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