The results indicate a setting in which microcredit can improve firm profitability, and suggest that GE effects can substantially shape microcredit’s effectiveness. Failure to consider these GE effects could lead to underestimates of the social welfare benefits of microcredit interventions. When implemented in rural or fragmented markets, microcredit interventions may lead local prices to respond substantially enough to alter the profitability of these interventions for direct beneficiaries and to impact the welfare of non-beneficiaries. The absence of financial intermediation can be doubly painful for poor households in rural areas. Lack of access to formal credit causes households to turn to much more expensive ways of moving consumption around in time, and aggregated across households this behavior generates a large scale price phenomenon that further lowers farm income and increases what most households must pay for food. This suggests that expanding access to affordable credit could reduce this price variability and thus have benefits for recipient and non-recipient households alike.

Agricultural innovation and inclusive value-chain development: A review

F&BKP Office — Mon, 26 Feb 2018 13:13:43 +0000

This paper (PDF) in the Journal of Agribusiness in Developing and Emerging Economies aims to review the knowledge about inclusive value-chain development (VCD) in the context of international agricultural research, and draw out implications for future research and action. Current knowledge is grouped under three headings: the challenges and approaches for inclusive VCD; linking agricultural innovation and VCD; evaluation intervention for innovation and VCD. Results emphasize the importance of combining value-chain approaches with other approaches, including those merging from innovation systems and rural livelihoods frameworks. Policy implications are given for a number of different themes. For example on smallholders who often find it difficult to exploit opportunities presented by expanding markets, due to limited access to land, credit, technical advice and basic knowledge of the market system. Therefore, it is of importance that policies and programs strengthen farmer associations and collective marketing. Furthermore, there are numerous challenges for achieving inclusive VCD, like the limited availability of work vehicles and fuel in public sector, the involvement of large private firms, the lack of facilitators or innovation brokers and the donor demand for quick results. The policy implication is that donors that wish to generate significant returns on investment in inclusive VCD, should plant to provide external support for at least a decade. Moreover, since innovation and VCD are complex processes, multistakeholder platforms need to be flexibly manged, learn from experience and adapt to unfolding events.The policy implication is that while general principles of agricultural innovation and VCD are broadly applicable, rigid models for innovation platform cannot simply be scaled up or transferred from one place to another. Priorities for future research include; 1) Methods for implementing asset-based approaches to VCD; 2) Membership, management and facilitation of multistakeholder platforms; 3) Evaluation approaches; 4) Scaling up the impact of value chain interventions and; 5) Application of a gender lens.

Unlocking smallholder credit: Does credit-linked agricultural insurance work?

F&BKP Office — Tue, 20 Feb 2018 09:55:19 +0000

This paper (PDF) by the World Bank Group reviews possibilities for, and experience with, credit-linked crop insurance, including different types of insurance and credit arrangements. The paper describes the main methods of linkage that are being tested or proposed, identifies the critical features of each method, and discusses the advantages and limitations for the three parties – farmers, financial service providers (FSPs), and insurers. A number of key lessons have been identified. One of the key lessons is that the main reasons that encourage FSPs to offer crop insurance are to reduce default risks, reduce the use of more costly and less efficient risk management techniques, reduce interest rates, raise profits, attract more clients, reach poorer smallholders, compete better with competitors, and generate fee income. However, if the insurance is administered by the FSP as part of its loan process, these benefits have to be balanced against the cost and management challenges faced in training and monitoring loan officers and others who explain the product to smallholders, and the incentives needed for staff members who take on these additional tasks. The authors finish with one general recommendation: the real need for more evaluations and impact assessments of credit-linked insurance, especially when public funds are to be invested in providing relevant public services and subsidies.

Mobile technologies and digitized data to promote access to finance for women in agriculture

Ati van der Honing — Thu, 01 Feb 2018 11:53:12 +0000

This report (PDF) by the World Bank Group provides the state of play of current and promising efforts that use mobile technologies and digitized data to close the gap in access to finance for women in agriculture. The evidence that women both drive agricultural production and rely on it for their livelihoods means that greater financial and informational service provision to women, especially through digital channels, could increase the efficiency and effectiveness of their labor. This report includes three components: a review of the financial characteristics and needs of women in agriculture; a stock taking of initiatives that use mobile technologies and digitized data for agricultural finance and women’s financial inclusion; and an analysis of gaps in existing initiatives that would increase access to Digital financial Services (DFS) by women farmers, laborers and women-owned agricultural enterprises. Four recommendations are given for the World Bank: 1) Leverage the strong role savings groups play in rural women’s lives through digitization efforts that help groups increase efficiency and transparency and encourage women to build their own digital financial profiles. 2) Select successful companies offering mobile savings, insurance and credit products, but who have not targeted women as a key customer segment, and provide assistance in their marketing and promotion to women. 3) Invest in the design of new gender-responsive bundled and customized service offerings that meet the financial priorities and lifecycle needs of women farmers. 4) Drive the collection and use of digitized data to expand bank offerings and financing to women in agriculture.

Integration of small farmers into global value chains: Challenges and opportunities inside the current global demand

Ati van der Honing — Tue, 30 Jan 2018 14:54:59 +0000

This article (PDF) in the journal Tec Empressarial analyze the main challenges and opportunities derived from the insertion of small farmers in global value chains. Global value chains often represent an option for local firms and suppliers in developing countries to get access to high-value markets and new technologies. Whereas the potential benefits from global value chains for medium-income developing countries are well documented, the studies dealing with the impact on low-income countries are scarce. The article suggests that small farmers are intertwined between both challenges and opportunities for development in this globalized market, nonetheless a model for sustainable and competitive insertion can be placed under consideration since aspects like education, access to technology, access to finance, policy support, and innovation can hold the key for turning a crisis into an opportunity. Therefore, in order to analyze how GVC and the upgrading can become opportunities for development, it is necessary to understand that the agribusiness sector is a system as well, and, thereby, it needs a systemic strategy. Small producers, firms, governments, and the rest of the stakeholders must learn more about each other as well as how to cooperate vertically and horizontally. Only through knowledge, communication and support, seclusion can be replaced for an opportunity of competitiveness along the VC. There is no true progress in a world that undermines farmers since they are the productive agents who can hold the key to food security, economic development, and sustainability

Developing investment-ready business cases with 4P

Ati van der Honing — Mon, 29 Jan 2018 11:23:12 +0000

SNV and TheRockGroup published a series of three vision papers based on learnings from the Partnering for Value Project. This project aims to develop best-practices on brokering successful Public-Private-Producer Partnerships (4Ps). The authors believe that such investments will benefit both the enterprises and the smallholder producers. One of the aims of a 4P is to build a profitable business case that can be used to attract external investments. The first paper (PDF) looks at the needs for capacity building support to let 4P partners become finance ready. In the paper concrete insights and recommendations to donors and development organisations are provided, to strengthen the capacities of each partner in the arrangement, so they can build an investment-ready business case. The second paper (PDF) focuses on the gap between the demand and supply for financing from agricultural SMEs. The paper analyzes the finance gap for agricultural SMEs and possible solutions to close it. The aim is to provide both private investors and international donors with recommendations towards their strategy regarding agricultural finance. The last paper (PDF) provides insights and recommendations for continued support after an investment deal has been signed, to ensure that a return on investment materializes in practice. The paper explains what type of capacity building is most effective to let 4Ps become a success, how support can be provided and a practical return on investment can be realized.

Reaching deep in low-income markets: Enterprises achieving impact, sustainability, and scale at the base of the pyramid

Ati van der Honing — Thu, 14 Dec 2017 16:46:47 +0000

This report (PDF) by Deloitte covers 20 well-established inclusive businesses and explores whether and how businesses can reach ‘down pyramid’. Most enterprises that were studied are able to reach base of the pyramid (BOP) populations with critical goods and services and some are able to reach surprisingly deep. Many of these enterprises are operating fairly successfully, both in terms of financial viability and growth. Being asset heavy and selling a push product does not necessarily prevent companies from reaching the BOP in a financially sustainable way. Moreover, selling to customers across a broader range of incomes is clearly possible. Regardless of sector or products sold, enterprises can improve their chances for success by using a number of common business model design tactics. Most enterprises in the study received some form of subsidized capital, which was often very helpful in mitigating start-up risks as well as navigating the challenges inherent in BOP markets. It was often received at an early stage and then replaced by more market-rate capital, suggesting subsidy does not preclude businesses from eventually becoming self-sustaining. While all the enterprises researched had an obvious social impact from the goods or services sold to BOP customers (access to finance, greater food security, etc.), these enterprises also yielded a number of less obvious development benefits. Based on the research, supporting for-profit enterprises that provide needed goods and services to the poor is a viable way to drive a development agenda.

Please read more about the report in this blog.

Contracts between smallholders and private firms in Mozambique and their implications on food security

Ati van der Honing — Wed, 06 Dec 2017 15:47:10 +0000

This working paper (PDF) by the United Nations University World Institute for Development Economics Research (UNU-WIDER) focuses on the role of contract farming agreements between smallholders and private investors in rural contexts. These contracts can take different forms, but in general are agreements under which producers commit to supply produce to a buyer firm. The focus of this paper is on contracts’ effects on food security in Mozambique. Contrasting effects may be expected: on the one hand, the effects of increased income, while, on the other, the effects of giving up food production and of monopsonistic market relations. Overall, the main findings of the paper indicate that selection in contracts is the main driver of the observed differences. Participating in contract farming increases household income, but has no effect on the variables measuring food security, nor on food production. Therefore, it is concluded that most of the observed differences are due to selection: more food secure households have higher probability of entering into contracts. Households that are able to enter into contract farming agreements are those households that are already food secure before the contract is established. The last conclusion is that contracts have a differentiation, not a specialization effect. They ‘add up’ to the usual livelihood strategy, but are not able to radically change it. This is consistent with other evidence in the continent since risk associated to a complete reliance on cash crops and on a monopsonistic buyer are too high.

NGOs in inclusive business: Contradiction or a complementarity?

Ati van der Honing — Wed, 29 Nov 2017 16:44:44 +0000

This blog by the Practitioner Hub for Inclusive Business discusses why NGOs should engage in inclusive business and what role they can play. Many still think that traditional NGO work and business approaches are a contradiction. Those who think they are complementary approaches may have a simple answer: Donor money is decreasing, and there is a need to focus on more sustainable and efficient usage of resources. But additionally, NGOs have strong local networks and deep technical knowledge on, for example, local value chains. They have established relationships to various players globally, and on the ground. And most importantly, through their work, they have gained the trust of the ultimate target group of all inclusive business efforts: the local people. Nevertheless, many international NGOs are still struggling to work out how they can best leverage these assets and find their role in the inclusive business landscape. There are three major roles that NGOs play currently: 1) Partnering with companies to establish or support inclusive business models. 2) Setting up inclusive businesses of their own. 3) Acting as impact investors. All roles described are fairly new territory for NGOs, and many have hard-earned experiences from first failed attempts or various project-iterations. But also those who are already experienced players in inclusive business continue to struggle with strategy, structure, internal buy-in and managing expectations and people.

This related blog discusses how to create a successful company from an NGO program.

The role of digital payments in sustainable agriculture and food security

Ati van der Honing — Wed, 22 Nov 2017 14:40:17 +0000

This report (PDF) by Better Than Cash Alliance and Asia-Pacific Economic Cooperation (APEC), examines how shifting to digital payments can provide powerful solutions to help countries improve agricultural productivity and ensure food security, bringing higher incomes and greater financial inclusion. The findings show that expanding digital payments and building responsible digital payments ecosystems are fundamental to creating a sustainable agricultural sector and addressing poverty and hunger. Additionally, digital payments can help to address the wide gender gap in agricultural opportunities and outcomes. Investing in agricultural productivity and capacity by enabling more digital payments is likely to have outsized returns. The disadvantages of cash are magnified for people in rural and remote communities. However, digital payments have been slow to catch on with smallholder farmers. In order to replace cash, digital payments must offer a greater value proposition and operate within a far broader digital payments ecosystem. The report identifies priority actions for different stakeholders. Governments should encourage adoption of digital payments by incorporating training on their benefits and use into existing channels for agricultural education. Agribusinesses should analyze the business case for digitizing aspects of the value chain, including bulk payments to farmers and supplier credit. Payment providers, governments, and aid organizations should work together to identify existing food aid, social transfers, and subsidies that benefit smallholder farmers and could be made more efficient through digitization.

Small Grants, Big Impacts

Ati van der Honing — Wed, 15 Nov 2017 09:45:32 +0000

This policy brief (PDF) by Both ENDS shows how small grants work, why they are effective, and how governments, international institutions and donors could use them to ensure that funding comes to the right place. Development and climate financing of large international donors and financial institutions rarely flows down to the poorest and to those who are hit hardest by the consequences of climate change. Thousands of grassroots groups and organisations are working worldwide to protect and improve the environment, human rights and the living conditions of local communities. Small grants funds, which are set up locally, can form the link between large donors and these grassroots organisations. These funds, which are national or regional, and receive also funding from large donors, pass it on in smaller amounts to local organisations and groups. Small grants funds know the local situation thoroughly, as they maintain close contact with the people and groups that need support. These funds not only provide financing, but also share information and knowledge, help build networks and conduct joint lobby activities. Recipient organisations always decide for themselves what they spend the money on. While an increasing number of private donors acknowledge the role played by small grants funds, major international funds are still largely unaware of them. Bilateral and multilateral donors, too, could reach local actors more effectively if they were to make greater use of these kinds of funds.

Picture-based crop insurance: Is it feasible? Is it sustainable?

Ati van der Honing — Tue, 31 Oct 2017 08:58:33 +0000

This blog by the CGIAR Research Program on Policies, Institutions and Markets examines the feasibility and sustainability picture-based crop insurance (PBI). By taking regular pictures of their crops on smartphones, farmers can reliably document damage after a natural calamity and provide evidence that the crop was managed appropriately until that point. This can minimize the cost of loss verification. Two project notes describe the results from an evaluation of PBI in India, one focusing on the economic viability and sustainability (PDF) and the other on the feasibility of measuring damage using smartphone pictures (PDF). These project notes show that farmers are able and willing to take enough pictures of sufficient quality for loss assessment. They are also willing to pay more for PBI than for weather index-based insurance. Additionally, damage is visible from smartphone pictures and can be quantified by agronomic experts. Picture-based loss assessments are strongly correlated with yields and improve upon weather index-based measures. Based on these findings, PBI offers a promising alternative to existing insurance products for poor farmers. However, before scaling up, some challenges need to be addressed. Further automated image processing and loss assessment can attract more interest from private insurance companies and government. Also insurance products that work for other crops besides wheat should be developed. Furthermore, it might be necessary to aggregate images taken by the smartphone holders into a common pool that insurance companies could also use to evaluate damage on the poorer villagers’ plots, who can’t afford smartphones.

New horizons: Accelerating sustainable development through inclusive business in Kenya

Ati van der Honing — Thu, 26 Oct 2017 15:08:20 +0000

This report (PDF) by the Business Call to Action discusses how inclusive business models be scaled to accelerate the achievement of the Sustainable Development Goals. Kenya has a vibrant inclusive business community that is already tapping into the base of pyramid (BoP) market and contributing towards the SDGs through core business. A variety of opportunities, along with successful and emerging business models, exist across sectors. To accelerate the impacts of inclusive business on the SDGs, a supportive ecosystem needs to foster dialogue and collaboration. Creating an enabling business environment in general, where those who are reaching the BoP with quality products and good business ethics are rewarded, forms the basis of the response. However, inclusive businesses often face specific challenges, such as inadequate infrastructure to reach potential customers; low awareness among target customers on products such as insurance; or a lack of capacity among BoP suppliers. To leverage the impact potential of inclusive business to reach the country’s development targets, both national and county level governments – and their partners – should consider additional means to support and enable these models to scale. Some of the measures include public private partnerships, smart end user subsidies, or collaboration in awareness raising and training for BoP consumers, employees and producers to enable them to fully engage in the economy.

This report is part of a series of three which highlight the market and SDG potential of inclusive business across sectors in Kenya, the Philippines and Colombia.

How financial inclusion would benefit smallholder farming in Senegal

Ati van der Honing — Wed, 25 Oct 2017 14:15:42 +0000

This working paper (PDF) by the Institute for Economic and Social Studies (IEES) analyzes the extent to which farmers are credit-constrained and the underlying generating mechanisms in the specific agro-ecological region of the Senegal River Valley. Additionally it looks at how financial inclusion through the elimination or the reduction of credit constraints would benefit smallholders. Credit constraints are among key challenges to unlocking the great economic and social potentials of small farm agriculture in sub-Saharan Africa. It is recognized that credit constraints come in different forms to the extent that they translate into market entry barriers at the pre-application stage or contribute to deteriorate the credit profile at the post-application stage. The results suggest that credit constraints, mostly originated from high transaction costs and high risk, are harming farmers’ performance, and access to credit leads to increased yields and labor productivity. As far as improving access to credit is concerned, the results suggest to first distinguish between the initial, pre-application stage of removing the barriers to credit market entry (mostly in the form of transaction cost constraints and risk constraints), and the post-application stage that consists of tackling mostly quantity constraints associated with inadequate collaterals or insufficient returns. It is expected that easing these constraints would promote financial inclusion, and help tap into the great potential of farming activities through increased performance and improved livelihoods for a large share of the population, especially in rural areas.

Four strategies for overcoming barriers to agricultural financing

Ati van der Honing — Thu, 05 Oct 2017 14:31:41 +0000

This highlight by the Microfinance Gateway discusses the engagement of formal financial service providers (FSPs) in the agriculture sector. Less than 2% of the demand for global financing by smallholder farmers is met by financial institutions. This is due to a number of risks that are specific to agriculture, which are difficult to mitigate and insure against. In addition, the lack of coordination within value chains, and the bulky, seasonal and long-term financing requirements for food products pose serious challenges. Adding to these challenges is the general lack of capacity within financial institutions to properly assess returns on investment in agricultural activities. However, the growing global demand for food is providing more opportunities for investments. In recent years, an increasing number of financial institutions have pioneered innovative experiences related to the delivery of a wide range of agricultural financial products and other investment vehicles, which tend to be more inclusive of poorer rural families that depend on agriculture. Drawing from the common traits of such experiences, four key strategies for addressing bottlenecks and overcoming barriers emerge: 1) Improve financial institutions’ understanding of the agricultural markets and their capacity to assess business opportunities. 2) Diversify and adapt products and services for different actors of the value chain. 3) Establish strategic partnerships with non-financial service providers, for transferring non-financial costs to specialized entities. 4) Identify alternatives to guarantees based on physical collateral.

Enabling environment and smallholder finance: A complex relationship

Ati van der Honing — Wed, 27 Sep 2017 14:31:17 +0000

This analysis by Initiative for Smallholder Finance and Rural & Agricultural Finance (RAF) Learning Lab discusses the relationship between the enabling environment and smallholder finance. This relation is complex, and to date, there is limited research on the link between the success of specific smallholder products and services and factors in the enabling environment. This analysis highlights some early learnings from the Mastercard Foundation’s rural and agricultural finance portfolio, which consists of ten programs spanning 26 countries in sub-Saharan Africa. The smallholder finance environment is determined by at least four key elements, including the regulatory, financial, knowledge, and digital infrastructure of a given country or context. Policies by government and regulators can encourage or discourage lending to smallholders. If governments regulate the use of collateral and streamline land registration procedures, the risk of agricultural lending decreases and financial institutions (FIs) are encouraged to enter the market. Also the market understanding has an impact. Generally, financial service providers (FSPs) lack a mature understanding of smallholder farmers, constraining potential borrowers from designing effective services and products. Furthermore, both the availability and price of capital affect the success of new business models. Digital infrastructure, including agent networks, is needed for cost-saving mobile-based solutions to take off. Last, building connections between value chain actors and smallholders is challenging and costly but critical to boosting product development and uptake.

Toward more inclusive and sustainable development of Zambian aquaculture

Ati van der Honing — Mon, 18 Sep 2017 14:45:38 +0000

This policy brief (PDF) by the CGIAR Research Program on Fish describes opportunities and approaches for inclusive and sustainable development of the aquaculture sector in Zambia. Three innovative, inclusive approaches can be considered “good practice” to achieve impact at scale. The first is pro-poor microfinance mechanisms, with a specific focus on youth and women. Increasing the access of small-scale farmers to microfinance is considered critical to help them invest in technologies. The second approach is a decentralized seed distribution model to improve access to seed. In this model, breeder farmers produce and supply fingerlings to cluster farmers for grow-out, which enables better coordination and cooperation between farmers and creates local “production zones”. The third approach consists of inclusive business models (contract farming) and out-grower schemes. A private sector fish farm and hatchery contract small-scale fish farmers to help them increase production through the provisioning of seed and feed on a loan basis, which can be recovered when the private sector company purchases fish after harvesting. Overall, it is recommended to promote entrepreneurship and the development of small- and medium-sized enterprises through inclusive business models that strengthen vertical and horizontal relations between actors in the aquaculture value chain. For example, out-grower schemes and private-public partnerships can increase small- and medium-scale farmers’ access to inputs, services, knowledge and markets in order to improve production and productivity while enabling large-scale producers to increase their market share.

Access to finance from different finance provider types: Farmer knowledge of the requirements

Ati van der Honing — Tue, 12 Sep 2017 14:19:32 +0000

This article (PDF) in the journal PLOS ONE compares farmer knowledge of the requirements to obtain finance with the actual requirements set by different finance provider types. This can provide valuable insights to policy makers about ways to improve farmers’ access to finance. Data for the study were collected in Indonesia, from 43 finance providers and 434 horticultural farmers. In Indonesia banks and MFI provide credit, whereas farmers’ associations and traders provide in-kind finance, and agricultural input kiosks provide flexible payment for inputs. It is found that the most important requirements to acquire finance vary among the finance provider types. Banks perceive character in terms of the history of loan repayments, the capacity of farmers to pay back the loan, and farmer ability to manage their farms as important requirements. MFI focus on character and spouse knowledge of the finance application. Furthermore, farmers’ associations require farmers to have membership, whereas traders perceive farmer ability and presence of a sales contract as the most important requirements. Agricultural input kiosks perceive the character of the farmer to be the most important requirement. Results also show that farmers generally have little knowledge of the requirements of each type of finance provider. Farmer knowledge is positively associated with finance experience, especially for finance from farmers’ associations. Awareness campaigns, with farmers involved who have experienced with different sources of finance, could improve farmer access to finance by increasing farmer knowledge of the diversity of requirements among the finance provider types.

Scaling inclusive business models at the nexus of poverty and environment: Case studies from the Philippines

Ati van der Honing — Tue, 05 Sep 2017 11:44:20 +0000

This report (PDF) by the United Nations Development Programme (UNDP), the Istanbul International Center for Private Sector in Development and Business Call to Action, examines inclusive business (IB) models at the nexus of poverty and environment in order to demonstrate how to scale them up successfully. The paper focuses on three inclusive agroforestry businesses in the Philippines. Investigation into these companies’ IB models reveals the fundamental components of success for the companies, farmers, the ecosystem, local value-chain actors and the natural environment where production takes place. These include: 1) Fair labour practices and adherence to international market prices for enhanced farmer incomes and income security; 2) Intensive capacity building, knowledge, skill building and farmers’ access to quality inputs, facilities, technical assistance and organizational development; 3) Alignment of operations with existing land-use and development plans, and use of eco-friendly agricultural practices to reduce environmental impact; 4) Innovative management and convergence schemes to streamline their value chains, increase the efficiency of resource management and strengthen relationships among local ecosystem actors; and 5) Commitments to meet global quality and sustainability standards through applications for product and process certification. Companies should continuously engage local governments and other local players in dialogue, and offer innovative products and services with clear value for local partners. Inclusive business partnerships can also be supported by enhanced government procurement policies to facilitate public-private partnerships. In conclusion, the research underscored the potential of inclusive agroforestry models to achieve positive social and environmental impacts.

Female-led enterprise & agribusiness development

Nynke — Wed, 23 Aug 2017 13:19:13 +0000

This blog from SNV elaborates on the positive impacts of female-led enterprises and agribusiness development for delivering sustainable development. The author, Raymond Brandes, believes that climate change adaptation and mitigation, nutrition, women’s economic empowerment and gender equality are important cross-cutting issues to be addressed in agribusiness agendas. Achieving sustainable development is impossible without addressing inequalities which hinder people from accessing opportunities and utilizing their potential to change their own situation. Gender based inequalities deepen the disadvantages of people, reinforcing their poverty. SNV’s programme works with its partners to enable female farmers/entrepreneurs to enhance their productivity and income to improve their living condition. If business is to make a difference in their lives, it must actively engage with smallholder farmers by providing them opportunities to move from simple subsistence to producing a marketable surplus while still investing in their own land, or by supporting the creation of higher value products from their produce. As women represent a significant portion of smallholder farmers and constitute the more disadvantaged group of the community they are a key target of any engagement. Private sector actors can achieve this through out-grower schemes that provide nearby smallholders with the inputs, finance and technologies/techniques required for successful production. To the same ends, contracts with farmer cooperatives can also enable private sector actors further up the value chain to support smallholders.

The blog is based on a study carried out under the ‘Enhancing Opportunities for Women’s Enterprises’ (EOWE) programme, which is being implemented between 2016 and 2020 in Kenya and Vietnam with funding from the Netherlands’ Ministry of Foreign Affairs under the ‘Funding Leadership Opportunities for Women’ (FLOW) framework.

Not by technology and money alone: The importance of functional capacity strengthening in agribusiness partnerships

Ati van der Honing — Mon, 21 Aug 2017 10:22:17 +0000

This collection of case studies (PDF) by ICRA and gives insight into the 2SCALE project, through 15 stories in four countries (Benin, Ghana, Mali and Nigeria). The main themes that emerge are: how building relationships and strengthening functional capacities (or soft skills) are necessary pre-requisites to technical improvements; the importance of organisations becoming more empowered; how to sustain support services beyond the project life; and a focus on gender and youth issues. One case focuses on Nigerian cereal farmers’ organisations. Getting better organized and linking up with aggregators from Nestlé, the farmers now get a better deal in supplying sorghum for the company’s products. Soft skills coaching also helped women farmers to add their voice to ongoing negotiations. Another story relates how strengthening business linkages at the cluster level constitutes an alternative to “hard” guarantees for young female vegetable growers to get credit. Strengthening organisational skills and business relationships led to farmers being able to repay their loans on time. This in turn built the confidence of the credit service to further expand their credit scheme, giving farmers more options. From these stories, it can be concluded that in addition to access to better technologies and money smallholder farmers and related business actors need a deeper understanding of how value chains and markets work, as well as strong networks and business relationships. For this, they need to develop functional capacities that give them the needed skills, confidence, mind-set and attitude to achieve lasting improvements.

Can flexible agricultural microfinance loans limit the repayment risk of low diversified farmers?

Ati van der Honing — Wed, 16 Aug 2017 08:29:37 +0000

This article in the journal Agricultural Economics investigates the credit risk of microfinance loans with flexible repayment schedules for crop farmers. Flexible repayment schedules allow a redistribution of principal payments during periods with low agricultural returns to periods when agricultural returns are high through predefined grace periods. For the study a data set from a commercial microfinance institution in Madagascar is used. A propensity score matching is applied to investigate how different numbers of grace periods reflecting different levels of production diversification affect the credit risk of crop farmers. In this attempt, three delinquency categories reflecting various levels of credit risk are assessed. Moreover, the specifics of the regions where loans were disbursed are considered. The results reveal that loans with predefined grace periods show significantly higher delinquencies. This effect is significant over all three delinquency categories for loans disbursed to low diversified crop farmers. For the more diversified farmers, this effect is only significant for the lowest delinquency category. Hence, predefined grace periods might bridge periods with low agricultural returns but come at the cost of higher credit risk for the lender. The magnitude of these effects is, however, small.

Contract farming as part of a multi-instrument inclusive business structure

Ati van der Honing — Tue, 08 Aug 2017 13:43:42 +0000

This article in the journal Agrekon discusses contract farming agreements, which are presently being restructured to form part of more complex inclusive business set-ups. Additional instruments, alongside contract farming, are implemented to overcome the challenges of contract farming and to adapt to the policy environment in which the different stakeholders operate. This paper develops a theoretical framework that gives insight into how these complex entities are structured and operate in a developing country context. This theoretical analysis takes a holistic approach by adopting elements of existing theories to form a new critical research paradigm. This new framework is then tested on two complex inclusive businesses that aim to integrate smallholder farmers into the commercial value chain, but which have each implemented a different institutional set-up developed around contract farming arrangements. It finds that a high dependence by the offtaker in the first case study stimulates a higher level of commitment and investment by this stakeholder in the contract arrangement. In turn, this increases the asset specificity aspect, which then requires safeguards to ensure the smallholders adhere to the contractual agreement. A higher dependency in this particular study also resulted in a higher number of smallholders being engaged in the contract, requiring mechanisms to efficiently monitor and coordinate them.

Institutional versus non-institutional credit to agricultural households in India: Evidence on impact from a national farmers’ survey

Ati van der Honing — Mon, 07 Aug 2017 13:02:42 +0000

This article in the journal Economic Systems investigates the role of institutional credit on farm income and farm household consumption expenditures in India. A goal of agricultural policy in India has been to reduce farmers’ dependence on informal credit. To that end, recent initiatives are focused explicitly on rural areas and have a positive impact on the flow of agricultural credit. Despite the significance of the above initiatives in enhancing the flow of institutional credit to agriculture, the links between institutional credit and net farm income and consumption expenditures in India are not very well documented. Therefore, this study was performed using large, national farm household level data and IV 2SLS estimation methods. Findings show that, in India, formal credit does indeed play a critical role in increasing both net farm income and per capita monthly household expenditures of Indian farm families. Finally, it is found that, in the presence of formal credit, social safety net programs like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) may have unintended consequences. In particular, MGNREGA reduces both net farm income and per capita monthly household consumption expenditures. On the other hand, in the presence of formal credit, the Public Distribution System may increase both net farm income and per capita monthly household consumption expenditures.

Index-based agricultural insurance products: challenges, opportunities and prospects for uptake in sub-Sahara Africa

Ati van der Honing — Mon, 31 Jul 2017 12:19:39 +0000

This article (PDF) in the Journal of Agriculture and Rural Development in the Tropics and Subtropics reviews factors and challenges that may explain the low uptake of index-based insurance products in Sub-Saharan Africa (SSA). The objectives of this paper are to assess and document 1) the insurance products available to farmers, 2) factors influencing farmers to purchase insurance products, 3) challenges limiting farmers accessing to insurance products and 4) opportunities that can positively enhance uptake in SSA. This review reveals that area yield index insurance, index-based crop insurance and index-based livestock insurance have been piloted or implemented in the region. These products have demonstrated their potentiality to replace traditional agricultural insurances, because they might be provided at lower costs to be even affordable to farmers with lower and mid on-farm income. The uptake of these products was found to be positively correlated with on-farm income, savings, literacy, and family size; and negatively correlated with premium rate, age of farmer, land tenure and farm size. Challenges that impede uptake of index-based products include weakness of regulatory environment and financial facilities, basis risk, quality and availability of weather data, capacity building of stakeholders (farmer, insurer, and regulator), and lack of innovation for local adaptation and scalability. The current gap between high promise and low uptake calls for farmer-driven product design, strong public-private partnerships and improved quality and availability of weather data.

Webinar materials: Using Psychometrics for smallholder credit scoring

F&BKP Office — Wed, 26 Jul 2017 13:45:17 +0000

In this webinar the Entrepreneurial Finance Lab (EFL) shares insights on using psychometric to create data for smallholder credit scores. The EFL tries to combat financial exclusion through using a interactive assessments that not only use generally available data, but also captures certain characteristics of smallholders that are predictive of credit risks. In this way, farmers that were ‘unbankable’ are able to attain a loan. The addition psychometric data contains data on attitude, control, entrepreneurial potential, and social behavior and are combined with other available data. In addition, the Lab also uses an SMS assessment mimicking a conversation with farmers, which is then also analysed. The programme combines all data, leading sometimes to an increased acceptance rate of financiers with 20%. In the webinar Juhudi Kilimo presents a concrete case study where his company uses EFL’s approach for their smallholder financing model.

Inclusive businesses in agriculture

Nynke — Fri, 21 Jul 2017 15:03:54 +0000

This book (PDF) published by African Sun Media scrutinizes the concept of inclusive business and investigates how inclusive businesses work and who benefits from them. The book focuses on the South African agricultural sectors and relates to three ongoing restructuring processes in South Africa, e.g. land reform and the necessity to integrate smallholder and emerging farmers within commercial agriculture; broad market restructuring in the agricultural sector; and the need to go beyond the more basic inclusive instruments, such as contract farming. Inclusive business is hailed as a win-win scenario for the development of poor communities; however, its exact benefits for smallholders are not clear. This book aims for a thorough understanding of the range of inclusive businesses in agriculture by examining: the structures they implement, the actors involved, and whether they are effectively inclusive of smallholders. It presents a range of case studies and is therefore empirically based and practically oriented. By offering a critical assessment of inclusive businesses overall, it allows for a better perception of what works where, and under which conditions. It provides useful insights that will benefit smallholders, agri-businesses, support groups, policy makers and investors who are willing to promote more inclusive businesses, that foster a better integration of smallholders into commercial value-chains and a more equitable and sustainable agricultural sector.

Improving the positive impacts of investments on smallholder livelihoods and the landscapes they live in

Nynke — Thu, 06 Jul 2017 14:30:53 +0000

This working paper (PDF) from Tropenbos International, FMO, KIT, and Hivos aims to to stimulate debate on how to improve positive impacts from investments on smallholder livelihoods and to move from ‘do no harm’ risk mitigation approach towards a ‘do good’ impact approach. Aimed primarily at investors, in just 15 pages it highlights how to work profitably and equitably with smallholders, and how to promote better land governance and livelihoods. The publication discusses the international guidelines that show the bottom line, and presents case studies that provide solid and evidence-based examples of projects, business models and investment funds that are implementing or financing alternative and innovative land related models in collaboration with smallholders and local communities. The publication concludes with a ‘checklist’ to help investors move from a ‘do no harm’ to a ‘do good’ approach. These are grouped in three areas: 1) recognize rights; 2) effectively engage; and 3) “think landscapes”. Some of the advises of the authors are: to understand laws and customary practices and acknowledge local values, understand community diversity and always start with good-faith building activities and meetings before the investment is made. In addition the focus on landscape level thinking, through understanding and mapping the local landscape and take into account the impact on local food security.

The authors are organizing an event on September 14, 2017 to discuss this working paper and to gather input for the second version of this document. For more information on this event, please click here.

The impact of remittances in Lesotho, Malawi and Zimbabwe

Ati van der Honing — Tue, 27 Jun 2017 10:15:46 +0000

This report (PDF) published by FinMark Trust provides an analysis on the impact of cross-border remittances on the lives of households in Malawi, Lesotho and Zimbabwe, and the role that access to financial services plays in shaping that impact. Remittances play a complex role in poverty alleviation. They contribute to improving food security. When the origin household practices farming, remittances may do more to support food security by paying for seasonal agricultural inputs, and helping recipients to grow their own food. This dynamic is one of the reasons that migrants from Malawi, which is less urbanized and more agricultural, remit less frequently than migrants from Lesotho and Zimbabwe. For many remittance recipients, access to goods such as fertilizers and education are predicated on having access to sufficient cash. The cash supplied by remittances enables access to these product and service markets, which have effects on agricultural productivity and the development of human capital. In all three economies, remittances play a vital role in supporting at-risk households, and in Lesotho and Zimbabwe, remittances are also of macroeconomic significance. By keeping children fed and educated, remittances help to improve the long-term growth prospects of impoverished nations. Facilitating the development of more affordable and efficient remittance markets thus continues to be an important pro-poor policy initiative. However, due to the heterogeneity of markets, there is a need for tailored approaches.

Responsible agriculture finance for smallholder farmers in Tanzania and Uganda

Ati van der Honing — Mon, 26 Jun 2017 10:16:32 +0000

This report (PDF), commissioned by the MasterCard Foundation, analyses input credit for smallholder farmers in Tanzania and Uganda. Agricultural inputs (either cash or in-kind) are provided on credit and the farmer reimburses the provider after harvest. Input credit products for farmers in Tanzania and Uganda are often ‘bundled’ with other compulsory services and fees. As a result, smallholder farmers may not fully understand the pricing structure and compulsory nature of bundled credit products, and may be taking on more risk than they can handle. It appears there may be a number of smallholder farmers who are indeed struggling to comprehend input credit bundles and the associated relatively high but variable risks of input credit. The objective of the study was to improve The MasterCard Foundation’s (MCF) understanding of how agricultural finance can be delivered in a responsible way. It was found that MCF could encourage governments to; (1) establish price ceilings and price floors on agricultural products, (2) relax current restrictions on micro-finance institutions, (3) create a certification program for crop inputs, and (4) set up a formalized customer complaints department about concerns with financial service providers. MCF could also work directly with financial institutions to modify and improve upon existing input credit products; and encourage them to provide a more comprehensive set of credit products that targets all entities within the agricultural value chains.

Helping women control their financial lives through digital financial services

Ati van der Honing — Mon, 26 Jun 2017 10:12:34 +0000

This expert opinion, published by the Center for Financial Inclusion, discusses how digital financial services (DFS) can help women to control their financial lives. One important benefit of DFS to women is privacy. Since digital transfers are invisible to others, protecting the recipient from the possible demands of friends or family, they give a woman greater independence around how she saves or spends her money. A study in Niger found that using mobile transfers to deliver cash payments increased women’s autonomy and decision-making. The households of these women were more likely to cultivate marginal cash crops primarily grown by women, which allowed women to earn more money. In other cases, it is the record-building that attracts women to DFS. The fact that financial service providers can view digital transactions means that women can build credit histories, which ultimately enable them to access loans and other financial products such as insurance. Additionally, DFS help women through crisis, because women can connect with their social networks of family and friends, quickly communicate their need and receive financial support via mobile money from remote contacts. This was the case in Kenya. According to the author, DFS not only give women greater control over their finances, but also over their time, since they do not have travel to a branch and wait in line.

The fund manager perspective: Moving the needle on inclusive agribusiness

Ati van der Honing — Wed, 07 Jun 2017 10:07:28 +0000

This briefing note (PDF) by The Initiative For Smallholder Finance describes how different impact-oriented agribusiness funds combine public and private capital to build a more inclusive agricultural market. Agribusiness in emerging markets has seen an increase in private equity and other forms of investment. Still, investors have been slow to embrace the agriculture market because of high risks and uncertain returns, and relatively few funds focus on small rural enterprises and smallholder farmers. However, the growth of an inclusive agricultural market is both necessary and can still be good business. In this context, impact-driven agribusiness funds emerge that combine public and private capital to align financing for inclusive agricultural market growth. With an inclusive agricultural market in mind, the authors recognize the inherent convergence of public and private interests and recommend that: 1) Donors can think more strategically and holistically about how they interact with agribusiness funds as a smart subsidy option for leveraging private capital in pursuit of market development and impact; 2) NGOs and technical assistance providers can move from service provider to incubator by looking across their current portfolios to package pipeline or insight that can spark new investment; 3) Fund managers can make long-term bets around trends and impact goals that will drive market development and pay off over time. Notable investment trends in the agriculture and rural development sector include more inclusive market development that incorporates smallholder farmers into supply chains.

Digitizing value chain finance for smallholder farmers

Ati van der Honing — Wed, 24 May 2017 10:05:11 +0000

This focus note (PDF) by the Consultative Group to Assist the Poor (CGAP) explores opportunities and emerging models in digital value chain finance. Particularly it looks at new technologies that can break down barriers to delivering financial services to a greater number of smallholder farmers. The authors identify three use cases for digitizing financial services in agricultural value chains: 1) Improving the efficiency of financial transactions. From bulk payments between buyers of agricultural commodities and their suppliers to digitized loan disbursements and repayments, digital payments offer some advantages over cash, while also posing new challenges of their own; 2) Overcoming barriers to providing financial services. Branchless banking and new data on customers allow for digitizing savings, credit, and insurance products—making them more affordable and accessible to a greater number of smallholders; 3) Improving market opportunities. Digital trading platforms, digital warehouse receipts, and digital invoice discounting help smallholders to maximize the price they get for their crops. Several barriers to digitization remain, including poor mobile network and agent infrastructure in rural areas, and uncertainty surrounding the cost of services and the quality of data collected on smallholder customers. But, according to the authors, the potential is also clear: digital value chain finance holds the promise to tightly integrate millions of smallholders into value chains.

More about this publication and the benefits of digital finance for smallholder farmers can be found in this blog by CGAP.

TechnoServe initiative for inclusive agricultural business models

Ati van der Honing — Tue, 09 May 2017 07:42:31 +0000

This publication (PDF) by TechnoServe presents four case studies of large and influential food companies and agribusinesses that scale inclusive business models. They show the intersection of multinational corporations and sustainable smallholder production. These projects span a broad variety of contexts: sustainable mango production in India by the Coca-Cola Company, local rice and date sourcing in Egypt by the Kellogg Company, smallholder grain and cassava supply chains in Uganda and Mozambique by SABMiller and AB InBev, and tomato and potato seed distribution in Kenya by Syngenta. Each case has its own key takeaways, but the following overall guidelines were developed for companies seeking to implement inclusive business models: 1) Start by defining concrete commercial and social impact objectives. Work with key internal stakeholders across divisions within the company to define and align on specific objectives for the inclusive business model; 2) Inclusive business models require detailed, quantifiable business cases in order to gain traction within multinational corporations; 3) Achieve internal alignment. Involve a steering group that includes local, regional, and head quarters stakeholders from different divisions along the entire process from the start; 4) Operational excellence and skillful implementation, including proper consideration of context, are required to realize potential value and impact; 5) There should be focus on the quantified impact and value story, complemented with broader key performance indicators to ensure holistic delivery.

Agricultural leasing market scoping study for sub-Saharan Africa

Ati van der Honing — Mon, 08 May 2017 08:45:58 +0000

This report (PDF) by Financial Sector Deepening Africa (FSDA) and Nathan Associates applies a market systems approach to agricultural equipment leasing in sub-Saharan Africa in order to capture a holistic view of how the leasing market currently works. The study has analysed core market functions (supply and demand), as well as supporting market functions and the policy environment. A country selection framework has examined the breadth of the financial sector, relative importance of agriculture in the overall economy, total employment provided by the agriculture sector, presence of major agricultural equipment suppliers and the presence of leasing companies. It has led to a closer analysis of the following countries: Ethiopia, Ghana, Kenya, Mozambique, Nigeria, Tanzania, Uganda and Zambia. Additional references have been made to South Sudan and Liberia, offering general insights on agricultural leasing in a selection of fragile and conflict-affected states, as well as to Rwanda. Constraints throughout the market system for leasing currently create an environment where effective demand to lease equipment is limited and the incentives for financial service providers to offer agricultural leasing products are low. Most farmers are unaware of how leasing works and what its potential benefits are compared to traditional bank loans. Financial service providers do not see sufficient market opportunity to justify investing in the skills and capacity required to effectively offer leasing to the agricultural sector. At the same time, there are significant benefits attached to supporting leasing in sub-Saharan Africa. The availability of financial leasing for agricultural equipment can greatly increase mechanisation, especially for smallholder farmers, and therefore has potential to drive meaningful development impact.

Inclusive agribusiness

Ati van der Honing — Wed, 03 May 2017 14:54:37 +0000

These six papers by Global Donor Platform for Rural Development, the Global Development Incubator (GDI), BEAM Exchange, and Wageningen Centre for Development Innovation (CDI), explore some of the key themes in inclusive agribusiness. The first publication (PDF) discusses enabling policy environments. Inclusive agribusiness requires an enabling environment that supports competitive and efficient markets while ensuring inclusive economic benefits and environmental sustainability. The next paper (PDF) considers access to finance for smallholder farmers, and small and medium enterprises. Pressing constraints include a gap between farmers’ need and demand for financial products; elusive business model returns for financial service providers; and a mismatch between financial service provider capital needs and the type and volume of capital available from investors. Changing this trajectory will require a coordinated effort across actors. Also the issue of gender dimension is dealt with in another paper (PDF). Agribusiness development provides many opportunities to promote gender equality and women’s empowerment across the seven principal domains of inequality. To take significant steps towards achieving gender equality and women’s empowerment, it is necessary to address the causes of gender inequality rather than merely treating the symptoms. The last three papers deal with the issues of multi-stakeholder partnerships for inclusive agribusiness (PDF), inclusive business models in agriculture (PDF) and systemic approaches to inclusive agribusiness (PDF).

Webinar on agriculture, banking, and the digital economy merge to improve South African agriculture

Ati van der Honing — Tue, 25 Apr 2017 08:45:18 +0000

This webinar by Agriculture Finance Support Facility’s (AgriFin) looks at the role of digital infrastructures in driving efficiency and sustainability in the agricultural value chain. Vuyani Jarana, Chief Officer of Vodacom Business, dives into issues that surround emerging innovations, capacity strengthening, and the enabling environment of mobile service banking. Specifically, he speaks about information gaps in existing agriculture value chains, which prevent farmers from gaining access to markets. Also, a lack of transaction records constrains their ability to produce the evidence needed for credit scoring. These combined with several other factors inhibit African agricultural development. The presentation argues for modernization of the agriculture sector through digitization of farming activities and the crop production cycle. Storing the data on accessible platforms and sharing it may lead to increases in farmer knowledge and skills. More digital records could be beneficial to financial institutions who use it to create unique agriculture client profiles. User experience results of agriculturalists and industries who have adopted Vodacom’s Connected Farmer Platform, which uses e-Voucher management to track key points in the agriculture value chain are discussed. A key message of the presentation is that technological improvements in agriculture financing represent not only an attractive business opportunity for lenders but also one of the most promising avenues to significantly increase financial inclusion. The entire webinar can be rewatched on this YouTube channel. The slides of the webinar can be downloaded here.

How can inclusive business advance the SDGs?

Ati van der Honing — Tue, 11 Apr 2017 14:12:05 +0000

This blog on Next Billion discusses how inclusive business (IB) can support the achievement of the Sustainable Development Goals (SDGs). Two publications are addressed. First, the booklet “Delivering on the Sustainable Development Goals: The inclusive business approach” (PDF) by the World Business Council for Sustainable Development (WBCSD). This publication briefly presents the business case of IB, the internal and external barriers to starting an IB, and a list of examples in which an inclusive business approach has the possibility to generate value. The example for SDG 2 (related to ending hunger and achieving food security) focuses on: the production and access to fortified food and supply of micronutrients; development of innovative and more efficient farming technologies to increase productivity and income of smallholder farmers. The second document, “Uncharted Waters: Blending Value and Values for Social Impact Through the SDGs,” (PDF) by the United Nations Development Programme (UNDP), Istanbul International Center for Private Sector in Development and Business Call to Action, includes a description of five sectors highly relevant for IB in the context of the SDGs; a scale of IB maturity; and an understanding of the entire IB process. The five promising sectors for IB are food and beverage, infrastructure, health, education and financial services. For the sector food and beverage examples of “primary business models” are contract farming; deep procurement (procurement directly from farmer/producer networks); distribution and sales through informal shops; mobile-enabled non-financial services; and smallholder farmer aggregators. The provision of credit and staff on the ground, as well as the development of trust over time, are important strategic elements to consider for companies engaging with smallholder farmers.

Prioritising climate-smart agricultural interventions: The financial aspects

Ati van der Honing — Mon, 10 Apr 2017 14:46:54 +0000

This special of Agricultural Systems focuses on prioritising climate-smart agricultural (CSA) interventions at different scales. Currently, there are few tools that can comprehensively evaluate the range of potential technologies and practices and their possible impacts on food production, environmental sustainability, and mitigation in any context. Therefore, what remains is the prioritization of interventions for investment and broad dissemination. There is a growing body of work by several CGIAR centres and their partners on tools and methods that can be used to prioritise CSA interventions and investments at a range of spatial and temporal scales. This special issue brings together nine papers describing a wide range of approaches and tools, of which some focus on the financial considerations for prioritization. One of the papers (PDF) by Sain et al. uses probabilistic cost benefit analysis to assess eight CSA practices. Indicators related to profitability and valuation of environmental and social externalities are used to assess options. The case study assessment suggests that most of the potential CSA practices are profitable, although some may have a long payback period, which may be a barrier for smallholder farmers. Another article by Khatri-Chhetri et al. (PDF) applies a participatory scoring and bidding approach to understand farmers’ preferences and willingness-to-pay for preferred CSA technologies. The paper presents that farmers’ preferences for CSA technologies are marked by some commonalities as well as differences according to their rainfall pattern, income, age, gender, and cost of implementation. This results also showed that farmers may not be always willing to invest their own money on many CSA technologies even if there are foreseen benefits. The methods could be used by government and other stakeholders to design and implement a climate change adaptation programme in agriculture.

Small-scale soya farming can outperform large-scale agricultural investments

F&BKP Office — Thu, 30 Mar 2017 09:30:38 +0000

This briefing (PDF) by the International Institute for Environment and Development (IIED) highlights how small- and mediumscale farm models can outperform large-scale operations in terms of monetary return, food security, employment generation, local prosperity and avoiding land conflicts. Agriculture is an important engine for economic growth in Africa, but effective agricultural strategies to support rural development and poverty alleviation are scarce. State investment in the small-scale farming sector is minimal and the entrepreneurial family farm sector remains underrepresented. Meanwhile, large-scale land investments are advocated as means to bring capital to rural areas and stimulate development. However, the investigation of soya production in Central Mozambique presented here suggests small-scale farming can produce similar profits to large-scale operations and better social outcomes. The authors did not find justification for any general condemnation of large-scale land investments as ‘land grabbers’, yet large-scale operations do appear to fail local development aims: they need much better oversight and transparency. Concentrating only on large-scale investments can mean forgoing opportunities for rural development and poverty reduction. With the right support, poorer households can develop market-oriented farming that contributes to local value chains at many levels. Supplying technology, finance and locally adapted extension services are all challenging, yet soya production in Central Mozambique presents a good example of how agricultural advice and support – here provided by various donors and NGOs – can successfully foster the small- and medium-scale commercial farming sector.

Enabling the business of agriculture

Nynke — Thu, 23 Mar 2017 10:22:40 +0000

This report (PDF) from the World Bank Group argues that better agriculture regulations in low and middle income countries could go a long way towards feeding the world’s growing population and improve farmers’ livelihoods. The report states that lower transaction costs, improved water permit systems for irrigation, or better conditions for micro-finance institutions could support agri-business. The report’s globally comparable data helps countries to identify areas for improvement that are critical to building a thriving agribusiness sector and measure themselves against others. For example, obtaining export documents for agricultural produce takes on average 6 days in Sub-Saharan African countries, compared with only 2.3 days in the Middle East and North Africa region. Such delays not only increase business costs, but also increase food waste and increase the likelihood that shipments are rejected upon arrival due to spoilage or low quality produce. Governments have a key role to play in supporting policies and practices that help smallholders and to remove burdensome processes that add to food costs and discourage agribusinesses from entering the market. The report presents data on legal barriers for farmers, entrepreneurs and businesses operating in agriculture in 62 countries and across the topics of land, seed, fertilizer, machinery, water, livestock, finance, markets, transport, and ICT. The 2017 edition also expands its survey of laws and regulations that impact environmental sustainability and gender.

Value chain upgrading and the inclusion of smallholders in markets: Reflections on contributions of multi-stakeholder processes in dairy development in Tanzania

F&BKP Office — Mon, 06 Mar 2017 10:51:23 +0000

Increasingly, value chain approaches are integrated with multi-stakeholder processes to facilitate inclusive innovation and value chain upgrading of smallholders. This pathway to smallholder integration into agri-food markets has received limited analysis. This article (PDF) in The European Journal of Development Research analyses this integration through a case study of an ongoing smallholder dairy development programme in Tanzania. Value chain upgrading and innovation systems perspectives were combined in an analytical framework to interpret the findings, which show that multi-stakeholder processes enhance horizontal and vertical coordination but limit process and product upgrading. The main conclusion is that, although such processes may catalyze smallholder market inclusion, their effects are largely bounded by existing value chain structures (e.g. production system, fragmented markets), timeframe and how prevailing institutional constraints are addressed, which may constrain the intentions of such collaboration action. This calls attention to the starting points of value chain interventions and the socio-political dynamics that are part of multi-stakeholder processes.

Large-scale agricultural investments and smallholder welfare: A comparison of wage labor and outgrower channels in Tanzania

F&BKP Office — Thu, 02 Mar 2017 09:55:49 +0000

This article in the World Development Journal evaluates household welfare effects of large-scale agricultural investments in Tanzania, one of the main recipients of such investments in Africa. Specifically, the article compares households participating in sugar and rice investments through outgrower schemes or as agro-industry workers with non-participants in terms of household income and income poverty. Building on primary household data, it is one of the first studies to empirically analyze ex-post impacts of large-scale agricultural investments in Africa. The analysis draws on cross-section survey data of 516 households collected in Kilombero District, a priority cluster for the Southern Agricultural Growth Corridor of Tanzania (SAGCOT). The results show overall positive household welfare differences between participants of the investments and the respective counterfactual. However, there are large differences between arrangements and subsectors. Estimated effects for outgrowers are largest, yet for land-rich outgrowers more so than for land-poor. Effects for agro-industry workers in the sugar investment are significantly larger than for those in the rice investment, though in both investments land-poor workers seem to benefit. Hence, the study results suggest potential benefits of outgrower schemes and potentials of agro-industry wage employment for the land-poor to escape extreme poverty. Yet, it also stresses particularly the need to address the constraints of land-poor outgrowers. Qualitative interviews, for example, pointed to growing risks for land-poor outgrowers in the context of rising elite capture by larger outgrowers.

Addressing the gender differentiated investment risks to climate-smart agriculture

Nynke — Wed, 22 Feb 2017 16:02:47 +0000

This article (PDF) published by AIMS Agriculture and Food argues that closing the gender gap in land and other productive resources can provide a “triple dividend” of gender equality, food security and climate management. It can thus offer a cost-effective approach to the pursuit of the Sustainable Development Goals. However, climate change compounds the structural barriers to gender equality that women farmers face, rapidly shrinking the window of opportunity to realize this triple dividend. The growing literature on the gender gap aims to better quantify its implications for agricultural productivity but does not provide a framework to prioritize policy responses. To complement these econometric efforts, this paper proposes a three-step methodology to assist policy-makers in developing countries in disentangling the opportunities and trade-offs of different policies and interventions to close the gender gap that impedes climate-smart agriculture (CSA) for women. The paper first develops a table that clusters barriers to CSA into nine independent risk categories. Second, it overlays a gender analysis upon this gender-neutral barrier and risk table to identify gender-differentiated risks and barriers to CSA. Third, it maps identified gender-neutral and differentiated investment risks against possible remedial public policy instruments. The authors argue that targeted interventions will be required to address these gender differentiated investment risks and ensure that CSA market transformation efforts benefit men and women farmers equally.

Promoting gender equality in foreign agricultural investments: Lessons from voluntary sustainability standards

Nynke — Wed, 22 Feb 2017 15:49:42 +0000

This report (PDF) published by IISD analyzes the gender-related content of five major global agricultural sustainability standards and five principles for responsible investment in agriculture. It contributes to the emerging literature on the gendered impacts of the contemporary wave of foreign agricultural investments. The outcomes of agricultural investments for men and women often differ in rural areas of the Global South where gender inequalities are persistent. Barriers to women’s access to productive resources— production inputs, credit and training—reduce female agricultural producers’ yields by 20–30 per cent from their full potential. Further, culturally based gender discrimination often leaves women with a heavier burden for care work, diminishes their access to education, restricts their access to land and limits options for decent paid work. The evidence presented in this paper indicates that these inequalities are often exacerbated by foreign agricultural investments, unless investors and host country governments work to ensure that investment contracts address the needs of women farmers and agricultural workers. The authors urge a focus on implementation and practice; adopting a gender-equality approach; engaging women as partners in developing and implementing principles; and accounting for localized gender norms. The document concludes with specific recommendations for investors, host governments, local communities and civil society organizations.

Inclusive finance and inclusive rural transformation

Ati van der Honing — Wed, 15 Feb 2017 14:06:04 +0000

This paper (PDF) in the IFAD Research Series provides an overview of concepts, issues and research on the relationship between financial inclusion and inclusive rural transformation. Liberalization of financial markets may not have had the desired spillover effects into rural credit. This indicates there may be justification for public intervention. Evidence shows that agricultural credit provides positive returns. However, according to the authors microcredit may not unto itself be a solution. Therefore, effective microcredit programmes might need to be coupled with outreach and technical assistance in order to achieve desired goals and objectives. Policies that curb interest rates or otherwise lower the cost of credit may encourage credit demand due to moderately inelastic to elastic demands. Other important issue that need to be considered for policies are collateral and risk, because risk-rationed farmers might either not borrow at all, or borrow less than optimal amounts of credit. Several solutions are presented to the farm credit problem, including subsidies and tax incentives, government-sponsored enterprises, risk-contingent credit and flex loans. Intervention policies should recognize that there is no one-size-fits-all credit policy, and policies should be targeted towards specific problems. For example, if subsidies are required, they must be smart in the sense of minimizing distortions in the marketplace or when markets fail, governments should consider government-sponsored enterprises to meet farmers’ credit demands.

Bittersweet vanilla: the unsavoury story of vanilla farmers in Madagascar’s Sava Region

Ati van der Honing — Wed, 15 Feb 2017 11:34:25 +0000

This report (PDF) by Fairfood and CNV Internationaal identifies interventions that will improve the situation of farmers in the vanilla value chain in Madagascar. The report examines the riches that vanilla production delivers, and the abject poverty many vanilla farmers experience. Vanilla is one of the most expensive and widely exported spices in the world, yet the large majority of the 80,000 smallholder vanilla farmers do not see this reflected in their income and are often even unable to provide food for themselves and their families. Fairfood and CNV Internationaal have devised a list of solutions to address these problems including measures to tackle vanilla theft, such as checkpoints, the tattooing of vanilla pods and the establishment of defence groups, as well as capacity training to help vanilla farmers organise and gain vital knowledge on topics such as modern agricultural techniques, financial planning, entrepreneurship. Fairfood has also held constructive dialogues with major multinationals who hold significant power in the value chain. Much of the power to effect change lies with these multinational companies. An integrated step-by step approach on five levels is recommended to effectively solve the issues: 1). At the level of the vanilla farmers; 2). At local community level; 3). At national government level; 4). At supply chain level; and 5). At consumer level.

Investments in irrigation for global food security

Ati van der Honing — Mon, 13 Feb 2017 10:19:34 +0000

This project paper (PDF) by IFPRI describes what it will take to achieve a level of irrigation investment that supports sustainable agriculture for improved food security and nutrition. Climate change and all the resulting uncertainties are sparking new interest in raising investments in irrigation to enable more stable food production. In order for these investments to pay off, they need to be targeted and ideally should be accompanied by the following: 1) Support for smallholder irrigation systems whenever feasible; 2) Improvements in water-use efficiency; 3) Economic incentives to conserve water resources; 4) Linkages with other sectors; 5) Linkages between irrigation and nutrition. Irrigation can and should be an integral part of sustainable agricultural production. For this to happen, investment in irrigation infrastructure, policies, and institutions must be strengthened in those regions most threatened by food insecurity and climate change, and where irrigation development is most environmentally sustainable. The authors conclude that irrigation has an important role to play in enhancing future food security and the time for targeted investments is now.

Connecting smallholders to markets: an analytical guide

Ati van der Honing — Tue, 07 Feb 2017 10:59:41 +0000

This analytical guide (PDF) by CSM shows in what ways policy recommendations illuminate the relationships of smallholders to markerts. The guide examines how small-scale food producers’ organisations and allied civil society can use the recommendations in their national and international advocacy and how they can work together with their governments to apply them in the context of national and regional policies and programmes. Connecting Smallholders to Markets’ is the title of policy recommendations negotiated on 8- 9 June 2016 in the Committee on World Food Security, the foremost inclusive international and intergovernmental platform deliberating on is- sues of food security and nutrition. Work on this topic has been underway since 2014. The authors argue that the policy recommendations illuminate the relationships of smallholders to markets in two main ways: i) they recognize that the bulk of food is channelled through markets linked to local, national and regional food systems (‘territorial markets’), thereby clearly positioning these markets as foremost amongst different kinds of market systems in the context of food security and nutrition; ii) they urge governments to employ public policy to support of these territorial markets, both by strengthening territorial markets where they already exist and by opening up new spaces for these markets to take root and flourish. With such an approach, smallholders would be well equipped to meet global challenges ahead.

Engaging with farmers’ organizations for more effective smallholder development

Ati van der Honing — Fri, 13 Jan 2017 13:50:35 +0000

This toolkit (PDF) by IFAD provides guidance on developing sustainable partnerships with farmers’ organizations (FOs) within IFAD projects that consider FOs as relevant partners and not simply as beneficiaries of IFAD-funded activities. In particular this toolkit aims to support those needing to address the following issues when engaging in partnerships with FOs: i) how to improve the identification of FOs in the geographic areas concerned; ii) how to improve the understanding of the strengths and challenges faced by FOs in delivering services to link their smallholder members to market opportunities and; iii) how to design the types of support needed to enhance sustainable development of FOs (e.g. type of activities, implementation arrangements, institutional set-ups). Given the complexity and diversity of both country contexts and FOs, the toolkit is not intended to be rigidly prescriptive. Rather, it provides an overview of the different approaches IFAD uses when building partnerships with FOs for the purposes of designing its strategies and programmes and implementing IFAD-supported projects. The toolkit consists of:

Teaser, which provides an overview of IFAD’s engagement with farmers’ organizations for more effective smallholder development, and the following parts:

How To Do Note: Engaging with farmers’ organizations for more effective smallholder development

And three specific modules on:

Module 1: How and when to conduct a mapping and profiling of farmers’ organizations

Module 2: How to support farmers’ organizations in designing their business plans

Module 3: Support to farmers’ organization business models

Benefits to smallholders? Evaluating the world food programme’s purchase for progress pilot

Ati van der Honing — Wed, 11 Jan 2017 10:35:06 +0000

This article, published in the Global Food Security journal, examines the impacts of the United Nations World Food Programme’s (WFP’s) Purchase for Progress (P4P) program on smallholder farmers in Tanzania. P4P is a multi-year, multi-country pilot that sought to improve smallholder farmer wellbeing through a combination of food purchases from farmer organizations and supply-side interventions. The authors examine the impacts of P4P on smallholder farmers in Tanzania, using panel data on members of participating and comparison farmer organizations. P4P targeted participants based on pre-existing warehouses locations. To account for possible selection on observables, the authors use propensity score matching, limiting the sample to participating farmers and their matches, and then compute conditional difference-in-differences. While participating small farmers increase their commercial farming activity relative to comparison farmers, they did not find evidence of increased income, increased food consumption scores or increased crop value. The article discusses possible factors contributing to these findings, including WFP’s diverse objectives and the targeting of farmer organizations rather than smallholders.

Impact of cash transfer programs on food security and nutrition in sub-Saharan Africa: A cross-country analysis

Ati van der Honing — Wed, 04 Jan 2017 10:16:05 +0000

This paper by the Global Food Security journal explores the extent to which government-run cash transfer programs in four sub-Saharan countries affect food security and nutritional outcomes. These programs include Ghana’s Livelihood Empowerment Against Poverty, Kenya’s Cash Transfer for Orphans and Vulnerable Children, Lesotho’s Child Grants Program and Zambia’s Child Grant model of the Social Cash Transfer program. The cross-country analysis highlights the importance of robust program design and implementation to achieve the intended results. The authors find that a relatively generous and regular and predictable transfer increases the quantity and quality of food and reduces the prevalence of food insecurity. On the other hand, a smaller, lumpy and irregular transfer does not lead to impacts on food expenditures. The paper complements binary treatment analysis with continuous treatment analysis to understand not only the impact of being in the program but also the variability in impacts by the extent of treatment.

Can commercial farming promote rural dynamism in sub-Saharan Africa?: Evidence from Mozambique

F&BKP Office — Tue, 03 Jan 2017 08:57:01 +0000

This working paper by UNU-WIDER, aims to bring evidence to the debate around the impact of large commercial farms on neighbouring smallholders in low-income sub-Saharan Africa. The analysis combines nationally representative agricultural survey data from Mozambique on over 6,000 smallholders collected in 2012 with a new micro-dataset covering all large farms in the country. These farms, which are by definition commercial, are defined as those currently cultivating an area of over 50 ha. The analysis consisted of two steps. First, is was investigated whether there is a systematic relationship between characteristics of these large farms and average smallholder or local characteristics. Evidence was found that operating commercial farms are more likely to be located near areas with lower than average education levels, urban areas, and farmers using more advanced production techniques. Second, the association between the presence of a large farm and various welfare outcomes (such as total household income) was investigated. A moderate positive association between the presence of a commercial farms and the welfare of local smallholders was found. However, this association does not appear to hold in general. Rather, it appears to relate primarily to commercial farms that produce permanent crops (e.g. fruit trees, sugar cane); also, smallholders who are outgrowers seemed to benefit disproportionately from the presence of medium-sized commercial farms. Critically, these findings point to significant heterogeneity in the local economic effects of commercial farms rather than any kind of automatic spillover effects. The implication is that a more nuanced policy position is demanded with respect to promoting rural dynamism through new commercial models. In particular, the creation of suitable incentives for and regulation of outgrower schemes needs to be a priority. The remainder of the paper is structured as follows: section 2 reviews insights from economic theory concerning the expected benefits for farmers operating in proximity to large commercial ventures. Section 3 introduces the data sources and provides a descriptive snapshot of the changes in large commercial agriculture in Mozambique between 2002 and 2012. Section 4 reports the analysis of patterns in large farm location decisions and outcomes for surrounding smallholder farmers. Section 5 concludes. The authors recommend that that future research would do well to focus on the specific circumstances, including the contribution of public regulation and oversight that determine when and how smallholders benefit from the introduction of new forms of commercial agriculture. They also indicate that policy needs to move beyond simplistic notions of promoting commercial farming and, rather, focus on the incentives for and regulation of outgrower schemes.

The business case for digitally-enabled smallholder finance

Ati van der Honing — Fri, 23 Dec 2016 12:34:23 +0000

This report (PDF) by RAF Learning is exploring the business case for smallholder finance, in particular the role of digital approaches in making it possible to profitably serve this market at scale. New digital technologies and innovative business models are making it possible to provide credit to smallholder farmers in Africa. As a host of digital technologies emerge along the lending value chain, a new generation of technology-enabled business approaches is bringing large segments of the population into the addressable market and doing so cost-efficiently. The report looks at where and how innovations in digital technology promise to enable financial service providers to serve smallholders at scale. The report draws on a new survey of 23 selected financial service profiders in Africa who have begun their “digital journey”, as well as extensive desk research and interviews with a cross-section of digital smallholder finance sector donors, implementers, and entrepreneurs. It explores how financial service providers are digitalizing their lending operations and early indications of the value they see, touches briefly on the customer perspective of these digital approaches, and then analyzes the challenges to going digital, providing recommendations for advancing digitalization in the sector.

A scheme and training manual on good agricultural practices (GAP) for fruits and vegetables

Ati van der Honing — Thu, 22 Dec 2016 09:06:34 +0000

This publication by FAO provides good Agricultural Practices (GAP) for fruits and vegetables during on-farm production and post-production processes resulting in safe agricultural products, ensuring a safe food supply. This publication comprises two volumes: Volume 1 (PDF) documents the entire scheme and Volume 2 (PDF) covers a training package on this scheme. This GAP scheme supports countries to establish an infrastructure in terms of standards, certification processes and accreditation systems in line with international standards and practices to facilitate regional and global trade. Implementing GAP during on-farm production and post-production processes resulting in safe agricultural products is of immense importance for ensuring a safe food supply. It has been developed as a regional scheme that may be adopted as it is or adapted by countries to suit their needs. The process for development of the scheme was through initial discussions on a draft at a regional workshop in September 2014 that was then implemented in four pilot countries, namely Bangladesh, Bhutan, Maldives and Nepal. This GAP scheme comprises three important areas or sections: standards for GAP; the structure for implementation in the country; and the certification and accreditation aspects. It is hoped that the publications will be useful not only to South Asian countries but also to other countries.

Published in 2016

Financial inclusion fit to size: Customizing digital credit for smallholder farmers in Tanzania

Ati van der Honing — Mon, 19 Dec 2016 15:23:31 +0000

This briefing (PDF) by The Initiative For Smallholder Finance explores the causes of low uptake in digital credit for smallholders in Tanzania. Dalberg’s Design Impact Group (DIG) explores these causes to better understand how concrete product solutions to jump-start adoption of digital credit products can be developed. Digital credit products represent an important financial inclusion opportunity for smallholder farmers in Tanzania, where close to 80% of the workforce is engaged in farming. Uptake of these products by smallholder farmers, however, remains limited. To address this challenge, DIG used a human-centered design (HCD) approach across three regions of Tanzania to produce behavioral insights around smallholder farmers’ interaction with, and demand for, digital credit products. Based on insights collected during their research, DIG designed and prototyped a new digital credit product for smallholder farmers and evaluated their response to it. This idealized digital credit product builds on existing products available in the Tanzanian market, but has five new components, each with multiple differentiated features, that meet the unique credit needs and behaviors of smallholders. One of these components is flexible credit, because loan sizes, repayment periods, and repayment terms of current digital credit products do not meet the credit needs of smallholder farmers. Most existing products were designed for urban consumers, whose finance needs differ significantly from smallholders’ needs in several respects.

Lessons learned: Digital financial services for smallholder households

Ati van der Honing — Sun, 18 Dec 2016 10:52:01 +0000

This note by IFAD is focusing on how digital financial services (DFSs) are meeting the financial needs of smallholder households. The authors offer examples of smallholder-specific DFSs as well as mainstream ones, highlighting the implications in each case for smallholder farmers and their households. Agricultural value added services (VASs) are included in this synthesis because they can serve as an entry point to financial inclusion and have the potential to improve the financial capability and farming productivity of smallholder farmers. A major quandary in developing DFSs for smallholder farmers is that the successful uptake of services depends largely on multiple, interconnected elements – technical infrastructure, regulations, distribution networks – that enable digital financial products to be widely used. With an enabling environment in place, a digital ecosystem for smallholders can be created in which a variety of participants in the agriculture sector connect with smallholder farmers through digital tools. However, significant challenges remain to a more extensive, scalable supply of digital financial offerings for smallholder farmers. It is possible that some of these will be addressed organically by continued growth and innovation in the technology. For instance, network coverage will likely increase over time in rural areas. But without an intentional and coordinated approach, innovations might not reach or benefit smallholder farmers directly, especially subsistence farmers.

IFC and agribusiness in a changing environment

F&BKP Office — Thu, 01 Dec 2016 13:38:04 +0000

RVO and IUCN NL organized together with the International Finance Corporation (IFC) on 28 October a one-day event in The Hague in the framework of the World Bank Group-Netherlands strategic partnership ‘Food for All’. The event convened more than 80 professionals in the private sector, knowledge institutions, NGOs and policy makers engaged in agribusiness in developing countries. IFC, the private sector arm of the World Bank Group, invests heavily in agribusiness in developing countries and emerging markets, and therefore has a great interest in exchanging experiences on investment opportunities, climate smart technologies and challenges in value chain operations. The main objective of the event was that both private sector and IFC bring current and upcoming activities and challenges in relevant countries to the table and explore opportunities for cooperation. This event was well received by the participants and some promising leads were established between IFC and several companies. One of the conclusions was that in order to achieve impact in climate smart agriculture and reducing deforestation, private sector green value chain initiatives and private sector finance must be aligned with public finance and government programs that ensure the necessary land-use planning, enabling environments, legislation and landscape wide monitoring and verification of impact. The complete meeting report can be found here.

How inclusive is inclusive business for women? Examples from Asia and Latin America

F&BKP Office — Wed, 30 Nov 2016 13:20:03 +0000

This report (PDF) assesses the extent to which inclusive business models promote women’s economic empowerment. As a commercially viable business model, inclusive business bears considerable potential for women’s economic advancement, though not every inclusive business will inevitably do so. It is important to distinguish two ways in which inclusive business is relevant to women’s economic empowerment. The first involves women as implicit beneficiaries of inclusive business models. These businesses provide services or products in areas in which women bear specific disadvantages and therefore often create tangible benefits for women, but do not necessarily address their empowerment specifically. The second involves women as explicit beneficiaries. Inclusive business models with this goal in mind may take measures to target women specifically in creating economic opportunity. This can include providing access to goods and services tailored to the needs of women, such as reproductive care or financial services for women’s businesses. This report highlights examples from the inclusive business portfolios of the Asian Development Bank (ADB), the Inter-American Development Bank (IDB) and the International Finance Corporation (IFC), including examples from the agricultural sector. It shows that there are only a few inclusive business models that explicitly promote gender empowerment. And while there are many social enterprise initiatives and corporate social responsibility activities promoting gender-related issues, these projects remain small in scale and impact.

Private sector investment in a changing climate: Resilient rice value chain development in Uganda

F&BKP Office — Wed, 30 Nov 2016 10:59:56 +0000

The PSI-Climate initiative explored how domestic private sector investment decisions can enable climate risk management by different actors along the rice value chain in Uganda. Led by the International Institute for Sustainable Development (IISD), the project was implemented in partnership with the Economic Policy Research Center and the Ministry of Finance, Planning and Economic Development during the period 2014–2016. Case study research was conducted in collaboration with a domestic seed company, Equator Seeds Ltd in Northern Uganda, and the Centenary Bank Ltd., a commercial bank in Eastern Uganda. This first briefing note (PDF) presents the results of case study research on financial services and climate risk management along agricultural value chains, focusing on the Centenary Bank’s services to rice value chain actors in Eastern Uganda. It discusses the need for climate risk management (CRM) along agricultural value chains, the role of financial services in enabling CRM by value chain actors, and practical options for financial service providers to realize their potential in this area. It also provides recommended areas of action for researchers and practitioners to move forward on financial services for CRM. This second brief focuses on investments by domestic seed companies in quality seeds, including climate-resilient varieties, in developing countries and the climate risk management benefits for other actors along the value chain. It is designed for researchers and practitioners working on agricultural value chains, food security and climate resilience in developing countries. This third brief proposes a framework of core functions for climate risk management (CRM) along agricultural value chains, and highlights the role of service providers in supporting CRM efforts. This video highlights the role of private sector investments in climate resilient rice value chains in Uganda. It focuses on the experiences of Equator Seeds Limited and Centenary Bank in the Eastern and Northern regions of Uganda.

New directions for inclusive pluralistic service systems, report of FAO expert consultation

Ati van der Honing — Thu, 24 Nov 2016 10:49:02 +0000

This paper (PDF) by FAO and KIT presents a synthesis of deliberations, and a set of policy recommendations and priority actions for pluralistic service systems (PSS). A growing variety of public and private agricultural advisory services are available today, leading to increasingly PSS in which advisory services are provided by different actors and funding sources. PSS hold the potential to overcome constraints related to funding, staffing and expertise, and making advisory services more demand-driven. But are PSS really able to reach the millions of farmers in need of services? What are the characteristics of PSS necessary to improve access to services for diverse small-scale farmers? What actors, policies and mechanisms are needed to make such a system work in practice? These were some of the questions raised by FAO Expert Consultation on Inclusive PSS. The lack of downward accountability towards farmers continues to be one of the Achilles heels of rural advisory services and is fundamentally grounded in a lack of voice and power of farmers. Practice has shown that governments often lack the capacity and/or the willingness to assume a comprehensive coordination role in PSS. This calls for a more differentiated understanding of coordination, including but not limited to governments. Producer organizations, in particular, are slowly being recognized for their important role in coordinating (and articulating) producers’ demands and matching service provision accordingly.

Innovation for inclusive value-chain development: Successes and challenges

Ati van der Honing — Wed, 02 Nov 2016 14:49:47 +0000

This publication (PDF) by IFPRI assesses how to improve the performance of agricultural value chains to benefit large numbers of low-income and poor smallholders. The book consists of 14 papers that present results of recent work associated with CGIAR and its partners in Africa, Asia, and Latin America. The papers identify challenges to smallholder participation in new and expanding markets and the resulting benefits. Methods for evaluating complex interventions that involve innovation and value-chain development are presented, along with empirical results of evaluation studies. Two types of intervention appear critical for allowing smallholders to participate in growing markets: ones that provide physical infrastructure and information technology to connect smallholders to markets; and ones that create or strengthen complementary institutions that reduce the high marketing risks and transaction costs faced by smallholders, due to their small production surpluses. From an analysis of the cases presented, emerging issues and policy implications are discussed, and knowledge gaps and priorities for future applied research and evaluation are identified. The book also explores the challenges livestock-dependent people face; how urbanization and advancing technologies affect linkages; ways to increase gender inclusion and economic growth; and the different roles various types of platforms play in value-chain development. Improving the performance of agricultural value chains has the potential to benefit large numbers of low-income and poor people, including a large proportion of women. However, the research reported in this book indicates that poor households require minimum assets to successfully participate in value chain development. Women are especially disadvantaged when it comes to access to land, labor, credit, and infrastructure. The implication is that gender issues need to be considered specifically in the design, implementation, and evaluation of interventions.

FinTech for micro, small and medium sized enterprises

Ati van der Honing — Tue, 01 Nov 2016 16:09:57 +0000

This report (PDF) by ING addresses the benefits of financial technology (FinTech) for micro, small and medium enterprises (MSMEs) in developing countries. The role of FinTech is important in the discussion on how to financially include poor people in developing economies and can also be of interest to the agro-food sector. This report shifts the focus on to MSMEs because these are important job creators at the bottom of the pyramid. The report contains 10 main insights that offer important opportunities for the agro-food sector. According to the authors, FinTech is the game changer for the traditional bricks and mortar bank that cannot close the finance gap. Especially in remote rural areas physical branches are costly to operate and cannot provide the finance that MSMEs need. Furthermore, FinTech has the potential to impact the whole financial value chain and thus improve financial access for MSMEs. To fully fulfill this potential smartphones must not be seen as solely a luxury good, but as essential for financial inclusion. This would mean that financial inclusion policies can no longer go without policies to digitally include MSMEs and the people they hire.

Inclusive agribusiness: The state of play background working paper

F&BKP Office — Wed, 12 Oct 2016 16:17:32 +0000

This working paper (PDF) has been prepared as background for the inclusive agribusiness work stream of the Global Donor Platform for Rural Development (GDPRD). The paper outlines the concept of inclusive business and its application to the agrifood sector, it maps the current state of play and explores implications for donors and the GDPRD. An inclusive business benefits poor producers and/or consumers by providing access to markets, services and products in ways that improve their livelihoods, while at the same time being a profitable commercial venture: Inclusive agribusiness provides a perspective that can contribute to a deeper understanding of how to align public and private interests and investments in pursuit of the Sustainable Development Goals. There is a vast body of experience and knowledge about how agricultural markets can help to tackle poverty and encourage sustainable practices. However, this has not been fully tapped, synthesised and communicated in ways that can help to tackle the ongoing structural barriers of taking inclusive agribusiness initiatives to scale. Consequently, inclusive agribusiness is a field where the GDPRD can potentially make a significant contribution through its knowledge sharing, advocacy and networking functions. The paper provides an initial mapping of this work and identifies emerging issues and opportunities. The paper also highlights a weak and fragmented evidence base regarding impact, which risks undermining the case for the much needed investment to take promising example to scale. Critics note that few inclusive business models have gone beyond pilot stage and reached scale.

Farm input subsidy programmes (FISPs): A benefit for, or the betrayal of, SADC’s small-scale farmers?

Ati van der Honing — Tue, 11 Oct 2016 09:37:54 +0000

This paper (PDF) by the African Centre for Biodiversity (ACBIO) reviews the farm input subsidy programmes (FISPs) within countries belonging to the Southern Africa Development Community (SADC), to ascertain whether input subsidies have benefited small-scale farmers, have increased food security at the household and national levels, and have improved the incomes of small-scale farmers. It does this by exploring the re-adoption of input subsidies in countries belonging to SADC, describing theprogramme designs, providing an analysis of the respective in-country effects, and providing an overarching review of input subsidy programmes within SADC countries. According to the authors the Green Revolution has been a dismal failure in Africa: the sheer size of the region, its diversity of agroecological zones and deep history of traditional farming practices, the depth of rural poverty and development challenges, and the lack of domestic markets mitigate attempts to provide a unitary solution
to a complex challenge. They conclude with that it appears that subsidies are relegating farmers to welfare recipients as it make them passive receivers of technical advice, beneficiaries of public sector subsidized inputs and price takers in local markets. The authors state that urgent transformative action is required, now, to bring about the sustainable food systems of the future.

Public-private partnerships for agribusiness development – A review of international experiences

Ati van der Honing — Mon, 03 Oct 2016 14:16:36 +0000

This publication (PDF) by FAO aims to improve understanding of both the potential benefits and the challenges of agri-Public-Private Partnerships (PPPs). FAO has gathered 70 case studies from 15 developing countries along with evidence from field-based support to PPP initiatives for agribusiness development in Central America and Southeast Asia. The primary objective is to draw lessons that can be used to provide guidance to FAO member countries on how to establish effective partnerships with the private sector to mobilize support for agribusiness development. Four common project types are identified: i) partnerships that aim to develop agricultural value chains; ii) partnerships for joint agricultural research, innovation and technology transfer; iii) partnerships for building and upgrading market infrastructure; and iv) partnerships for the delivery of business development services to farmers and small and medium enterprises. Agri-PPPs are expected to contribute to the pursuit of sustainable agricultural development that is inclusive of smallholder farmers. For smallholder farmers, many of the partnerships studied showed evidence of positive impacts on net income through improved market access, increased productivity, improved product quality or reduced costs through the adoption of new technologies, increased capacity of farmer organizations, and generation of on- and off-farm employment. The main lessons are synthesized, including the public skills and institutions required to enable more effective partnerships with the private sector, and the circumstances under which PPPs are likely to be the best modality for achieving sustainable development outcomes. The conclusion reached is that while there is evidence of positive contributions to sustainable agricultural development objectives, there remain several outstanding issues associated with the impact of PPPs on poverty reduction and inclusion, which still need to be addressed. When deciding whether or not to engage in an agri-PPP, policy-makers should aim to ensure that the partnership will represent value for money and generate public benefits that exceed those that could be achieved through alternative modes of public procurement or through private investment alone.

Procurement governance for home grown school feeding

Ati van der Honing — Mon, 19 Sep 2016 11:21:01 +0000

This learning series by SNV discusses the Procurement Governance for Home Grown School Feeding (PG-HGSF) project, which develops a more inclusive and responsive relationship between smallholder farmers and school feeding buyers in Ghana, Kenya, and Mali. This project aims to link smallholder farmers with government-led school feeding programs based on the premise that such a structured demand (SD) market, coming from reliable and predictable needs for food products, is a compelling opportunity for smallholder farmers. This learning document (PDF) discusses how to prepare school feeding suppliers, particularly smallholder farmers and their organizations, to be competitive suppliers to the school feeding market. Producer organizations (POs) can serve as intermediaries between smallholder farmers and the constraints they face to reach structured demand markets. Their role within the value chain is described in this document (PDF) and intervention areas are suggested to improve the competitiveness of producer organisations. Another learning document (PDF) examines several SD markets to determine which markets have the potential to serve as effective boosters of rural development and poverty reduction. It concludes with recommendations for how governments and development partners can make SD markets more inclusive to smallholder farmers: pro-smallholder procurement tools and procedures; capacity building of the procuring entity; matchmaking between procuring entity and intermediate actors; financing services and business training for direct suppliers and POs; strengthening of the financial capacity of community grain banks. More about grain banks, which aim to built a bridge between caterers and farmers, can be found in this case study (PDF).

Market-based solutions for input supply: making inputs accessible for smallholder farmers in Africa

Ati van der Honing — Tue, 13 Sep 2016 10:27:21 +0000

This paper by the Netherlands Development Organization (SNV) and the Royal Tropical Institute (KIT) explores market-based solutions for improved input supply. The lessons out of this paper can help donors and policy makers increase the impact of their input support programs. To define these lessons, practitioners managing input-related projects from SNV and KIT, came together at a workshop in Johannesburg in December 2014. This briefing paper is a result of that workshop. SNV and KIT have developed three market-based approaches to input supply: the agro-dealer approach, the chain leader approach, and the local traders approach. These approaches are based on experiences from agricultural value chain development, agro-dealer support, and seed sector programs in Cameroon, Ghana, Mali, Mozambique, Niger, Tanzania, Uganda, Zambia and Zimbabwe. The paper is structured in three sections. The first introduces what market-based input supply is. The second section explains seven principles for the promotion of market-based input supply in Africa, based on SNV and KIT’s practical experiences. In the final section, three approaches to support market-based input supply are outlined.

National survey and segmentation of smallholder households in Tanzania

Ati van der Honing — Fri, 09 Sep 2016 13:22:36 +0000

This working paper (PDF) by CGAP examines how smallholder families manage their income and expenses and the issues they face that often lead to financial instability. CGAP conducted a nationally representative survey of smallholder households in Tanzania between August and September 2015. The report shares the findings, observations, and insights from the study. The study sought to develop a comprehensive map of the many activities, interests, aspirations, barriers, and pressures facing smallholder families. The results show that smallholder farmers in Tanzania have a deeply committed, reciprocal relationship with their land and farm. Farmers prioritize, invest in, and cultivate their farming activities year in and year out. In return, agriculture provides their household with sustenance, income, even investments and growth opportunities. Agriculture is part of the identity of smallholder households, a point of pride, and a legacy for future generations. Many see a future in farming, and they look for opportunities to be more successful in their agricultural endeavors. Smallholder familyhouseholds’ circumstances and the surrounding ecosystem in Tanzania may mean they struggle day in and day out, live below the poverty line, and are vulnerable to the harsh realities of farming. Their mindset, however, suggests commitment, diligence, and a desire for a prosperous future.

Agriculture finance support facility: Lessons learned

Ati van der Honing — Fri, 09 Sep 2016 12:32:11 +0000

This report (PDF) by the Agriculture Finance Support Facility’s (AgriFin) shares lessons on agricultural finance in the hope of guiding future initiatives and programs aimed at expanding the provision of agriculture finance services in developing countries. The report has two main chapters: the first deals with lessons learned from the design and implementation of AgriFin’s Technical Assistance program, while the second covers the lessons emerging from the design and implementation of the program. AgriFin aims to provide technical assistance and knowledge support primarily to financial institutions to help them develop their business models for financing smallholder farmers. The Facility established a Technical Assistance program and a Knowledge and Networks initiative. Both programs has shown good results and therefore provides interesting lessons learned. The overall AgriFin’s experience has shown that increased lending to agriculture can be achieved by bridging the knowledge gap that often hinders banks from embracing a market segment often viewed as too risky or fragmented to be profitable. The target audience includes development organizations with programs involved in agriculture finance, technical assistance and knowledge management initiatives aimed at improving financial institutions’ capacity in agriculture lending.

Realising the promise of inclusive agribusiness

F&BKP Office — Tue, 06 Sep 2016 13:52:23 +0000

Inclusive agribusiness is one perspective from which to view transformations in the agriculture and food sectors, and one which is gaining a lot of support amongst donors, as well as private sector groups in recent years. This perspective recognizes the critical role the private sector, from small local business to large international corporations, can play in contributing to poverty reduction. The concept is probably similar to value chain development or market systems approach, but the idea here is to emphasize the way that businesses operate and invest taking into consideration the need s and economic opportunities of poor people. But where do we stand with regard to inclusive agribusiness initiatives worldwide? How do we measure inclusiveness? And how much have inclusive agribusiness initiatives contributed to achieve global goals of reducing poverty and promoting food security to poor groups? Consultant to the Donor Platform Jim Woodhill explored these questions in a webinar on 5th July 2016, where he shared the results of his background working paper on inclusive agribusiness, including recommendations for donors. One of the key messages is that there are numerous inclusive agribusiness-related projects/businesses that have generated a broad base of practitioners with a growing understanding of how to put inclusive agribusiness models into practice. However, there is little systemic analysis of how all these initiatives are contributing to improving the livelihoods of the poor at a global scale. With such finding, donors, business networks, knowledge institutes and others are called for supporting a global knowledge and learning agenda that can help generate better evidence about the inclusive agribusiness space to justify the continuation of investments and improve the effectiveness of initiatives. Participants in this webinar included experts from different donor/development organisations, such as DFID, USAID, EIF-WTO, IrishAid, FAO, GIZ, as well as from knowledge organisations such as ECDPM and Seas of Change Initiative. Woodhill’s presentation can be found here.

Event report: Roundtable on inclusive agribusiness in Southeast Asia

F&BKP Office — Wed, 31 Aug 2016 15:08:16 +0000

This conference report (PDF) provides a snapshot of the rich content and discussions from the Roundtable on Inclusive Agribusiness in Southeast Asia, held in Ho Chi Minh City, Vietnam on 23–24 September 2015. The Roundtable brought together approximately 120 business leaders, key development practitioners, policy makers and research experts, largely from Myanmar, Indonesia, the Philippines and Vietnam. These senior practitioners are at the forefront of converting challenges into opportunities by implementing inclusive approaches to better engage smallholder farmers in value chains. The Roundtable was hosted by Grow Asia and the Ministry of Agriculture and Rural Development of Vietnam. The event was convened by the Food System Innovation Initiative, Seas of Change and the Global Donor Platform for Rural Development (GDPRD), with support from the Australian Department of Foreign Affairs and Trade (DFAT).

A shared approach to performance measurement: Common indicators and metrics

F&BKP Office — Thu, 18 Aug 2016 15:26:49 +0000

This paper (PDF) presents an aligned yet customizable framework of indicators for measuring farm-level sustainability in smallholder agricultural supply chains. These indicators are proposed primarily in the context of performance measurement, but can also be useful for more in-depth impact evaluation studies. The proposal is not for one single common set of indicators, but rather for using the same indicators when asking the same types of questions at the farm and household level. The authors argue that using the same indicators when asking the same questions in smallholder supply chains will increase comparability across data collection efforts and ensure that the community is building on the common understanding of how to gather credible, affordable, and useful data in smallholder chains. The ideas presented here are drawn from recent fieldwork of food and beverage companies, standards organizations, NGOs, and development agencies, and were synthesized as part of a community of practice led and facilitated by the Sustainable Food Lab. This community is co-led by a committee of practitioners from the Committee on Sustainability Assessment (COSA), the International Social and Environmental Accreditation and Labeling Alliance (ISEAL), the IDH/Sustainable Trade Initiative, Rainforest Alliance, the Ford Foundation, the Center for Development Innovation of Wageningen (CDI), Nestlé, Root Capital, Mars Inc., and the Sustainable Food Lab. The work is funded by the Ford Foundation and the IDH Sustainable Trade Initiative.

Making climate finance work in agriculture

Ati van der Honing — Tue, 09 Aug 2016 15:24:29 +0000

This paper (PDF) by World Bank explores the intersection between climate and agriculture finance by promoting dialogue about these topics and suggesting innovative approaches. The paper was produced as a background document for the 2016 FAO State of Food and Agriculture report. It is based on in-depth analysis of the agriculture and climate finance literature, as well as interviews with key experts representing various stakeholder groups in the agriculture, climate, and finance sectors. The interviews were conducted in order to identify those opportunities and innovations that should be explored to make climate finance work for agriculture. The paper proposes three different avenues to use climate finance to achieve this goal: 1) Designing and adapting innovative mechanisms to leverage additional sources of capital, from both public and private sources, that can be directed towards climate smartinvestments in the agriculture sector. 2) Identifying entry points for directing climate finance into agriculture and for linking FIs to smallholders and agricultural SMEs, including through capacity building and technical assistance. 3) Providing technical assistance to increase investments in agriculture. Finally, this paper presents several suggestions to contribute to the achievement of the ideas presented in this paper, including the need for increased knowledge on innovative financial instruments and mechanisms, bridging information gaps, identifying opportunities, promoting dialogue and cooperation, and designing an action plan to move this agenda forward

Can insurance help manage climate risk and food insecurity? Evidence from the pastoral regions of East Africa

Ati van der Honing — Tue, 02 Aug 2016 14:25:11 +0000

This article by Michael R. Carter, Sarah A. Janzen and Quentin Stoeffler suggests that insurance can help manage climate risk and food insecurity. If well-designed, insurance contracts can be implemented and priced at a reasonable level, despite the uncertainties that attend climate change. Evidence from the Index-Based Livestock Insurance (IBLI) index insurance project in the pastoral regions in East Africa suggest that practical difficulties can be overcome and that insurance can have the impacts that underlay the positive theoretical evaluation. At the same time, continuing analysis of the IBLI experience suggests that much remains to be done if quality index insurancecontracts are to be scaled up and sustained. The authors conclude that insurance is not an easy off-the-shelf solution to the problem of climate risk and food insecurity. Creativity in the technical and institutional design of contracts is still required, as efforts to forge the more effective public-private partnerships needed to price insurance at levels that will allow insurance to fulfill its potential as part of an integrated approach to social protection and food security in an era of climate change.

Livestock Finance Fair: Summary report

F&BKP Office — Thu, 28 Jul 2016 14:51:48 +0000

This report (PDF) from the AgriProFocus Innovation Community on Access to Finance presents the lessons from a regional finance fair in Mbarara, Western Uganda. The objectives of the fair were to provide a platform for building business links and brokering deals between farmer entrepreneurs in the livestock sector and financial service providers. In addition, it aimed to jointly find solutions to other challenges in the livestock value chain. The meeting was foward looking and emphasized the need for designing financial products that are tailor made to suit the dairy sector and encourage linkage banking; the promotion of financial services in remote areas and regulation on interest rates. Farmers were briefed on the best practices of financial management for the livestock value chain and the role of the Uganda Agriculture Insurance Scheme. A presentation on the role of Uganda’s Agriculture Credit Facility (ACF) in financing agriculture was delivered. The event and report were produced in partnership with Mbarara District Farmers Association (MBADIFA), SNV, GIZ AGRUFIN, The Hunger Project, Agritera, Trias, TIDE Project–SNV, and AMFIU.

Also see the one page summary of the report.

How agricultural insurance can improve food security – and why regulation matters

F&BKP Office — Thu, 28 Jul 2016 13:16:56 +0000

This policy note (PDF) by the Access to Insurance Initiative (A2ii) makes the case for agricultural insurance in the context of food security, explains the role of regulation to make effective risk protection work and highlights some of the challenges in regulating innovative index-based insurance approaches. Adverse weather events cause heavy losses to farmers every year and contribute to rural poverty. While traditional insurance is too expensive for most smallholder farmers, index-based agricultural insurance has the potential to offer a promising solution with lower premiums and faster payouts. However, key barriers still need to be addressed and most products are still in pilot stage. An area that has not received much attention yet is the essential role that regulation and supervision plays in supporting and enabling wider access to index-based agricultural insurance products. The paper provides an overview of the benefits of agricultural insurance, explains why regulation matters and highlights some of the challenges faced by supervisors when seeking to regulate index-based agricultural insurance.

Partnerships delivering inclusive business

F&BKP Office — Mon, 11 Jul 2016 14:07:41 +0000

The Practitioner Hub for Inclusive Business and The Partnering Initiative, with support from the UK’s Department for International Development, developed a series (PDF) which focused on the role of partnerships in delivering inclusive business. They explored why and when partnerships are necessary, why they can be so challenging, and how those challenges can be overcome. A range of on-the-ground examples- from SAB Miller in Africa to SAFICA in Haiti – share successes and failures. You can find a ‘checklist’ and tools to support partnering for inclusive business.

Agriculture and adaptation to climate change: The role of insurance in risk management – the case of Colombia

F&BKP Office — Tue, 05 Jul 2016 09:22:07 +0000

This paper (PDF) by the Inter-American Development Bank, analyzes in detail the market constraints on the development of the agricultural insurance market in Colombia and provides recommendations so that it can fulfill its potential as a risk management tool in the country. The first section of the paper describes the agricultural sector in Colombia and the expected impact of climate change in the country. The second section then describes the agricultural insurance market in Colombia, providing a brief history of previous and current insurance schemes and a detailed analysis of the market imperfections and constraints in the country as well as of current government support schemes. Afterward new developments in the agricultural insurance market taking place in the country and their potential effects are discussed, followed by a reflection on how climate change will affect the insurance industry. The last section concludes and provides policy recommendations. Insurance can potentially play an important role in climate change adaptation for rural households in developing countries as part of the overall climate change adaptation strategy. However, agricultural insurance markets have many market failures that inhibit their full development. In Colombia these market failures, namely information asymmetries and high transaction costs, are amplified by the country’s difficult topography, poor infrastructure, and history of rural violence. Even though the government provides premium subsidies to increase coverage, it is still very low and important crops and small producers are not covered. An important policy recommendation of the authors is that it is necessary to update the agroclimatic risk maps for different crops and regions, and to generate such maps at a lower scale so that insurance companies have up-to-date effective information for pricing policies and assessing risk. Furthermore, regarding the new challenges climate change poses not only for the agricultural sector but also the insurance sector, it is necessary to create bridges between the scientific community and their climate change models and the actuarial offices in insurance companies so that climate change models can be used to assess and price risks.

Balancing detail and scale in assessing transparency to improve the governance of agricultural commodity supply chains

F&BKP Office — Fri, 01 Jul 2016 14:42:00 +0000

In this article in the Environmental Research Letters, a complementary approach to existing approaches of assessing the sustainability of commodity supply chains is introduced. This approach can help provide actionable information, for example to improve sourcing and production practices, without requiring costly dedicated tracking systems for each individual supply chain. The authors illustrate some of the advantages of a complementary middle-ground approach that balances detail and scale of supply chain transparency information by combining consistent country-wide data on commodity production at the sub-national (e.g. municipal) level with per shipment customs data to describe trade flows of a given commodity covering all companies and production regions within that country. This approach can support supply chain governance in two key ways. First, enhanced spatial resolution of the production regions that connect to individual supply chains allows for a more accurate consideration of geographic variability in measures of risk and performance that are associated with different production practices. Second, identification of key actors that operate within a specific supply chain, including producers, traders, shippers and consumers can help discriminate coalitions of actors that have shared stake in a particular region, and that together are capable of delivering more cost-effective and coordinated interventions. The potential of this approach is illustrated with examples from Brazil, Indonesia and Colombia. It is discussed how transparency information can deepen understanding of the environmental and social impacts of commodity production systems, how benefits are distributed among actors, and some of the trade-offs involved in efforts to improve supply chain sustainability.

Inclusive business models: Guidelines for improving linkages between producer groups and buyers of agricultural produce

F&BKP Office — Wed, 29 Jun 2016 09:00:53 +0000

These guidelines (PDF) by FAO have been developed to support the growth of inclusive business models (IBMs) that integrate smallholders into agricultural value chains. Small actors in agricultural value chains are tied to markets through a series of forward and backward business linkages, which incorporate various types of business models. The complexity of these business models varies according to the commodity, number of actors involved, local context and market structure. Aimed at designers of agricultural value chain projects, rural development projects and enterprise development projects, together with grassroots NGOs that implement smallholder commercialization projects, these guidelines have been developed to facilitate the design and implementation of interventions that strengthen business models linking smallholders to value chains. The methodology described has been pilot tested across Africa, the Caribbean and the Pacific with support from the European Union (EU) and the Government of Ireland and is accompanied by guidance tips, principles and criteria based on experiences during its implementation. Findings are categorized according to crop types, cash, high-value and food staple crops – which provide an additional source of guidance useful in the design, planning and implementation phases. A FAO policy brief further complements these guidelines, describing how the public sector can contribute to both the inclusive and competitive goals of inclusive business models. An important contribution of this publication to existing literature on agricultural value chains is the guidance it provides on designing business model strategies that do not only link smallholders to markets, but that also encourage practitioners to consider the quality of market inclusion and its impact on poverty reduction.

The OECD-FAO guidance for responsible agricultural supply chains

F&BKP Office — Mon, 06 Jun 2016 11:59:16 +0000

This guide by the Organisation for Economic Co-operation and Development (OECD) and the Food and Agriculture Organization (FAO), has been developed to help enterprises observe existing standards for responsible business conduct along agricultural supply chains. These standards include the OECD Guidelines for Multinational Enterprises, the Principles for Responsible Investment in Agriculture and Food Systems, and the Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security. Observing these standards helps enterprises mitigate their adverse impacts and contribute to sustainable development. The Guidance targets all enterprises operating along agricultural supply chains, including domestic and foreign, private and public, small, medium and large-scale enterprises. It covers agricultural upstream and downstream sectors from input supply to production, post-harvest handling, processing, transportation, marketing, distribution and retailing. The following areas of risk arising along agricultural supply chains are addressed: human rights; labour rights; health and safety; food security and nutrition; tenure rights over and access to natural resources; animal welfare; environmental protection and sustainable use of natural resources; governance; and technology and innovation.

Financing farm renovation: How to build resilience using a blend of capital

Babs — Thu, 02 Jun 2016 09:40:32 +0000

This report by Root Capital explains how a blend of capital can help build resilience against a dwindling supply and rising demand in commodities such as coffee, cacao, and tea. La Roya, also known as coffee leaf rust, is a crippling crop disease that continues to spread across Latin America. In 2016, it is expected that global consumers will drink more coffee than ever before. With growing populations and rising incomes, demand for coffee — as well as cocoa, tea, and other agricultural commodities — will continue to increase in the coming years. Over the past three years leaf rust has affected the lives of millions of farmers and farmworkers. The challenges resulting from this has started a downward cycle of low productivity, reduced income, and underinvestment that often leads to migration, deforestation, and other desperate measures. To address these many challenges, Root Capital leveraged public-private partnerships and developed the Coffee Farmer Resilience Initiative (CFRI). This report shares learnings from Root Capital’s model with CFRI, what they’ve done over the past two years for the Initiative, and what they continue to learn. The report states that investment in agriculture—perhaps more than any other sector—has the potential to bring about unprecedented change today and into the future, from food security and nutrition to environmental sustainability and economic growth.

The executive summary is also available in Spanish.

The 4Ps of inclusive business: How perseverance, partnerships, pilots and passion can lead to success

F&BKP Office — Wed, 01 Jun 2016 14:29:06 +0000

Business Innovation Facility (BIF), is a pilot programme funded by the UK Department for International Development (DFID), that has provided hundreds of inclusive businesses with technical and advisory support, which means the BIF team has been truly inside the ‘engine’ of business. This report is the culmination of the lessons learned during this work, written at the completion of the BIF pilot. The report draws together findings on inclusive business models that work – or don’t – and the journeys that companies are making. There is a strong story to tell, about the challenge and importance of creating a viable business model, how it evolves in different directions and the time needed to deliver results at scale. Despite the diversity of the BIF portfolio, some common themes have emerged. Nonetheless, some caveats are equally important. The analysis is based only on a small and very specific portfolio – 40 businesses which have received lengthy and intensive support and have been engaged in our a monitoring system. The report presents 10 overall findings, clustered under two themes: 1) Companies investing in inclusive business need the right business model, but this takes time and innovation; and 2) Commercial and social returns are small and variable, but are emerging and expected to grow significantly over the next five years.

Sustainable global agrifood supply chains: Exploring the barriers

F&BKP Office — Tue, 31 May 2016 12:13:59 +0000

The article (PDF) in the Journal of Industrial Ecology investigates the factors that make businesses postpone integrating the performance dimension of sustainability in global agrifood supply chains. Based on literature-based conceptual reasoning, the article conceptualizes a double company lens distinguishing between substantial supply chain management and mere public relations endeavors as a major obstacle for businesses pursuing comprehensive supply chain performance in global agrifood chains. The authors point out that many supply chain performance attributes represent, in fact, credence attributes that cannot be verified by the consumer, hence entailing an information asymmetry between the company and its consumers. Rational business responses to this situation tend to focus on symbolic actions and communication efforts by means of sustainability reports and other brand-enhancing marketing tools that may be decoupled from substantial operations and supply chain improvements. The research propositions developed have partly been corroborated by a content analysis of annual and sustainability reports of four major agrifood companies (Nestlé, PepsiCo, Unilever, and Mondelez International). The conceptual arguments and empirical analysis presented in the article may serve as the basis for managers and academics to develop innovative inter- and intraorganizational business processes that reconcile trade-offs between various agrifood supply chain performance dimensions, thus pushing the performance frontier outward, and that provide the necessary transparency for overcoming the currently adverse setting of incentives inherent in the food production, processing, retailing, and consumption system.

Unlocking local currency lending: Foreign exchange risk in agricultural finance

Babs — Thu, 26 May 2016 14:11:01 +0000

This briefing note by the The Initiative for Smallholder Finance, details how philanthropic investment can play an influential role in mitigating foreign exchange risk. The note emerged from conversations with stakeholders at various levels of the agricultural value chain who expressed concerns about managing the foreign exchange (FX) exposure in their businesses – traders who pre-finance farmers and financiers who lend to smallholders and agri-businesses, among others. While a reasonable body of literature covers management of FX risk in microfinance, relatively little research has been conducted targeting FX risk management in smallholder agricultural lending. This briefing seeks to lay the foundation for further research, collaboration, and experimentation that can lead to the development and testing of solutions for managing the FX risk inherent in agricultural value chains. This briefing outlines the particular challenges of FX management in agriculture and profiles the landscape of existing solutions – drawing broadly from microfinance and industry solutions when relevant. The note concludes with recommendations for how lenders, donors, and other partners can develop interventions that will help mitigate these FX risks in the short to medium term.

Inflection Point: Unlocking growth in the era of farmer finance

Babs — Thu, 26 May 2016 12:54:36 +0000

This report by the Rural and Agricultural Finance Learning Lab and the Initiative for Smallholder Finance captures the way the smallholder finance space currently operates by describing the key actors and the nature of their interactions, and by conceptualizing these in a new “industry model.” The report identifies market frictions across the major components of the “industry model” that continue to inhibit smallholder farmers’ access to financial services and opportunities for removing them, and rallies sector actors around the need for more collective action than ever before. A key finding is that the gap today between smallholder finance supply and need is significant and projected growth of 7% per year for formal finance providers will not significantly cut into it over the next five years. The authors highlight that in order to fulfill the promise of the era of farmer finance, now is the time to push the sector toward an ambitious new trajectory.

Fostering inclusive outcomes in sub-Saharan African agriculture. Improving agricultural productivity and expanding agribusiness opportunities

Ati van der Honing — Thu, 12 May 2016 10:20:35 +0000

This paper (PDF) by IFAD looks at the role of agriculture in fostering inclusive and sustainable development in Sub-Saharan Africa. It discusses how improving agricultural productivity, smallholder access to markets and expanding agribusiness opportunities can accelerate transformation, investment and industrialization. The paper presents key investment and policy elements to be considered and points to the centrality of smallholders for the rural transformation process to be inclusive. Productivity improvements in agriculture as a whole and among smallholders in particular are very important at the beginning of structural transformation. At the outcome of the analysis two clear avenues for policy and investment emerge. First, there is the need to create the right conditions to facilitate the emergence of agro-industry. Second, it is important to promote smallholder competitiveness in high-value activities. Pertinently, opportunities for agribusinesses to benefit from interacting with smallholders exist across several agricultural value chains – from the sale of inputs, such as seeds and chemical inputs, to the procurement of outputs for processing or marketing into domestic or external markets. Furthermore, as consumer awareness around social and environmental dimensions of global value chains increases the need for value chains to be inclusive, fair and responsive to the needs of smallholders is greater than ever before, the authors state.

Is inclusive business for you? Managing and upscaling an inclusive company – lessons from the field

F&BKP Office — Wed, 04 May 2016 14:51:23 +0000

This publication (PDF) by the Centre for Development Innovation (CDI) and The Technical Centre for Agricultural and Rural Cooperation (CTA) provides readers with a valuable understanding of how agri-food markets can contribute to food security and rural poverty reduction, while still building profitable commercial relations. The report gives the outcomes of the ‘From Islands of Success to Seas of Change’ initiative on scaling inclusive agri-food markets. It combines background research, interviews and case studies with the insights of 100 leaders from business, government, NGOs, research, and farmer organizations who attended the Seas of Change workshop in April 2012. The case for scaling inclusive agrifood markets is explained and ten key challenges are explored. This leads to lessons for key stakeholders and a follow-up agenda for improved targeting of inclusive investments. It aims to distil original research on incentives and mechanisms for inclusiveness, success factors and obstacles, and opportunities for scaling up successful models. Bringing together ten case studies across a wide range of commodities in East Africa, the book features numerous photos, tables and diagrams, and includes a useful ‘Lessons learnt’ chapter at the end.

Agricultural value chain finance – A guide for bankers

F&BKP Office — Wed, 20 Apr 2016 11:40:49 +0000

This guide (PDF), developed by AgriFin (World Bank Group), in partnership with Bankaool (Mexico), HBL Bank (Pakistan) and HDFC Bank (India), provides a practical, evidence-based guidance to financial institutions engaging in agricultural value chain finance (AVCF). It includes a comprehensive picture of agricultural value chains to enable financial institutions to adapt financial products to the specific demands of value chain actors; and examples of field-tested AVCF products and procedures that have shown value or promise for financial institutions. The AVCF Guide can be used by financial institutions’ staff, including senior management to understand the strategic benefits of value chain finance, heads of lending departments and their teams to implement value chain finance, other bank staff for training and self-study. The AVCF Guide is also useful for development professionals supporting agricultural finance projects. The Guide is available in two formats – an online version which provides a high level overview of each step of the VCF process – and the full Guide which provides more detailed technical information and background materials on the mechanics of financing agricultural value chains. There is also a webinar presentation available introducing the guide here.

The rise of the data scientist: How big data and data science are changing smallholder finance

Babs — Tue, 12 Apr 2016 10:05:39 +0000

This briefing note by the Initiative for Smallholder Finance explores how innovative lenders are using new data sources and analytics to assess the creditworthiness of borrowers. It seeks to supplement the growing body of literature on alternative applications of data in assessing credit risk with a discussion of the opportunity to extend these models to the agriculture sector. The current state of alternative credit assessment models apart from and with respect to the agriculture sector is highlighted, as well as the challenges that prevent an easy transfer of urban tested models to agricultural borrowers. The authors highlight efforts to develop new data sources for the agriculture sector, as well as trends that may support alternative data driven credit assessment in these environments. The note concludes with recommendations for how lenders, donors, and other partners can push forward the development of such alternative credit assessment models.

Opportunities for value chain finance in Africa’s intra-regional food trade

Babs — Mon, 14 Mar 2016 10:46:29 +0000

This brief paper (PDF) explores the opportunities for African banks in financing intra-African food trade, in particular using value chain financing mechanisms (also called structured financing techniques). Value chain financing is used widely in the continent’s agricultural trade, but mostly for exports to and imports from other parts of the world, not for intra-African trade. And most such value chain financing transactions are managed by international banks, with African banks having at best a supporting role. Apart from a relative lack of familiarity of value chain financing techniques among African bankers, their negative perceptions about the risk of agricultural financing also constrains the market, as does their lack of awareness of the large commercial opportunities in financing short-distance value chains (from farmers to cities in the country or neighbouring countries). The brief concludes that there is a lot of scope for improving intra-African food trade. For example, governments and regional institutions, with the support of the donor community, can do more to encourage food sector operators and African banks to develop viable value chains for intra-regional food trade and its financing, including by creating dedicated re-financing and guarantee facilities.

Smallholder diaries: building the evidence base with farming families in Mozambique, Tanzania, and Pakistan

Babs — Mon, 07 Mar 2016 13:28:01 +0000

For CGAP‘s Financial Diaries with Smallholder Households, researchers interviewed 270 total families in Mozambique, Pakistan, and Tanzania every two weeks for an entire calendar year, tracking their income, expenses, and agricultural production. The result was approximately 500,000 data points, combined with rich personal stories, about the challenges these families face – related to agriculture, finance, and other areas of life such as health and education. The Smallholder Diaries (PDF) provide a deep view of how smallholders are affected by the agricultural cycle and manage their money in response to its ebbs and flows, as well as point to ways that financial service providers might better meet smallholders’ needs. While the Smallholder Diaries methodology and sample size are not statistically representative of all smallholder families in a given country, the findings from the Smallholder Diaries have global implications for the smallholder household sector. Early insights from the Financial Diaries of Smallholder Households from April 2015 can be found here. A CGAP’s blog series focusses on the art and science of Financial Diaries can be found here.

It takes two to trade: Understanding and improving farmer-firm relations in Africa

Nynke — Thu, 03 Mar 2016 09:58:41 +0000

This book (PDF) from AgriProFocus focuses on understanding and improving relations between farmers and firms. The book presents an approach – comprising an analytical framework, a practical assessment tool and suggestions for action – that can be used to analyse, assess and facilitate the relationship between supplying farmers and their organization on the one hand and buying firms on the other. This approach is called “It takes two to trade” (abbreviated as “2-2 Trade”) because farmers and firms need each other if their relationship to perform wel. The book presents an action-oriented facilitation tool (Chapter 4) that can be used to facilitate understanding, assessment and improvement of existing farmer-firm relations. Farm-firm relations are defined as trade relations where both parties collaborate and coordinate activities with each other, with the aim of doing business with each other over a longer period of time. The approach and accompanying tool were developed using 25 case studies and in intensive dialogue with farmers, firms and development practitioners. The book features 12 of these case studies and illustrates the diversity of farmer -firm relations and the usage of the tool. On the website of AgriProFocus more documents from the 2-2 Trade approach can be found, like a factsheet and a workbook.

Drivers influencing farmer decisions for adopting organic or conventional coffee management practices

Nynke — Mon, 29 Feb 2016 13:52:31 +0000

This article in the Food Policy journal investigates which drivers influence farmer’s decision-making on adopting organic or conventional coffee management practices. The authors use the case of Santader, Colombia, one of the world’s most important producers of Arabica coffee, where both conventional and organic schemes of management are used. The results suggests that social identity of coffee growers, the influence of coffee institutions, attitudes about management practices, and social relations of production, all play an important role in the process of decision making. The authors identified 18 socioeconomic drivers. Important factors were technology availability, the type of landowner, formal education of farmers, the role of institutions, membership of community organisations, farm size, coffee productivity and the number of coffee plots per farm. Likewise, economic drivers, such as crop profitability, determined how farmers are involved in trade and market networks at broad regional, national, and international spatial scales. The complexity of factors that influencing adoption of coffee management schemes is great and that not only financial factors but also a variety of other social factors drive farmer decision making. The authors argue that identifying the most influential behavioural drivers provides policy with opportunities to better support farmer livelihoods.

Webinar on “The role of governments in scaling up agriculture (index) insurance”

F&BKP Office — Mon, 29 Feb 2016 10:31:36 +0000

This webinar by the Impact Insurance Facility looked at how governments can catalyse the development of agriculture insurance markets through a variety of interventions such as the provision, administration and management of subsidies, support for developing infrastructure for effective implementation of insurance programmes, investment in collection and sharing of data and customer education. It also looked at the government’s role in developing enabling regulations and using insurance as a part of their social protection and agriculture development agendas. Organized together with the WBG’s Global Index Insurance Facility, the USAID & Basis/I4-supported Global Action Network for agriculture insurance, it featured resource persons from USAID, the World Bank and the Government of Kenya. The entire webinar can be rewatched on this YouTube channel. The slides of the webinar can be accessed through Slideshare. Some of the questions in the Q&A session of the webinar were left unanswered. The panellists have taken a look into these and you can access their responses here.

From subsistence to successful businesses

Ati van der Honing — Thu, 18 Feb 2016 09:22:52 +0000

This Report (PDF) by the All-Party Parliamentary Group on Agriculture and Food for Development (APPG) give recommendations on how to support and scale up smallholder agribusiness development in sub-Saharan Africa. This report represents a summary of the wide variety of case studies, evidence and learning presented to the APPG. The APPG supports the argument that smallholder agriculture offers new opportunities for growth and economic transformation. Improving agricultural performance and linking farmers to markets is the most powerful tool to end global poverty and hunger and boost shared prosperity. Recognising this untapped potential, the APPG conducted a series of evidence sessions, bringing together experts and practitioners in the field from smallholder entrepreneurs. The authors conclude with some recommendations, for example: public sector investment and government support to create an enabling environment for small agri-enterprise, including market-oriented farmers to flourish is key. Public sector investment should focus on infrastructure, advisory services and research. Also Governments, donors, CSOs and large-scale agri-business all have a critical role, both in helping farmers to access essential services and inputs, but also to help coordinate various market players. To achieve this partnership between these different stakeholders is essential. Enabling the development of small-scale agri-enterprise is a long-term venture and will only be realised in an inclusive way if women, who represent 70% of farmers in sub-Saharan Africa, are specifically targeted.

Drivers of household food availability in sub-Saharan Africa based on big data from small farms

Nynke — Mon, 15 Feb 2016 15:24:13 +0000

The analysis in this article (PDF) in PNAS uncovers the drivers for the variation in household food availability in sub-Saharan Africa. It suggest that targeting poverty through improving market access and off-farm opportunities is a better strategy to increase food security than focusing on agricultural production and closing the yield gaps. The analysis builds on data from 93 sites in 17 countries in sub-Saharan Africa, across contrasting agro-ecologies and calculated a simple indicator of food availability. The authors found that crop production was the major source of energy, contributing 60% of food availability. The off-farm income contribution to food availability ranged from 12% for households without enough food available (18% of the total sample) to 27% for the 58% of households with sufficient food available. Using only three explanatory variables (household size, number of livestock, and land area), the authors could predict correctly the agricultural determined status of food availability for 72% of the households, but the relationships were strongly influenced by the degree of market access. The authors state that their findings call for multi-sectoral policy harmonization, incentives, and diversification of employment sources rather than a singular focus on agricultural development. Recognizing and understanding diversity among smallholder farm households in sub-Saharan Africa is key for the design of policies that aim to improve food security.

Evidence on the impact of rural and agricultural finance on clients in Sub-Saharan Africa: a literature review

Babs — Mon, 11 Jan 2016 10:10:53 +0000

This report by the Evans School Policy Analysis and Research Group (EPAR) and commissioned The Rural and Agricultural Finance Learning Lab, reviews and summarizes the existing evidence on the impact of access to financial services/products on measures of production, income and wealth, consumption and food security, and resilience for smallholder farmers and other rural customers and their households in Sub-Saharan Africa. This study covers four main types of financial products/services: 1) credit; 2) savings; 3) insurance; and 4) mobile money and digital products. The literature review provides a great overview of what the rigorous impact studies to date have found, and a full bibliography to dig further. Some of the key takeaways are that rural and agricultural finance solutions can deliver real impact for smallholder/rural households, but the impact is far from guaranteed, especially since successfully utilizing a financial solution to transform one’s livelihood hinges on a complex range of factors. Perhaps most importantly, it’s clear that there’s a lot to learn still about impact of different financial solutions – including the product experience and the context in which they are delivered – on smallholder households. These themes are also discussed further in the Impact Case study by Dalberg which builds from the foundation of the EPAR literature review.

The effect of specialty coffee certification on household livelihood strategies and specialisation

Nynke — Tue, 05 Jan 2016 13:53:20 +0000

This article in the Food Policy journal analyses the effect of specialty coffee certification on income diversification of smallholders and questions the benefits of this certification for them. Smallholder coffee producers are responsible for 80% of global coffee production and need farm certification to access specialty coffee markets. Although rural households are known to depend on more than agricultural production alone, the literature on specialty coffee and certification has rather narrowly focused on coffee income and production. In this study, broader impacts are explicitly taken into account. Household income was decomposed into categories corresponding to specific income-generating activities and coffee income was broken down into price, yield and area effects. Results show that coffee certification encourages farmers to specialize in coffee production, increasing coffee income but not total household income, at least not in the short run. The time and effort required to attain the higher coffee income offered by certified production, means farmers have to give up other activities. This substitution effect cancels out the income effect, such that there is no increase in total household income. The lack of an effect on total household income suggests the return to the additional labor effort required for certified coffee production is not higher than in other activities, questioning the benefits of certification for small-scale producers.

Strengthening the first mile: Enabling small and medium agribusinesses to unlock development in East Africa

Babs — Tue, 08 Dec 2015 14:53:56 +0000

This report (PDF) by Farm Africa, highlights how support to small and medium agriculture businesses is key to driving rural economic development in East Africa. These ‘first mile’ businesses play a vital role in connecting small-scale farming to wider markets by buying their produce or supplying goods to them. However, the first mile market is failing due to a lack of appropriate financial products for agricultural small and medium-sized enterprises (SMEs). Without the finance they need to invest, professionalise or develop, the growth of agricultural SMEs is being stifled, as is the productivity and profitability of smallholders who depend on their services. Agricultural SMEs are being held back by a ‘missing middle’ of suitable financial products. This report maps the various financial instruments that should be provided for agricultural SMEs’ needs, enabling them to grow.

Designing digital financial services for smallholder families

Babs — Tue, 08 Dec 2015 14:14:16 +0000

A new report published by CGAP presents insights in how digital financial services (DFS) can work for smallholders. Digital tools offer great opportunities for the world’s 450 million smallholder families, but cannot replace personal support, according to the new human-centered design research. Recognizing the need for DFS that better respond to smallholder demand, CGAP partnered in early 2015 with a financial service provider (FSP) in each of Zimbabwe, Senegal, Rwanda, and Cambodia to design a new generation of smallholder-specific digital financial products and services. Under the guidance and expertise of two human-centered design (HCD) firms, CGAP and its FSP partners worked to explore, create, evolve, and test possible digital solutions for smallholder families. This publication (PDF) begins with a brief overview of the HCD methodology, before outlining a set of recommendations for FSPs to consider when developing new DFS offerings for smallholders. These recommendations, supported by field insights, are organized around four key design principles: 1) Design around Smallholder Needs and Aspirations; 2) Design to Drive Adoption; 3) Design for Continuous Engagement; and 4) Design for Customer Growth. Following the recommendations, this publication closes by identifying next steps in the design process, opportunities for further research, and potential challenges to bringing innovative DFS to market.

Integrating SMEs into Global Value Chains: challenges and policy actions in Asia

Babs — Tue, 24 Nov 2015 13:41:11 +0000

This study (PDF) by the Asian Development Bank and the Asian Development Bank Institute examines ways of encouraging SME participation in value chains, and explores policy solutions to address the financial and nonfinancial barriers faced by SMEs in global value chains. The authors highlight that two main factors require attention: 1) enterprise competitiveness and 2) enterprise connectivity. A survey of enterprises in four countries (Kazakhstan, Papua New Guinea, the Philippines, and Sri Lanka) was carried out as part of this study project (Chapter 2 and Chapter 3). Enterprises were asked to indicate the five most critical success factors for integrating into value chains. Their responses focused on both competitiveness and connectivity. Enterprises felt that the quality of their products or services was the most critical success factor. The second factor for success in value chains was skilled labor, a key ingredient for product quality and crucial to achieving high productivity and efficiency. The third factor nominated was strength of customer relations. The fourth most critical factor was specified as the ambition of the owner. The fifth factor was the education, experience, and international exposure of the owner. Besides these nonfinancial issues, access to finance is also a key success factor for SMEs to participate in global value chains. Public policies that can support SMEs should closely link to the dual objectives of enterprise competitiveness and connectivity.

Agricultural Lending: A how-to guide

Babs — Thu, 12 Nov 2015 14:24:34 +0000

This toolkit (PDF) by IFC introduces and explains step by step the key elements of success for financial institutions (FIs) to expand financial services to farmers. The content was developed around IFC’s global experience in assisting FIs with the development and implementation of agricultural finance products. The benefits of this work are synthesized in this guide, along with knowledge and expertise of best practices among both IFC clients and others. The guide includes advice on each step involved and tips on how to address the complex challenges that might arise during product development process. The guide has seven chief components: 1.) Introduction to Agricultural Finance; 2.) The Product Development Process; 3.) Product Development Phase 1 – Preparation; 4) Product Development Phase 2 – Market Research; 5) Product Development Phase 3 – Pilot Design; 6) Product Development Phase 4 – Pilot Testing and Monitoring; and 7) Product Development Phase 5 – Product Launch and Rollout. This guide highlights case studies and success stories from around the globe to illustrate how other institutions already work within the
agricultural sector.

Inclusive global value chains : policy options in trade and complementary areas for GVC integration by small and medium enterprises and low-income developing countries

Babs — Thu, 29 Oct 2015 13:29:07 +0000

This report (PDF) from the OECD and the World Bank focuses on making global value chains (GVCs) more inclusive. This is achieved by overcoming participation constraints for Small and Medium Enterprises (SMEs) and facilitation access for Low Income Developing Countries (LIDCs).The two major points of this report are 1) participation in GVCs is heterogeneous and uneven, across and within countries and 2) available data and survey-based evidence suggest that SME participation in GVCs is mostly taking place through indirect contribution to exports, rather than through exporting directly. The report makes the case that policy action, at the national and multilateral level, can make a difference in achieving more inclusive GVCs through: a holistic approach to reform spanning trade, investment and domestic policies; and, investment in expanding the statistical basis and analysis of GVCs and in sharing knowledge on best practices on enabling policies and programs.

Sustainable evaluation and verification in supply chains: Aligning and leveraging accountability to stakeholders

Babs — Thu, 22 Oct 2015 15:22:11 +0000

This article in the Journal of Operations Management, synthesizes a model that proposes how firms might address accountability for sustainability issues in their supply chain. At its core, the construct of sustainable evaluation and verification (SEV) captures three interrelated dimensions: inclusivity, scope, and disclosure. These dimensions characterize how supply chain processes might identify key measures, collect and process data, and finally, verify materiality, reliability and accuracy of any data and resulting information. As a result, the concept of monitoring is significantly extended, while also considering how different stakeholders can play diverse, active roles as metrics are established, audits are conducted, and information is validated. Also, several antecedents of SEV systems are explored. Finally, the means by which an SEV system can create a competitive advantage are investigated. The model of SEV proposed here provides a conceptual foundation for building specific measures, understanding complex relationships, and integrating additional theory.

Innovations and emerging trends in agricultural insurance

Babs — Wed, 21 Oct 2015 14:58:19 +0000

Index based insurance is a promising innovation that might yet help scale up agricultural insurance to needed levels, as well as help underwrite many public relief programs. It also promises to be a useful bridge for increasing the engagement of private insurers in managing these risks, either directly or through various kinds of public-private or nonprofit-private partnerships. Yet despite many promising pilots, IBI has not yet taken off at scale. There are a number of challenges holding back IBI, including problems of weak farmer demand, difficulties in developing appropriate indices and distribution networks, coping with climate change, insufficient public investments in necessary public goods, and first mover problems. This paper (PDF) has reviewed some recent innovations that seek to overcome these challenges, and some are indeed showing promise in ongoing pilot projects.

New trends in financing agricultural value chains – promising practices and emerging recommendations for policy development

Babs — Wed, 21 Oct 2015 14:09:33 +0000

This publication (PDF) by Dr. Rauno Zander from the GPFI SME Finance SubGroup aims to provide development policymakers with some practical recent insights on new trends in agricultural value chain financing. It highlights good practices, success factors and lessons to be learnt from recent experiences, covering the past five years. The paper looks at innovation challenges in agricultural value chain financing and details three possible types of innovation, namely for products, processes and systems. Several cases are highlighted, such as the case of ICT solutions to facilitate logistics and financing for coffee in Uganda. The final chapter outlines some areas for increased engagement of donors and other private and public sector programme partners. The chapter tries to capture the way forward for the most important development partners, based on the emerging experience of the German Development Cooperation, i.e. central banks and regulatory authorities, agribusiness stakeholders and other agricultural sectors, financial institutions and other financial sector players, investors and funders, and, also important, the primary producers and their associations.

Sustainable sourcing of global agricultural raw materials: Assessing gaps in key impact and vulnerability issues and indicators

Babs — Thu, 03 Sep 2015 15:12:21 +0000

For this research article at PlOS One, a comprehensive list of sustainable sourcing issues was collated in order to better structure the complex relationships and assess any gaps. The issues were pulled from the following three perspectives: major global sustainability assessments, sustainability communications from global food companies, and conceptual frameworks of sustainable livelihoods from academic publications. These terms were then integrated across perspectives using a common vocabulary, classified by their relevance to impacts and vulnerabilities, and categorized into groups by economic, environmental, physical, human, social, and political characteristics. These issues were then associated with over 2,000 sustainability indicators gathered from existing sources. A gap analysis was performed to determine if particular issues and issue groups are over or underrepresented. This process resulted in 44 “integrated” issues that are composed of 318 “component” issues. This current network of carefully selected issue and indicators forms a basis for an evolving, dynamic network informed by input from stakeholder partners on the relevant issues and useful, salient, and transparent indicator sets.

Financial innovation and poverty reduction: Evidence from rural northern Nigeria

Babs — Thu, 06 Aug 2015 13:22:32 +0000

This paper (PDF) by the Making Finance Work for Africa Partnership (MFW4A) examines the effect of financial innovation on poverty reduction in rural northern Nigeria. Households from this part of the world are farmers hence, exposed to the vagaries of Climate Change. Assessing whether or not the poorest income quintile (the poorest of the poor) benefit from existing financial inclusive strategies, would inform policy makers and direct the attention of microfinance entrepreneurs to better innovate products that would increase financial inclusiveness and reduce poverty in developing countries. The findings of the paper include the following: First, females constitute the majority of farmers in the poorest income quintile while men are mostly in the 4th and richest quintile. Secondly, smaller size households are more likely to be in the poorest income quintile than large households as family size matters for farm labour due to traditional farm practice. Thirdly, traditional crop insurance benefits mostly rich farmers and poor farmers do not utilize microfinance institutions meant to accelerate formal access to credit. Lending to rural farm households organized into savings clubs, however, benefits the poorest income quintile farmers. Fourthly, government programmes put forward to help rural farm households cope with agricultural shocks have, unfortunately, benefited mostly those in the richest income quintile. Lastly, to eradicate poverty for all in a post 2015 sustainable development framework, looking into how rural farm households are organized in developing countries and designing financial inclusive products that would be consistent with their values and community life, would be needful.

The impact of investment in agricultural research and development and agricultural productivity

Babs — Thu, 06 Aug 2015 13:03:05 +0000

This study by IFPRI was conducted to determine the impact on world prices, agricultural commodities production, and food security and nutrition of raising the annual growth in agricultural total factor productivity (TFP) from the current estimate of 1.6 percent to 2 percent by 2030 through investment in agricultural research and development (R&D). The study also compared three R&D investment strategies: (1) gradual TFP increase, (2) accelerated TFP increase, and (3) developing-countries-only TFP increase. Results show that compared with the baseline scenario of business as usual, R&D investment strategies to increase TFP to 2 percent can lower world prices of cereals and meat by as much as 17 and 15 percent, respectively, as well as increase area planted in crops by 2.4 percent and crop yields by 8.5 percent by 2030. World cereal and meat production can also be increased by 12.5 and 3.9 percent, respectively, and consumption by 4.5 and 3.9 percent, respectively. The number of malnourished children can be reduced by 7 million (5.4 percent), and the population at risk of hunger can be reduced by 160 million (23.2 percent).

Principles & practices for sustainable dairy farming 2015

Babs — Mon, 03 Aug 2015 15:35:58 +0000

This document by SAI Platform provides a set of Principles and suggested Practices for Sustainable Dairy Farming for the mainstream market in all regions of the world. It is designed to be dynamic and revised regularly on the basis of new practical experience and knowledge generation. It is meant to be ‘delivered’ and used with specific guidelines and practical tools relevant to local innovations and prevailing conditions (according to the region and its climate, ecological variables, farming systems, cultures etc.) as well as respecting national laws and regulations. This 2015 review has also taken the Principles to another level in that it has been aligned with the Global Dairy Agenda for Action program known as the Dairy Sustainability Framework (DSF) – which was launched in October 2013. This was important as the Principles support the dairy sector in working towards the Criteria and Strategic Intents of the DSF. A gap analysis was undertaken to identify any gaps in the coverage of the Principles and identified gaps have subsequently been addressed.

Investment contracts for agriculture: maximizing gains and minimizing risks

Babs — Mon, 20 Jul 2015 13:45:58 +0000

This joint IISD, World Bank and UNCTAD discussion paper marries two substantial bodies of research to show how investment contracts can be set up to promote sustainable development. It presents the top five positive outcomes and the five downsides from private sector investments in large- scale agricultural projects. It is important that such investments are sustainable not only in the long term, but also beneficial in the short term with minimal risks or negative effects. This paper looks at one approach to achieving this namely, carefully devised contracts with investors, and in doing so offers a number of concrete solutions. The paper presents the top five positive outcomes and the five downsides from private sector investments in large scale agricultural projects. This is derived from empirical evidence gathered by the United Nations Conference on Trade and Development (UNCTAD) and the World Bank after visiting large-scale agricultural projects (UNCTAD and World Bank 2014). The paper also proposes legal options to maximizing the main positive outcomes and minimizing the main downsides through better drafting of contracts between investors and governments for the lease of farmland. This derived from work conducted by the International Institute for Sustainable Development (IISD), which studied almost 80 contracts and produced a guide to negotiating contracts for farmland and water, including a model contract. Investment contracts are one tool among a range of other legal and policy instruments available.

Interactive practitioner’s guide for sustainable sourcing of agricultural raw materials

Babs — Wed, 15 Jul 2015 14:39:55 +0000

This SAI Platform practitioner’s guide is a reference manual for companies seeking to source their agricultural raw materials sustainably. It is intended for any food and beverage company buying its agricultural raw materials from farmers and farmer organisations directly, or indirectly through supplier companies. It describes every step of the process of a company’s sustainable sourcing strategy development and implementation, and contains suggestions, advice and concrete examples for each of those steps.

From smallholder to small business: Private sector insights on service delivery models that boost profitability along the value chain

Babs — Mon, 06 Jul 2015 14:07:15 +0000

This report (PDF) by Grow Africa and IDH, offers a first set of insights, distilled from the knowledge of leading practitioners, on how to successfully integrate smallholders into value chains through effective service delivery and smallholder aggregation models. The publication begins by setting a common understanding of service delivery, with case examples from companies actively working in the field. This is followed in chapter three with examples of some of the key challenges that must be overcome on the ground, like side-selling, ensuring there is access to finance for smallholders, and aggregating land to enable largerscale commercial production. In their conclusions, the authors endorse a new approach to inclusive business taken by agribusiness in Africa, and raise some additional questions that are still to be addressed.

Mobile payments: How digital finance is transforming agriculture

Babs — Mon, 22 Jun 2015 10:56:08 +0000

This report (PDF) by The Technical Centre for Agricultural and Rural Cooperation (CTA) offers new and interesting insights on the role that digital finance can play in providing a more cost-effective and secure method for financial transactions in the agricultural sector, particularly for rural smallholder farms. In doing so, it offers a three-step approach for digital financed-based business development that emphasizes deep engagement with smallholder farmers, innovative partnership strategies, and a focus on mutual value creation. Complementing these recommendations, the initiatives profiled in this report offer compelling cases of how three different organisations approached the agri-digital finance opportunity and the solutions they crafted to successfully reach smallholder farmers. The study was carried out using three case studies; SmartMoney from Uganda, NWK Agri-Services from Zambia, and Rice Mobile Finance (RiMFin) from Ghana. The report introduces the concept of digital finance by providing an overview of the new technologies and business models that began only seven years ago. The report’s findings provide an insight that portrays the nascent usage of digital payments by users ranging from large agricultural commodity buyers to the small-scale farmers at the bottom of the pyramid.

SME Internationalization through global value chains and free trade agreements: Malaysian evidence

Babs — Thu, 18 Jun 2015 13:45:24 +0000

This paper (PDF) by the Asian Development Bank Institute examines the characteristics of SMEs in in global value chains (GVCs) and free trade agreements (FTAs) and explores the policy implications. It finds that among SMEs, firm size matters for participation in GVCs and FTAs. But size is not the whole story for SME internationalization. Licensing of foreign technology and investment in research and development are also positively associated with SMEs joining GVCs. Furthermore, increased exposure to international trade, knowledge of FTA provisions and central location positively affects the use of FTAs by SMEs. More business support for SMEs can help them to engage in GVCs and FTAs. For more information, this study by APEC suggests some policy principles and best practices to increase the chances for SMEs to play an important role in GVCs.

The 10 principles of food industry sustainability

Babs — Wed, 10 Jun 2015 15:40:53 +0000

This book identifies the most pressing sustainability priorities across the entire food supply chain and shows, with tools and examples, how producers, processors, packers, distributors, marketers and retailers all play a role in advancing improvement. The book begins with an overview of the Principles of sustainability in the food industry: what they are and why they matter. Subsequent chapters focus on each of the Ten Principles in detail: how they relate to the food industry, their global relevance (including their environmental, health, and social impacts), and the best practices to achieve the potential of meaningful and positive progress that the Principles offer. Specific examples from industry are presented in order to provide scalable solutions and bring the concepts to life, along with top resources for further exploration. The Principles, practices, and potential of sustainability in the food industry covered in this book are designed to be motivating and to offer a much-needed and clear way forward towards a sustainable food supply.

Advancing health and well-being in food systems: strategic opportunities for funders

Babs — Tue, 09 Jun 2015 15:03:57 +0000

The working group of the Global Alliance for the Future of Food commissioned four scoping papers (PDF), one for each of its strategies, from cutting-edge experts in the field of food systems policy and practice. The papers focus on key recommendations for action by funders to promote positive systemic change in food systems and to strengthen the fundamental role that food systems play in creating and sustaining health and well-being in all communities and populations. The papers seek to promote policies and actions that: enhance access to healthy, high quality food at affordable prices through diverse outlets; minimize the marketing and distribution of foods that contribute to disease and inequities in health; and support healthy and resilient community environments.

Managing risk with insurance and savings: Experimental evidence for male and female farm managers in West Africa

Babs — Mon, 01 Jun 2015 12:43:34 +0000

While there is a fast-growing policy interest in offering financial products to help rural households manage risk, the literature is still scant as to which products are the most effective. In order to inform gender targeting of rural finance policy, this paper by IFPRI investigates which financial products best improve farmers’ productivity, resilience, and welfare, and whether benefits affect men and women equally. Using a randomized field experiment in Senegal and Burkina Faso, the authors compare male and female farmers who are offered index-based agricultural insurance with those who are offered a variety of savings instruments. They found that female farm managers were less likely to purchase agricultural insurance and more likely to invest in savings for emergencies, even when controlled for access to informal insurance and differences in crop choice. The hypothesize is that this difference results from the fact that although men and women are equally exposed to yield risk, women face additional sources of life cycle risk—particularly health risks associated with fertility and childcare—that men do not. In essence, the basis risk associated with agricultural insurance products is higher for women. Insurance was more effective than savings at increasing input spending and use. Those who purchased more insurance realized higher average yields and were better able to manage food insecurity and shocks. This suggests that gender differences in demand for financial products can have an impact on productivity, resilience, and welfare.

Finance for Smallholders: opportunities for risk management by linking financial institutions and producer organisations

Babs — Mon, 01 Jun 2015 07:57:50 +0000

This research (PDF) initiated by the Rural Finance working group of NpM, coordinated by ICCO Terrafina Microfinance and carried out in cooperation with AgriProFocus and the Wageningen UR, aimed to investigated the bottlenecks that exist to finance smallholder farmers. The research provides insight into how food production systems work and how they can be strengthened with improved financial services. The success factors of 14 projects in four African countries – Ethiopia, Mali, Uganda and Rwanda – have been analysed. In addition to specific financing mechanisms, the cooperation between financial institutions, producer organizations and investors has been examined and specific risk mitigation strategies have been investigated. The research report shows that linking financial institutions and producer organizations together offers new finance opportunities because risks are reduced.

Indicators of global sustainable sourcing as a set covering problem: an integrated approach to sustainability.

Babs — Tue, 19 May 2015 15:50:38 +0000

This paper in the Ecosystem Health and Sustainability Journal, presents a new method to systematically link issues and indicators under two conceptual frameworks of sustainability in order to enable quantitative analyses. The authors demonstrate this approach with a specific use case focused on the global sourcing of agricultural products. They used the optimization software Marxan in a novel way to develop minimum sets of indicators that provide maximum coverage of sustainability issues. Minimum covering sets were identified and accumulation curves were developed to measure the contribution of each indicator in each set to overall issues coverage. While greater detail in the assessment of each indicator would likely provide more effective sets of indicators, those that were generated provide optimism that this approach can bring better focus to sustainability assessments.

Agribusiness SMEs in Malawi: assessment of small and medium enterprises in the agriculture sector and improved access to finance in Malawi

Babs — Tue, 19 May 2015 10:28:22 +0000

This report by USAID and ACDI/VOCA (PDF) presents an assessment of agri-business small and medium enterprises (ASMEs) in Malawi. It was found that this is a sector with diversified business ownership, in which owners commonly operate multiple businesses and can be classed as ‘portfolio’ owner-managers spanning both agri-business and non-agri-businesses. A portfolio enables them to move resources to address cashflow shortages and seasonality in each business, manage uncontrollable downside risks by moving resources from businesses affected by such a risk, and manage growth opportunities by investing in businesses that are making most progress. A key implication is that it is difficult for public sector and donors to invest in specific value chains, as owners move resources within a portfolio of businesses that span more than one value chain and may include non-agri-businesses. The analysis is particularly focused on ASME access to finance, use of business development services, use of information and communication technology, collaborating and clustering and the enabling environment. For Malawian ASMEs, the way forward depends on tailored, common sense approaches that are key to increasing their competitiveness.

Oxfam’s agricultural sourcing scorecard: food and beverage companies must do more to tackle climate change

Babs — Mon, 18 May 2015 14:06:27 +0000

Oxfam’s ‘Behind the Brands’ assesses the companies’ policies and commitments to improve food security and sustainability. It looks at how well they perform on issues relating to transparency, women, workers, farmers, land, water, and climate. In the latest ‘scorecard’ of March 2015, which rates the agricultural sourcing policies of the top 10 international food and drink companies, Unilever has come top of a ‘scorecard’. Oxfam calls on the Big 10 to face up to the scale of greenhouse gas emissions produced through their supply chains, and address the deforestation and unsustainable land-use practices.

Financing Sustainable Development: Implementing the SDGs through Effective Investment Strategies and Partnerships.

Babs — Mon, 18 May 2015 08:52:51 +0000

This working paper (PDF) by the Sustainable Development Solutions Network (UNSDSN) provides a roadmap for the Financing for Sustainable Development discussions in the lead-up to the Addis Conference. The paper focuses on a broad array of issues and examines some of the key questions involved in designing new institutions to handle the long-term, complex investments needed for key sustainable development priorities. Chapter 5.3 covers Sustainable agriculture, food systems, and improved nutrition. This chapter reviews major investment strategies and financing mechanisms in key investment areas. Some key points summarized: the vast majority of investments in agriculture comes from private sources. A strengthened global partnership is needed around three public-private investment challenges: (i) the needs of smallholder farmers and artisanal fishermen – available financing mechanisms are inadequately resourced; (ii) nutrition – a complex, multi-sectoral investment challenge in need of an improved institutional financing architecture; and (iii) agricultural research around a strengthened Consultative Group on International Agricultural Research. The chapter also highlights gaps in resource mobilization and financing mechanisms and non-financing priorities for agriculture/food systems and nutrition. Furthermore, there is a special focus on the biodiversity and ecosystem SDGs in this chapter.

Small and medium enterprises in agriculture value chain: opportunities and recommendations

Babs — Thu, 14 May 2015 12:48:55 +0000

This report by Shujog, commissioned by Oxfam, analyses the effectiveness of development programs in addressing challenges faced by Small and Medium Enterprises (SMEs) in the agriculture sector in Asia. The purpose of this report is to inform the decision-making of development programs that aim to catalyze the growth of Social Enterprises (SEs) in agriculture and attract impact investment capital to fuel the growth of the food and agriculture sector in Asia. Access to timely, affordable, and appropriate type of finance, and consistent access to stable and high-value markets remain the most daunting challenges faced by SMEs in agriculture. It was found that most of the development interventions targeting these challenges were relevant and effective when they were tailored for the specific geography and market conditions they targeted. Social Enterprises in agriculture face unique challenges in addition to those faced by SMEs in agriculture. Several recommendations are made for existing and new interventions for addressing these challenges.

Revolutionising agricultural finance: a post Fin4Ag conference special report

Babs — Thu, 07 May 2015 12:40:48 +0000

The Fin4Ag conference was held in Nairobi, Kenya, July 2014, specifically focusing on agri-financing. This conference report (PDF) by The Technical Centre for Agricultural and Rural Cooperation (CTA) provides a valuable overview of the event, which covered new thinking around the three broad themes of innovative tools, a new legal and regulatory framework, and cross-cutting issues in agri-value chain finance. Specific issues covered include warehouse receipt financing, the progress of African commodity exchanges and alternative sources of finance. For more reading, see this special report from the fin4ag conference from July 2014 “Revisiting agricultural finance“.

Rural finance and agricultural technology adoption in Ethiopia

Babs — Thu, 07 May 2015 11:24:03 +0000

Financial cooperatives and microfinance institutions (MFIs) are the two major sources of rural finance in Ethiopia. Whereas MFIs are relatively new, financial cooperatives have existed for centuries in various forms. The coexistence of two different institutions serving the same group of people, and delivering the same financial services, raises several policy questions. Those questions have become particularly relevant, as the government has embarked on developing a new strategy for improving rural financial services delivery. This study (PDF) by IFPRI serves as an input to that policy discussion. Using a unique household survey dataset and the propensity-score-matching technique, the impacts of the two financial service providers on agricultural technology adoption is examined. The results suggest that access to institutional finance has significant positive impacts on both the adoption and extent of technology use. However, when impacts are disaggregated by type of financial institution and farm size, considerable heterogeneities are observed. In particular, financial cooperatives have a greater impact on technology adoption than do MFIs, and the impacts appear to vary depending on farm size and types of inputs. The underlying implications of these results are discussed in light of the country’s rural finance policies and programs.

How can Danone Ecosystem sustainable sourcing innovation be scaled up?

Babs — Tue, 28 Apr 2015 13:31:11 +0000

This issue of the Down to Earth blog of Danone is about sustainable sourcing by preserving natural resources, strengthening the company’s stakeholders and global ecosystems, and ensuring that it is still able to accomplish its mission in the most sustainable way possible in the future. To reflect on these issues, Danoners and stakeholders gathered for an intense and fruitful three-day work session. The workshops ended with a strong focus on the challenges the Danone projects face. Based on votes from all participants, a list of the 5 most important ones was drawn up: 1) How to make farmers’ organisations and farmers financially sustainable; 2) How to attract young people to continue the farming business; 3) How to foster co-creation within Danone and look for internal support; 4) How to develop farmers’ knowledge; and 5) How to leverage animal feeding to further sustainable agriculture.

Lessons learned from sustainable agricultural value chain financing in Zimbabwe

Babs — Thu, 23 Apr 2015 09:56:21 +0000

This case study highlights how SNV helped create an enabling ecosystem for small and medium enterprises (SMEs) through access to finance and business development services. SNV, with support from Hivos and other partners, established the Zimbabwe Agricultural Development Trust (ZADT) in the pursuit of their common objective of providing sustainable financial support to value chain actors. SNV also provided capacity development services to the banks to enable them provide development-friendly and sustainable financial products targeted at agricultural value chain actors. Despite some limiting factors, banks were able to generate business by developing the previously neglected segments such as agro dealers. Also, companies were able to do business with increased number of SMEs. Due to the success of this programme, SNV has handed over the Secretariat and is no longer playing a prominent role in the Zimbabwe Agricultural Development Trust.

Cocoa barometer 2015: chocolate too cheap to be sustainable

Babs — Fri, 10 Apr 2015 15:48:43 +0000

The Cocoa Barometer 2015 (PDF) is published and funded by the members of the Barometer Consortium: FNV Mondiaal, Hivos, Solidaridad, and the VOICE Network (Oxfam Novib, Oxfam Wereldwinkels, ABVV/Horval, Berne Declaration, Stop The Traffik, and Südwind Institut). The cocao barometer was launched at the chocoa conference in March 2015. The main conclusion from the report is that at the moment, chocolate is too cheap to be sustainable. Current cocoa farmers are not receiving a living income and younger generations no longer want to be in cocoa. Therefore, this barometer focuses on the financial aspects of the cocoa supply chain. Previous Cocoa Barometers have looked at issues such as ‘Beyond Certification’ and ‘Beyond Productivity’. This Barometer looks at the themes “Value Distribution” and “Living Income for Smallholders”. Recommendations from the report include: 1) Develop a living income model for smallholder cocoa farming, 2) Address the price-setting mechanisms in order to increase prices at farm-gate level and 3) Move from voluntary to mandatory sector-wide solutions.

Improving agricultural microfinance through risk mitigation

Ine — Thu, 09 Apr 2015 15:37:55 +0000

Agricultural lending is considered risky, though with proper risk management the agricultural sector is worth investing in as it shows considerable potential for growth. The risk management factsheet (PDF) elaborated by Cordaid presents four categories of risk mitigating measures that microfinance institutions (MFIs) can adopt to enhance safe opportunities for agricultural lending, in terms of: preparation, product risk alleviation, operations and collaborations. These measures have been identified in the ACP/EU Microfinance Program, by the MicroSave/Cordaid agricultural lending project which supported seven African MFIs in developing or refining appropriate agricultural lending products, including risk management and elements of agricultural value chain development.

Scaling up index insurance for smallholder farmers: Recent evidence and insights

Babs — Tue, 07 Apr 2015 13:33:42 +0000

This report (PDF) by CGIAR CCAFS explores evidence and insights from five case studies that have made significant recent progress in addressing the challenge of insuring poor smallholder farmers and pastoralists in the developing world. The case studies include cases in: Ethiopia, India, Kenya, Mongolia, Rwanda, Senegal and Tanzania. A few common features appear to have contributed to recent progress within these case studies: 1) explicitly targeting obstacles to improving farmer income; 2) integration of insurance with other development interventions; 3) giving farmers a voice in the design of products; 4) investing in local capacity; and 5) investing in science-based index development. This report demonstrates that despite challenges, there are index insurance programmes that have made recent advances in scaling up services for relatively poor smallholder farmers and pastoralists in the developing world, with demonstrable benefits.

Small and growing: entrepreneurship in African agriculture

Ine — Thu, 02 Apr 2015 16:03:32 +0000

This report (PDF) from the Montpellier Panel argues that investment in rural and food sector entrepreneurship, particularly amongst Africa’s growing youth population, can do more than achieve sustainable food and nutrition security for the continent: it can create jobs, wealth and robust livelihoods. The report’s recommendations include: (i) the establishment of programmes in order to support the development of rural and food sector enterprises (RFSEs), (ii) making microfinance and credit more accessible to higher-risk groups such as women and (iii) the development of financial products for those SMEs who grow beyond microfinance.

Financing strategies for integrated landscape investments

Babs — Thu, 02 Apr 2015 08:58:56 +0000

Integrated Landscape Initiatives (ILIs) have unique financing needs: they need investment and financial support timeframes. Integrated landscape management (ILM) provides a context to spatially target and harmonize investments so that they can efficiently yield public goods and private financial returns while mitigating investment risks. In Africa, financing systems for ILM must support local, national, and regional development priorities and provide not only national food security, but also local food security, rural livelihoods, and healthy ecosystems. During the Landscapes for People, Food and Nature in Africa Conference, experts, practitioners and policy makers from across Africa and around the world came together over three days to synthesize lessons learned and developed an action plan, research priorities and policy recommendations. Funding remains a main challenge and more effort is needed to evaluate the business case for the participation of the business sector serving local, national, and international markets.

Oxfam-Unilever ‘project Sunrise’: enhancing livelihoods while strengthening supply chains

Ine — Tue, 31 Mar 2015 16:25:13 +0000

Unilever and Oxfam collaborated in the project ‘Sunrise’, which brought together the development aims of Oxfam with the sustainable sourcing efforts of Unilever. Together they explored how to build sustainable smallholder-based supply chains that could grow its business while reducing poverty for marginalised communities. The project studied pilot projects producing dehydrated vegetables, tea, tomatoes and black soy beans in such countries as Tanzania, Kenya, Azerbaijan, India and Indonesia. Sunrise has resulted in new guidelines for Unilever’s supply, which is now part of their procurement process. Oxfam has developed a guide for NGOs on how to work with private companies, based on the lessons learned from Project Sunrise. The report can be found here.

Coffee Barometer 2014: building demand for sustainable coffee

Ine — Tue, 03 Mar 2015 16:30:21 +0000

The Coffee Barometer 2014 (PDF) is a bi-annual overview of developments in the coffee industry. This joint publication of Hivos, Solidaridad, Oxfam Novib, IUCN-NL and WWF discusses recent developments in the coffee market, standards and certification and provides an overview of case studies advocating adaptation strategies. Ecological, economic and social aspects of coffee production, climate change and (voluntary) standards systems are covered. The barometer draws attention to the consequences of climate change on coffee production practices and the need to scale up and coordinate industry wide sustainability initiatives to make farmers more resilient. Furthermore, it highlights the importance of ensuring that women and the next generation of farmers remain in, and benefit from coffee production. The Barometer consortium calls upon the top ten coffee roasters to increase demand for sustainable coffee and to communicate transparently on the sustainable certified and verified volumes purchased.

Doing business with nature: opportunities from natural capital

Ine — Tue, 03 Mar 2015 16:26:37 +0000

The University of Cambridge and the Natural Capital Leaders Platform published the report, Doing Business with Nature: opportunities from natural capital (PDF), which aims to engage industry in a review of the global challenges around water, biodiversity and soil and showcases the extent to which companies are working together to develop new interventions in the face of natural capital degradation. The report provides a number of case studies that show the current steps international companies (such as Olam, Nestlé, Asda, and Mars) are taking to address natural capital challenges. The report shares some business responses to these challenges, such as capacity building, knowledge extension services and farmer engagement, while also highlighting the barriers to long-term and sustainable management of natural capital.

Source: CISL; February 17, 2015

Sustainable matchmaking between SMEs: in emerging economies and the Netherlands

Ine — Tue, 03 Mar 2015 16:19:42 +0000

Sustainable Match is an initiative of six complementary Dutch parties (Agri-ProFocus, BBO, MVO Nederland, Oxfam Novib, PeopleConnector, ProPortion) that has been executed between 2012 and 2013 on innovating trade and investment missions in anticipation of the new policy for international cooperation of the Dutch Ministry of Foreign Affairs (PDF). By means of two pilots in Uganda and Bangladesh, an innovative approach for sustainable “matchmaking” was developed. Their publication (PDF) highlights lessons learned in sustainable matchmaking between small and medium enterprises in emerging economies and the Netherlands. An important lesson learned is that local knowledge and presence and cooperation with local partners are essential to match entrepreneurs in sustainable and inclusive international business partnerships.

Non-farm entrepreneurship in rural Africa: patterns and determinants

Ine — Tue, 03 Mar 2015 16:17:21 +0000

This paper (PDF) published by Dare provides an empirical description of the patterns and determinants of non-farm entrepreneurship in rural Africa, using the World Bank’s unique LSMSISA dataset on six countries: Ethiopia, Niger, Nigeria, Malawi, Tanzania and Uganda. The research finds that non-farm entrepreneurship predominantly creates informal jobs and mostly for family members; that these jobs tend to be transient and influenced by seasonality in agriculture; and that there is substantial heterogeneity across countries in the determinants of rural non-farm entrepreneurship. The researchers conclude that Africa’s non-farm economy continues to fulfil mainly a risk-diversifying role and has therefore a limited impact on poverty and growth.

Firm to Farm Finance Toolkit (F2FF)

Babs — Tue, 03 Mar 2015 16:10:02 +0000

The Firm to Farm Finance Toolkit (F2FF) (PDF) was commissioned by USAID and in a pilot project in Bangladesh. This toolkit suggests an approach and process for achieving sustainable and mutually beneficial market linkages between poor rural farmers and financial institutions. This F2FF toolkit aims to codify and use the learning of the successful pilot experience to inform the research and development of innovative and promising access to finance solutions for low-income households and communities. The toolkit provides step-by-step guidance on how to apply the framework and tailor it for use in selecting and commercializing feasible, viable and desirable financial products and service models to sustainably reach low-income households and communities with efficient, scalable strategies for inclusive finance.

Insight into social lending and direct-to-farmer finance for smallholder farmers

Ine — Tue, 03 Mar 2015 16:01:32 +0000

The Initiative for Smallholder Finance is a multi-donor effort designed to demonstrate how specific products and services can expand the reach of financing for smallholder farmers. They have published several briefings which provide insight into targeted market research, product development and testing and investment facilitation in the smallholder finance market. Their investor and funder guide (PDF) to the agricultural social lending sector offers opportunities to support social lenders in closing the smallholder agricultural finance gap. A briefing document on direct-to-farmer finance explored over 150 finance providers who offer finance directly to smallholder farmers globally. According to this document, providers’ specific approaches to direct-to-farmer finance cluster around four business model archetypes: Build & Integrate, Build & Partner, Leverage & Network, and Extend & Mobilize. Understanding the four archetypes can help funders, investors and finance providers better align models across smallholder farmer segments and identify opportunities to address scaling challenges. The Direct to Farmer Finance: Innovation Spaces Playbook (PDF) offers concrete ways in which direct-to-farmer finance providers can innovate in order to better serve smallholders.

Islamic microfinance: Unlocking new potential to fight rural poverty

Ine — Tue, 03 Mar 2015 15:57:06 +0000

This paper (PDF) by the International Fund for Agricultural Development (IFAD) highlights the role of Islamic microfinance as an instrument in tackling rural poverty in Muslim countries. It describes key features of Islamic microfinance and describes Islamic microfinance contract modalities in Sudan, the Syrian Arab Republic, and Bosnia and Herzegovina that are being tested in IFAD-supported operations in the Near East and Europe. The paper argues that specific terms and conditions (Sharia-compliant finance) make Islamic microfinance products favorable and accessible to the most vulnerable populations, these include risk-sharing, profit-sharing, fixed repayment rate, transparency, social welfare and justice. According to IFAD, these conditions make Islamic finance products a viable alternative to conventional lending.

Source: IFAD; November 2014