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Cutting the knot of poverty and hunger

Posted by Roxanna Samii Saturday, July 24, 2010 1 comments

By Kanayo F. Nwanze, President of the International Fund for Agricultural Development

If words and good intentions could feed people, there would be no hungry children in the world today. But as those of us working in development know all too well, malnutrition, hunger and poverty are bound tightly together in a knot that requires collective action to cut.

You cannot guarantee good health without a nutritious diet. You cannot ensure a nutritious diet without freedom from poverty. And you cannot free most of the world’s poorest people from poverty without improving the lot of small farmers, because most of the world’s 1.4 billion extremely poor people live in the rural areas of developing countries and depend on agriculture for their livelihoods.

It is one of life’s tragic ironies that three-quarters of Africa’s malnourished children live on small farms. In Asia and Latin America, farm children also often go hungry. According to the Lancet medical journal, poverty is associated with inadequate food and poor sanitation that lead to increased infections and stunting in children. Children who suffer from malnutrition early in life are forever deprived of their full physical, mental and social development potential. This means that instead of being an asset to their societies when they grow up, they are more likely to be a burden.

To release the knot of malnutrition, hunger and poverty, rich and poor countries alike must invest in and support the poorest smallholders, creating the conditions to bring them out of subsistence and into the marketplace. Numerous studies show that GDP growth generated by agriculture is at least twice as effective in reducing poverty as growth in other sectors. And experience repeatedly shows – in China, Thailand, Vietnam, India, Ghana, Burkina Faso and elsewhere – that smallholders can lead agricultural growth.

Small farms are often more productive, per hectare, than large farms, when agro-ecological conditions and access to technology are comparable. Small farmers have a strong personal incentive to get the most from their land and from their own labour. Indeed, there is ample research to show that there are few economies of scale in the production end of farming. Family farms have very low management costs and are labour intensive, while large farms are either heavily mechanised - offering little employment opportunities - or have high costs for managing the workforce.

Cutting the knot also means not treating poor rural people paternalistically by doling out handouts. Smallholders need financial services to pay for seeds, tools and fertilizer. They need the protection of weather insurance. They also need secure access to land and water, and roads and transportation to get their products to market. And they need agricultural research and technology to improve their resilience to rapid economic and environmental changes. These are all things that national governments, with the support of the international community, can put into place for small farmers.

Access to basic technology can make a huge difference in farmers’ lives. In Zambia, the Zambia National Farmers Union worked with IFAD to introduce an SMS market information service to give farmers up-to date market prices, along with the names of buyers, for 12 major commodities. The farmers are now able to get higher prices for their goods. The project has been so successful that it is now being extended across the border to the Katanga Province in neighbouring Democratic Republic of Congo. Congolese traders access the information in French by phone, while the Zambian traders and farmers receive the data in English through Africonnect.

It is also crucial for smallholders to have secure access to land. In Rwanda, the economic security of 5,000 households – half of which were headed by women – improved when the land of state-owned tea plantations was privatized and redistributed to the tea farmers. As a result, investment in the land has increased. A partnership with private investors has built a nearby tea factory, providing better market access for 2,600 of these households, and a second tea factory is under construction, to improve market access for the other households.

By creating the conditions for poor rural people to develop profitable businesses, and by fostering their entrepreneurial spirit, we will be able to create a vibrant rural sector. A dynamic rural sector will generate local demand for locally produced goods and services. This, in turn, will spur sustainable non-farm employment in services, agro-processing and small-scale manufacturing. With better access to higher quality food in childhood, young people will be able to contribute to their societies. And with a greater range of rural employment options, poor rural youth will have an incentive to become the farmers of tomorrow instead of abandoning their communities – as they do now – to look for work in the cities.

At a time when budgets are tight, it may seem prudent to cut back on investments in key sectors such as agriculture and development. But this would lead to greater world food insecurity and slower economic growth. Indeed, the world’s poorest people need support now more than ever because the financial crisis has had a severe impact on the economies of developing countries, which have seen export revenues fall, private capital flows diminish and remittances decline.

This year, I hope world leaders will accelerate their efforts to meet the commitments made at L’Aquila. I hope that the leaders of nations in Africa, Asia and Latin America will take the steps they need to create vibrant rural economies at home.

By doing this, they will be able to loosen the knot that binds malnutrition, hunger and poverty together and create a world free from poverty, hunger and desperation.

IFAD President's visit to Zambia

Posted by Roxanna Samii Friday, July 23, 2010 0 comments


On 23 July 2010, in Lusaka, IFAD President, Kanayo F. Nwanze, met with President of the Republic of Zambia, Rupiah Banda.

The two officials praised the excellent collaboration between IFAD and the Government of Zambia. “We are proud with IFAD support” said President Banda. President Banda requested IFAD to continue assisting his government’s efforts in agriculture conservation agriculture and irrigation schemes.

IFAD President commended the Head of State and the Government of Zambia for their sustained commitment to agricultural and for being a leader within the region in agriculture conservation. Having noted the country’s bumper harvest in maize, Nwanze and Banda discussed crop diversification to ensure food security and to increase smallholder farmers’ revenues. He also assures President Banda that IFAD will continue to work with smallholder farmers.

The day before his meeting with President Banda, Nwanze travelled to Livingstone, Choma and Kalomo to visit some IFAD-supported projects. IFAD President noticed with great satisfaction that closed IFAD-funded projects were fully sustained by project beneficiaries who had managed to expand their businesses.

In Mukuni village where the Smallholder Livestock Investment project operates, he was received by Chief Mukuni with the Minister of Agriculture and Cooperatives, Hon. Peter Daka and was provided a demonstration of tagging and branding of local cattle. In Kalomo District, Nwanze met the beneficiaries of the Nabuyani irrigation project.

During his visit, Nwanze signed the host country agreement for the IFAD country office.

by Geraldine Mpouma Logmo

President's visit to Rwanda - Chronicle of day 3

Posted by Roxanna Samii Tuesday, July 20, 2010 0 comments

20 July 2010

Rush! Rush! The Minister of Agriculture is waiting at the President’s office. We scramble out of the meeting with the Minister of Trade and Industry, which had a surprisingly strong emphasis on agriculture and post-harvest activities. All this is improvised, the meeting with the Head of State was shifted several times, but what did we expect? Today is the start of the 20-day campaign period for the presidential elections, and at 1pm Mr Kagame is to kick it off his campaign with a massive rally at the national stadium. So we rush past the security checks, get installed in the large meeting room with a massive video conference facility that could stem from a science fiction movie, and when President Kagame flies in we cannot be but impressed.

Proud of government’s accomplishments, he recalls in detail his encounters with farmers and the development stories they told him. He is clearly content with the one-cow programme, and remembers well the past difficulties of PDRCIU, our infrastructure project, in which his intervention assisted greatly. He confirms that much still remains to be done, and that the high population growth poses an obstacle to development in the country. A surprising request of his, with which we happily agree, is to concentrate our development efforts, rather than spreading them thinly. The President also reminds him that IFAD is a development institution owned by its members, rather than a donor with its own agenda. Overall, a very supportive meeting, we find as we stroll back to the cars through the garden-like Presidential compound.

In the afternoon we have some time off as a result of the programme items that were shifted to the morning, and I manage to get some work done in the office. The press conference also becomes a victim of the election campaign: it gets postponed to 8pm and when we emerge 90 minutes later we are hungry as wolves. At Chez Robert in town they still have dinner, but with the usual wait we finally get to eat just before 11! I’m lucky to be able to go to bed for good after that, but the President, Ides and Géraldine have a flight to catch, at 3am to Nairobi and on to Zambia. I bid them farewell, grateful for a supportive visit and also deeply relieved that it all went so smoothly. Tomorrow I need to thank the project staff for their hard work.

By Claus Reiner

President's visit to Rwanda - Chronicle of day 2

Posted by Roxanna Samii Monday, July 19, 2010 0 comments

19 July 2010



Breakfast at sunrise, and off to the Centre for Agricultural Information and Communication, still in Kigali, that was inserted into the programme just before we did the plan-by-the-minute during the dry run on Thursday last week. We know that at 13h30 we have to be back in town to meet the UNDP ResRep, who was kind enough to delay a retreat of the UN country team to make this possible. Dense traffic, we arrive with 10 min delay. The delay keeps growing, and my worries with it.

An impressive display of internet interactivity and a functioning radio studio give us an idea of the reference centre for the community innovation centre (CCI) that features a little later on the programme. When we’re ready to go, our most faithful 10-year old IFAD car is the only one not to start, and luckily the 3 of us remaining can join Aimable, our CPO, in the FAO vehicle. In the marshland, rice farmers explain cultivation and water retention technologies, and these explanations satisfy the President's research heart and put a smile on his face. At the CCI, he cut the inaugural ribbon so that farmers could demonstrate the applied research results and their watershed plans. Even microenterprise clients get their stage. The whole CCI was bustling with activity, it was a real pleasure to see this centre come to life. Remember the community competitions we looked at with a few Rwandans in Peru? Well, it's at the CCIs that these are now planned to be happening. Unfortunately we need to cut a few farmer presentations short, in order to make good some of our ever looming delays.

On the way back, a sericulture cooperative is still waiting, I know that enormous preparations must be waiting for us there, so we decide to at least give it a quick stop. But then, before we get there, the cars swerve to the right onto another dirt road. The Minister of Agriculture had decided that we absolutely needed to see the One Cow per Poor Family programme. That almost saw me faint.

In the end, we did it relatively quickly, and I couldn’t but admit that it was a perfect complement to the agricultural programme. Even a presidential TV interview fitted in, and at the sericulture cooperative, which had the smallest silkworms you’ve ever seen on display, we sped through the production room, on plastic sandals to make sure we didn’t contaminate the place. With some forceful driving on the way back, we made it to the UN lunch with no more than 30 min delay. I almost couldn’t believe it.

The rest of the day was very quiet in comparison. Meetings with private sector representatives and the Minister of Finance went smoothly, and by 6pm I started oscillating between the hotel pool and sauna to catch my breath. And then I had to get dressed again for the official reception and dinner.

by Claus Reiner

IFAD President visits Kigali Memorial Centre

Posted by Roxanna Samii Sunday, July 18, 2010 0 comments



On the first leg of his Rwanda trip, this afternoon, IFAD President, Dr Kanayo Nwanze accompanied by Her Execellency Agnes Matilda Kalibata, Minister of Agriculture and Animal Resources visited the Kigali Memorial Centre.

The Kigali Memorial Centre was opened on the 10th Anniversary of the Rwandan Genocide. The Centre built on the site where over 250,000 people are buried is a permanent memorial to those who fell victim to the genocide and serves as a place for people to grieve those they lost.

Nwanze and Kalibata laid wreath and paid their repects to the victims of the genocide. A visibly touched Nwanze, listened carefully to the explanation offered. Signing the VIP book, Nwanze wrote: "Beyond words".

Tomorrow, Nwanze will travel to Bugesera District, where he will inaugurate the Bugasera community innovation centre.



President’s visit to Rwanda

Posted by Roxanna Samii 1 comments

Sunday night, 18 July 2010


After much preparation, that I don’t want to get into here, we have finally arrived at the starting position. The President has arrived in Rwanda, he has rested and had some time off over the weekend to meet up with some friends who live here, and tomorrow the tight programme will kick off with a field visit very early in the morning. Apart from last-minute preparations, today’s only programme was the visit to the genocide memorial, accompanied by the Minister of agriculture and our communication team made up of Géraldine, media expert, and Declan with his video camera. Having visited this site of profound sadness several times before, I dropped them off and retreated to the hotel to prepare tomorrow’s speech.


When the three returned, they were uneasily silent, the President having very well packaged the feeling into the phrase “beyond words”, written into the visitors’ book. We all agreed, the atrocities that have been committed in this country in 1994 are as hard to imagine as the motivations and social dynamics at the time are to understand. Do we all have the possibility of mass murder in ourselves? How can we make sure it will never happen again? We felt that checking the population growth and thus the pressure on resources is certainly part of the answer. After all, Rwanda is the most densely populated country on the continent, and growing fast.

In the little time left I indulge a little in the luxuries the best Hotel in Kigali has to offer. At dinner, we go through a few talking points for tomorrow, making sure that the key messages get delivered to government. One point makes me nervous: the meeting with the head of state, Paul Kagame, is set for Tuesday, shortly after the official opening ceremony of the presidential elections at which he will address the crowds at the national stadium. Will this work out? Government tells me not to worry, which I try to do. To be continued.

By Claus Reiner

Future of Smallholder Farming, seminar by Peter Hazell

Posted by Erin Baggott and Jennifer Smolak Wednesday, July 14, 2010 0 comments


What challenges do smallholder farmers face today? What are their viable options for growth and prosperity? What is their future? The Office of the Chief Development Strategist invited Peter Hazell, Visiting Professor at Imperial College London and formerly of the World Bank and IFPRI, to share his views on the changing context of smallholder farming. The discussion will help shape the concept of a proposed conference, to be held in November 2010 at IFAD.


Hazell started his lecture by observing that smallholder farming is not only persistent, but there are increasing numbers of smallholder farmers across the globe today . China, for example, has not yet reached a tipping point where the number of its smallholder farmers is decreasing. The trend exists because rural populations keep growing, yet in the face of this growth, many countries cannot create enough productive nonfarm jobs.

A minority of smallholder farmers have increased their incomes by specializing in high-value products, but most smallholders remain poor, face stagnation, and are partially diversifying into nonfarm employment to increase their income. Hazell made the point that this is a pathway of survival, not prosperity—most part-time nonfarm jobs undertaken by smallholder farmers require little skill and are very low wage.

Hazell challenged the audience by saying that an important question to ask when opening any discussion of smallholder farming is, what has changed? He argued that after all, smallholder farms have been present since the advent of settled agriculture. Presently there are several facets of change in smallholder farming.

  • Firstly, small farms are becoming increasingly small.
  • Secondly, new market chains have emerged that present opportunities for profit but which can also be difficult to join.
  • Thirdly, globalization has introduced increased competition into both export and domestic markets.
  • Fourthly, the growing privatization of agricultural research is leading to the neglect of problems specific to small farms.
  • And lastly, climate change may create new problems for smallholder farmers.

Numerous conferences have been held on the state of smallholder farming and we understand the contours of the issues fairly well at this point. What is lacking is an understanding of the operational steps required in the near future. So the challenge is how can we enable smallholder farmers to capture new opportunities and prosper?

The prospects for smallholder farms becoming viable businesses will ultimately depend on their connection to the market. Market access is more important for business development than any other factor, including technology adoption. Smallholder farmers have shown themselves to be naturally entrepreneurial, however, there is an important role for training farmers in the acquisition of business skills. The reality of dealing with a variety of private sector agents such as input sellers, wholesalers, and sourcing agents requires skills and empowerment. Particular attention needs to be paid to vulnerable groups such as women and indigenous populations.

Difficulty lies ahead for the development community in targeting those farms that are potentially viable businesses. How many smallholder farmers can engage in business and how many will be left out? This necessarily excludes a segment of traditional beneficiaries of IFAD and other agencies, and the development approach for this group of people will become a critical issue.

Hazell pointed out that while agriculture is widely regarded as a main driver of economic growth, the debate over small versus large farms continues. There is not necessarily broad popular buy in for a small farm agenda in many countries and the likely solution will involve some mixture of big and small farms. This issue deserves further clarification.

Environmental sustainability will often be at odds with market-driven agricultural development. Consider the case in which the market demands a particular crop that contributes to soil degradation – market forces will dictate specializing in that crop but a cycle of environmental deterioration will ensue. The issue of sustainability and natural resource management will need particular attention within a business context.

Climate change will have a tremendous impact on smallholder farmers, who are already vulnerable due to limited access to technology and resources. However, outside of areas where deforesting is a problem, smallholder farmers are not among the major contributors to climate change and thus mitigation efforts may best be focused elsewhere. One interesting area for mitigation efforts is payments for environmental services, which could improve farmer livelihoods. Overall, smallholder farmers may be best served by adaptation strategies.

Off-farm opportunities are also important when considering smallholder farming and national economic development pathways. Rural-urban migration will have to play a bigger role in Latin America and Africa. In the Asian Green Revolution, agricultural development stimulated the growth of the nonfarm economy, which in turn provided employment opportunities for those moving out of agriculture. Today, however, the backward linkages to the rural economy are urban and industrial rather than agricultural. Backward linkages have been stagnant in Africa, where the nonfarm economy remains flat and exit opportunities are scarce.

New innovations include the rise of producer organizations as a means by which to connect smallholders to modern market chains. Much potential lies in this form of organization and it will be useful to look at which types of organizations have worked and what can be scaled up. Also, social enterprises will allow NGOs to engage on a commercial level while maintaining a development agenda. Innovative ways of supplying inputs and stimulating markets can be explored. Finally, there is a changing role for governments in coordinating investment and growth strategies, but too much involvement (such as in the Asian Green Revolution) is not desirable. The proper role for governments is that of stimulating partnerships. There is a need for innovative partnerships, include public-private and unions linking smallholders with medium and large-scale farms.

Hazell concluded his lecture by saying that with a renewed interest in agriculture at the international donor-community level, it is an exciting time to be involved in rural development. For guidance we need to look at the success stories: the organizations, programs, and interventions that have worked and could be scaled up. Of particular interest are cases that have involved private sector operators, social enterprises, and financial service providers. The challenge for IFAD will be to capture the knowledge that exists here, identify the gaps, and operationalize findings into development strategy.



Armando el rompecabezas en Colombia

Posted by Greg Benchwick Tuesday, July 13, 2010 0 comments


Conversatorio Internacional “La Mujer Rural: Derechos, desafíos y perspectivas”

By Maija Peltola
“Sueños, derechos, territorios, cultura, identidad, violencia, resistencia, políticas públicas, desplazamientos forzados, organización, capacitación, emprendimientos, indígenas, afrodescendientes, mestizas, futuro…” Éstas fueron algunas palabras que las y los participantes del Conversatorio Internacional “La Mujer Rural: Derechos, desafíos y perspectivas” saborearon y sazonaron durante tres días (7 al 9 de julio), en Bogotá, Colombia. El frío y la lluvia de la ciudad no apaciguaron el calor humano de nuestros anfitriones colombianos, y tampoco entibiaron los debates en los cuales pa
rticiparon y opinaron más de sesenta mujeres y hombres, provenientes de todos los rincones de Latinoamérica.

El conversatorio fue coorganizado por el FIDA, la Coalición Internacional por el Acceso a la Tierra (Internacional Land Coalition) y la fundación colombiana CINEP (Centro de Investigación y Educación Popular – Programa por la Paz), con los objetivos de:


  1. Enriquecer el conocimiento sobre los procesos de emancipación desde la pobreza y la marginación de las mujeres que viven en las áreas rurales de Latinoamérica y el Caribe.

  2. Elaborar un inventario de instrumentos políticos y técnicos, y de experiencias para apoyar a las mujeres a erradicar las discriminaciones y ejercer sus derechos civiles, económicos, sociales y culturales.

Para el FIDA, el conversatorio ofreció, además, una oportunidad de recoger recomendaciones concretas, formuladas por las mismas mujeres productoras, sobre cómo fortalecer el rol de las mujeres en nuestros proyectos y, en particular, cómo trabajar hacia el acceso equitativo de mujeres y hombres a la tierra.

La participación de mujeres y hombres de Centroamérica, la región andina, el Caribe y el Conosur garantizó que las experiencias compartidas fueran distintas – más quizá no tan distantes – entre sí. Aprendimos cómo, en Argentina, Patricia Rojas van der Bruyn de GAJAT (Grupo de Apoyo Jurídico por el Acceso a la Tierra), capacita y presta apoyo legal a organizacio
nes indígenas que luchan por hacer valer sus derechos a las tierras ancestrales.

En el otro extremo del continente sudamericano, Dorina Hernández, de la comunidad de San Basilio de Palenque, disfruta de la seguridad y oportunidad de sobresalir que le proporciona su “cuadro”, el grupo que se nutre de la cultura e identidad afrocolombianas. Estos cuadros se forman espontáneamente, pero cobran cuotas y se reúnen de manera periódica. Al momento de una emergencia como enfermedad o muerte, los cuadros ofrecen apoyo a sus miembros, cubriendo gastos de medicina y servicios fúnebres, entre otros.

En el Perú, Olga Zapana Alania participa en las actividades del pro
yecto Sierra Sur (cofinanciado por el FIDA) y se ha convertido en promotora de grupos de mujeres ahorristas. “Al principio nuestros esposos no querían que ahorráramos, ‘les van a robar’ nos decían, pero ahora ya no”, nos contaba. Ahora las mujeres indígenas de los altos cuentan con seguros de vida y exportan sus productos textiles hasta Canadá y Japón.

Y en Nicaragua, Lea Montes de la organización NITLAPAN promueve un fondo de tierras que ha permitido a mujeres rurales pobres – presionadas, por un lado por los flujos emigratorios y, por el otro, el acaparamiento de terrenos por grandes empresarios – adquirir terrenos fértiles para cultivar.

Y, entre toda esta maraña de experiencias, operamos las organizaciones, redes e instituciones de financiamiento como el FIDA, buscando cambiar el curso de la historia y el rumbo del mundo rural. Como si fueran piezas de rompecabezas vamos, comprometidos con los derechos de las mujeres rurales en el mundo, juntando las palabras, los desafíos – y los sueños.

Cuando pequeños, solíamos juntarnos con nuestros hermanos, primos, amiguitos y vecinos, para armar un rompecabezas que a veces nos abrumaba por su complejidad y cantidad de piezas. A veces teníamos como apoyo una imagen que nos ayudaba a visualizar cómo tenía que ser. Otras veces nos dejábamos guiar por la intuición. Aún me acuerdo lo feliz que nos sentíamos cuando por fin lográbamos descifrar el caos y encontrar un lugar perfecto para cada pieza. Pero más allá de la satisfacción al terminar una tarea difícil, lo que más atesoraba era el compartir: charlar, pelearnos y reírnos juntos.

Al igual que hace muchos años, en este conversatorio volví a sentir lo mismo: el privilegio de compartir un fin común, y la oportunidad de estar trabajando juntos hacia esa meta. Y así vamos todos armando el gran rompecabezas de los sueños, pieza por pieza, equivocándonos sobre la marcha, debatiendo ideas, cambiando estrategias, buscando soluciones... Para que algún día todas las mujeres y hombres rurales en el mundo puedan revertir la rueda de la pobreza.



The Investment Forum discusses innovative financing for food security

Posted by Martina Spisiakova Friday, July 9, 2010 0 comments

The Asia and the Pacific Region has emerging financial products and services for financing food security-related activities, which address the numerous market imperfections and high uncertainties due to the vagaries of weather that are constantly faced by the small-scale farmers, small and medium food service providers and other agribusiness entities in the food chain. This session of the Investment Forum, facilitated by Sana Jatta from IFAD featured case studies on mitigating risks associated with commodity price and weather volatility as well as other food security risks.

Ganesh Thapa shares innovations, good practices and lessons learned from financing food security activities

High food prices and dietary changes provided new incentives for the private sector to invest in the food sector. Despite of this, the private sector remains a minor investor in the food and agriculture sector due to limited access to finance. Credit financing for smallholders is traditionally considered a high risk business and involves high transaction and supervision costs. Innovative financing schemes show approaches and practices to address these problems.

Value chain financing responds to problems tied with access to credit by interlinking two separate transactions as a substitute for collateral. For instance, loans for purchase of inputs are linked to the sale of output as a condition for the loan. Some examples of innovative financing include:

  • Warehouse receipts
  • Contract farming
  • Trade finance
  • Other commodity-finance instruments such as repurchase agreements, export receivable financing, factoring and Islamic trade finance.

The following risk-reducing mechanisms deal with the reduction of covariate risks and indemnity against losses:

  • Index-based weather insurance
  • Index-based livestock insurance
  • Guarantee schemes
  • Micro-insurance

Credit delivery mechanisms link informal financial intermediaries with formal ones is a widespread practice in many countries. Examples include: India’s self-help groups (SHG) linkage banking, Cambodia’s AMRET-village association linkage banking and improving market access through cooperative strengthening, China.

Lessons for replication and scaling up

Small producers should be given options for direct or indirect linkages with buying companies. This can be achieved by enhancing awareness and building capacity of private providers, government agencies, rural producers and farmer organizations on new lending approaches, financial innovations and instruments for risk management. Leveraging on technology investments, for instance sharing of power, telecommunications and data network facilities, can also reduce investment costs.

Policy direction should be towards creating an enabling policy and regulatory environment to promote innovative financing schemes in response to financing issues facing small producers. Governments should provide sufficient legal and regulatory environment for the development of warehouse receipts, other collateral mechanisms and supply chain financing and minimize direct competition between state-owned enterprises and private sector to entice private investment. Policies should be directed at improving current financing models through the development of new risk-reducing instruments, better monitoring and more effective regulation of warehouses, and the use of innovations in ICT to test the effectiveness of credit delivery mechanisms.

Veiverne Yuen from Rabobank International shares innovative smallholder business models for food

Rabobank is the leading global food and agribusiness bank, with presence in 48 countries worldwide, total assets of Euro 608 billion, and 59,000 employees. It offers a wide range of financial, advisory, research, and specialized products.

There are three primary ways to invest in agriculture – direct investment in commodities, investing in equities, and primary investment in agriculture (e.g., land and other agricultural assets). With governments’ increased concern on food security, private investors are become increasingly interested in investing in agricultural land.

Developing a platform for engagement should consider the following factors:

Looking at the structure of the food and agri value chain: Upstream is highly fragmented, composed of many smallholders, poorly financed, and numerous retailers. Midstream has numerous players that are rapidly consolidating and integrating systems. Downstream industries are rapidly modernizing, integrating and increasing market control.

New value chain model: Reorganizing primary production capabilities and distribution channels to achieve greater economies of scale, increasing access to competitive markets.

New pricing models driving growth is disintermediation, cutting out the middle players.

Emerging successful agribusiness models include economic clusters (e.g., Northern Economic Region in Malaysia) and food zones. An example of the latter, which involves public-private partnerships, is the China-Singapore Jilin Food production zone. The government provides logistics infrastructure for the private sector’s vertically integrated modern food production and marketing business.

Apiradee Yimlamai from the Bank of Agriculture and Agricultural Cooperatives (BAAC) presents Agricultural Weather Index Insurance in Thailand

Weather risk management is vital for Thailand because of the importance of agriculture in its economy. Also, the country is particularly vulnerable to hydro-meteorological risks. It is ranked among the top six countries most frequently affected by floods and droughts. Moreover, calamity relief becomes an increasing burden in public resources. From 2005-2008 alone the country spent US$ 450 million in ad-hoc disaster relief. Thailand’s BAAC reaches over 80 per cent of farm households and the insurance sector is growing with over 70 non-life insurance companies in the market. Lastly, the country has reliable and good weather data infrastructure.

Two tools to manage risk are the traditional agricultural reinsurance and index insurance contracts. Traditional crop insurance is generally considered a global failure, marred with moral hazard, adverse selection, high monitoring and administrative costs. The challenge, therefore, is to develop an alternative, efficient and cost-effective crop failure insurance program that can be easily reinsured and distributed to individual farmers and at the same time overcome problems associated with traditional crop insurance.

One such response is the weather based insurance programme which offers protection against weather uncertainties that result in volume/output volatility. Index insurance contracts indemnify based on the value of the “index” not on actual losses. Indexes should be highly correlated with losses but cannot be influenced by the insured. Examples of indexes include rainfall, temperature, regional yield and river levels. Such contracts overcome the supply side problems associated with traditional insurance contracts.

Thailand’s weather insurance contract based on the commodity risk management of the World Bank uses market based risk transfer products like weather index-based insurance and price risk management contracts. The World Bank model also involves knowledge transfer and technical assistance to farmers.

The open forum focused on the continuing lack of access of smallholders to financing despite the innovations reported in the session.

With world population projected to reach 9 billion by 2050, food production will need to increase by 70 per cent, according to FAO estimates. Thus, enhanced productivity is important, especially in existing cultivable lands where production is small-scale and water resources are highly stressed. This session of the Investment Forum in Manila discussed some of the innovative practices that work at the ground level.

Swift Company of Thailand – promoting good agricultural practices (GAP)

Shifting from traditional farming practices to knowledge-based GAP is a difficult task for smallholder farmers. For Thailand’s Swift Company, this required long-term and intensive training and giving farmers a strong incentive to learn and conform to the guidelines.

Swift Company first implemented GlobalGap standards on organic farming of asparagus in Srakaew Province, Thailand. Swift’s model aims to secure sufficient quantities of premium quality fresh produce that meets highest standards of food safety and ensure that everyone in the chain, from grower to consumer, benefits fairly from the operation.

The contract farming model was designed to address basic problems faced by smallholder farmers. Following risk assessment of target farms, farm owners were organized into groups and, together with the company, they designed production plans to supply predetermined volume of farm produce. Traditional constraints on technology and lack of market information were removed through intensive training and regular meetings and discussions with technical representatives of the company.

Farmers sell all grades of their farm produce at guaranteed prices agreed prior to planting. If at any point in time the market price is higher than the guaranteed base price, the market price is applied. Fair pricing is determined by giving due consideration to farming and logistics cost and the retail price in the target retail market.

Production planning and collection stations established in each contracted group facilitate direct daily delivery of produce from the farm to the Company’s packing house. This streamlined the overall supply chain process, thereby reducing handling cost and spillage. The Company provides a well-planned financial assistance program for farmers, including long-term interest-free loans to the group rather than to individual farmers.

Swift recommends that for scaling up international organizations and the public sector should provide sufficient support to basic and applied research on innovative farming from seed development to post-harvest control and handling; assist the private sector, particularly SMEs in developing and applying innovative farming approaches; and develop strong cooperation between public and private sectors for agricultural development planning and implementation. Planning and implementation should give emphasis on sustainability.

The private sector should revise their business orientation and look at both short-term and long-term gains. They should help their suppliers be able to reduce wastage in the supply chain and improve productivity in smallholder farming. They should advocate application of good agricultural practices and environmental protection, thereby balancing monetary gains with responsible acts.

International Rice Research Institute (IRRI)

Rice, typically grown by smallholders, is a primary staple for billions. About 90 per cent of the world’s rice is produced and consumed in Asia. Over 70 per cent of the world’s poor are in Asia. Ultimately, poverty reduction is linked to investments in rice production.

New challenges face global rice production. To meet demand for 2035 and or keep prices affordable, an additional 114 million tons of rice are needed. However, major problems affect smallholder rice production, among which are the effects of economic growth, increasing pressure on land use, climate change, stagnating yields, and less land, water and labor.

IRRI develops stress-tolerant rice varieties, improves water and nutrient management approaches, and establishes approaches to capture greater and significant value for smallholders. It strives to provide reliable information to support decision makers through rice monitoring and forecasting system, global rice model and rice database.

FAO shares innovations and good practices in agricultural water management

Developing extensive new irrigation schemes to grow more food is no solution. Future investments must protect the environmental services that wetlands, rivers and other ecosystems provide. Investments to raise yields and productivity from irrigated land are thus key to producing the extra food needed, while safeguarding the environment from additional stresses. Other options, such as upgrading rainfed farming and increasing international trade in foodgrains must contribute, but they will need to be supplemented by a significant increase in production from irrigated agriculture.

Innovations and good practices in agricultural water management are already being undertaken in Asia-Pacific and other regions. Among these are the following:

  • Adapting irrigation design and operation concepts to changing objectives. The Deduru Oya Project, for example, in Sri Lanka blends ancient and new technology. The government has begun building a dam to capture and store the runoff from rainfall during the wet season, and supplies it through a canal to a 1.5 MW powerhouse, provides irrigation water to existing and new areas through numerous tanks.
  • Recognizing and supporting farmers’ initiatives. Farm storage tanks make canal irrigation more flexible and reliable for farmers in India and China, for example. In Saurashtra, India water supply is boosted by groundwater recharge movement.
  • Innovating in institutional reform and management concepts. China has been successful with its “bounded service provider” model where water-saving incentives are given to contracted water managers who provided irrigation water to small farming villages located within large irrigation systems.
  • Expanding capacity and knowledge. Among the concepts in practice are the Jiamakou business model, Andhra Pradesh where farmers manage their groundwater resources, IRRI’s “magic pipe” systems which bridge the gap between research and extension, and FAO’s MASSCOTE which encourages irrigation staff to modernize.
  • Decreasing the vulnerability of the poor and vulnerable. A project in the Philippines empowers the poor to invest in shallow tubewells through Farmer Field Schools and adapted financing mechanisms.
  • Developing sound integrated water conservation strategies. An example is the use of sound water accounting concepts to develop and monitor integrated water conservation strategies in China.
  • Looking beyond irrigation and the water sector. Implementation of non-water support programs such as the National Rural Employment Guarantee Act of India.

The open forum revolved around the need to focus more attention and resources on post-harvest losses, the need for more responsive extension services and strengthened research initiatives.

Highlights of proposed country partnership frameworks on food security

Posted by Martina Spisiakova Thursday, July 8, 2010 0 comments

Food security investments in the region need an enabling environment and innovative partnerships. This session featured proposed partnership frameworks for food security by India, Bangladesh, Lao PDR and the Pacific.

India

Vibrant and dynamic food supply chains and novel public-private partnerships are emerging, but more needs to be done to tackle food and nutrition security. The participants suggested the following opportunities for partnerships:

  • replicating these dynamic food supply chains in less progressive states
  • productivity enhancement for food and high-value crops
  • transparency and better mechanisms for social audits, and
  • access to basic goods and services by extremely poor people.

These basic goods include clean drinking water, fuels, health services, education, as well as innovative women participation in the labour force.

Bangladesh

Bangladesh’s National Food Policy Plan of Action and its attendant Comprehensive Investment Plan cover four components for achieving food security: availability, access, utilization, and absorption, and is supported by a number of programs. It considers the challenge of mobilizing adequate financial and technical resources as the greatest in implementing the plan. The Government of Bangladesh urged development partners and the Partnership Framework to take a positive and proactive role in the implementation of the plan by reviewing their investment portfolio and aligning interventions around the identified investment priorities.

Lao People’s Democratic Republic

Lao PDR considers greater investment in food and agriculture through enhanced biodiversity by opening its abundant agriculture land to foreign direct investments as its major approach to meeting its MDGs in poverty, hunger, and health. Its approach is not so much to attract official development assistance funding, but rather private sector funds. They need support for innovative land use contract arrangements and regulations.

Pacific Sub-region

The key elements of food security in the sub-region cover availability, access, nutrition, and stability, with emphasis on developing traditional and healthier food crops. Because of small population, and archipelagic, small, and numerous islands of the Pacific, focus will be towards improving food supply chains at the national and regional levels, facilitating trade, and enhancing productivity of nutritious food. The region’s food security programme will be imbedded in local structures supporting and building on ongoing initiatives, link strongly with donor and NGO-supported activities and the private sector, and collaborate with activities of relevant national and regional projects operating at country levels.

James Bolger, Chairman, Advisory Council, World Agricultural Forum and former Prime Minister of New Zealand joined the Investment Forum, organized by ADB, FAO and IFAD, as the eminent speaker.

The world today is facing innumerable problems, from terrorist threats to food crisis, trade constraints and financial crisis, which altogether contribute to the worsening of poverty and hunger in many parts of the world. The great challenge is how to meet the food and nutritional needs of the 9 billion people on earth in 2050 when we are not meeting the basic needs of 6.5 billion people today.

“It is a time for new thinking as yesterday’s thinking will not solve tomorrow’s problems”

According to Mr Bolger, the Forum’s theme of “Food for All” is a difficult task. But it is possible through innovative partnerships – a partnership that would focus on addressing the needs of the 3 billion citizens that live on less than US$ 2.5 a day. The partnership should aim to move food consumption from those spending too much to those who need to consume more to achieve dignity in life. This partnership is a contrary to the approach of most economic theorists who emphasised individuals and firms acting in their self-interest rather than in the interest of the broader community. To succeed, there is a need for a new paradigm to recognize the needs of an integrated world community – a partnership between public policy and the needs of the people.

There also needs to be a vital partnership among water and land resources, science and technology, finance and people. The world’s population survives on 0.75 per cent of total water on earth. Fresh water is the most valuable resource in the planet. The United Nations forecast that over 60 per cent of the world’s population will soon be living in water challenged regions. As part of the new partnership to produce Food for All, every country and community must develop strategies to achieve the most beneficial use of water. New thinking is also required for the use of land. Every year, large areas of land are lost to food production due to desertification, saline poisoning, erosion and growing demands of urban growth. There should be more stringent requirements for the use of land and water. After all, they support life. Making minor adjustments will not feed tomorrow’s world. To have food for all will need radical re-thinking on how the world moves forward. We need to have more responsible and wiser use of land and water.

“The world will need to utilise all the responsible science available to produce the food required”

Science and technology will continue to reshape food production. Science may change the costs as we move forward. However, science should be used wisely in addressing the challenge of providing Food for All. Attention should also be given to the nutritional and medicinal values of tomorrow’s food.

Agriculture feeds the world. However, agricultural development and food production should be done with minimum environmental impact and more environmental benefits. We need to ensure that the commercial world’s development of higher producing, pest resistant and environmentally friendly plants are made available to farmers. To achieve this, a partnership is required between plant breeders who need markets, growers who need new generation seeds and governments that see this as necessary to produce more food for their people.

“The world needs to accept that no single model fits all”

Countries and societies have different cultures, levels of development, and situations that require different approaches. The present economic and trade model has started to fail the world and we can expect this to continue in the future. Priorities must change. Have we got our spending priorities right? The answer is an emphatic no. The developed world has to do more to help the developing world, at least give 7 cents for every 10 dollars.

In today’s world no single nation can hide and prosper alone. To the contrary, no matter how powerful, countries need to make every effort to gain the cooperation of other like minded nations.

Finally, Mr Bolger urged leaders to make resources and expertise available for shifting to this development paradigm and empowering the bottom poor. But action and political will are needed now. He pointed out that the issues discussed are not outside our ability to solve. They can be resolved with our current state of knowledge. And the growth of knowledge continues.

The Asian Development Bank (ADB), the Food and Agriculture Organization of the United Nations (FAO) and IFAD met in Manila at the first regional forum on food security to showcase Asia and the Pacific as an attractive region for increased public- and private-sector investments in food security-related initiatives.

The event started yesterday with a ‘Ribbon Cutting Ceremony’ of the Marketplace – a place where private-sector companies and civil society organizations were invited to exhibit their innovative products and services in the areas of productivity enhancement, financial services, connectivity improvements, natural resources management and climate resilience. Ursula Schaefer-Preuss, Vice President for Knowledge Management and Sustainable Development (ADB) formally opened the Marketplace together with Hiroyuki Konuma, Assistant Director General and Regional Representative for Asia and the Pacific (FAO RAP), and Ganesh Thapa, Regional Economist (IFAD). They encouraged the delegates to engage with the exhibitors, taking the opportunity to explore possible future partnerships in food security ventures, network and exchange ideas and good practices to address the challenge of ensuring food security.

In his welcoming statement, Haruhiko Kuroda, President of ADB, pointed out that the Asia and Pacific Region is rebounding from the recent global economic and food crisis with a projected growth of 7.5 per cent for 2010, signalling a return to dynamic growth rates in the coming years. However, global food prices have remained 85 per cent higher than their 2003 levels. FAO and OECD projections show a continued increase in food prices for 2010-2019. ADB Strategy 2010 gives high importance to food security as the underlying component for sustainable and inclusive economic growth. ADB has committed US$ 2 billion a year to implement its Operational Plan for Food Security in Asia and the Pacific and hopes that this amount will help complement and galvanize the work of ADB’s development partners, the public and private sectors, and civil society organizations. Mr Kuroda stressed that it is time for the organizations represented in the Forum to move out of their comfort zones and forge new partnerships, collaborative arrangements, networks, and alliances with the single objective of achieving ‘Food for All’.

Jacques Diouf, Director-General (FAO) joined Mr Kuroda through a video message stating that during the past three years, world hunger has increased dramatically as a result of soaring food prices and the global financial and economic crisis. In 2009, there were 1 billion hungry people in the world. In Asia and the Pacific alone, the number of undernourished people increased by over 60 million in 2009 reaching 642 million! Mr Diouf pointed out that the sheer magnitude of food insecurity is the result of low priority that has been given to agriculture in economic development policies. In December 2007, FAO launched the Initiative on Soaring Food Prices to facilitate access by small farmers to indispensable agricultural inputs. Such inputs worth US$ 8 million have been provided to over 140,000 small farm households in 24 countries in Asia and the Pacific. Through the European Union’s ‘Food Facility’ programme, FAO has also made available US$ 100 million to benefit 250,000 households in the region. In 2009 in L’Aquila, through the Food Security Initiative, the G-8 committed to mobilize US$ 20 billion over three years for food security and agriculture. The G8 in Toronto a few days ago kept the same commitment. These are steps in the right direction, provided they are implemented effectively and rapidly.


Kanayo Nwanze, President (IFAD) also welcomed the participants through a video message stressing that the Investment Forum is different to global forums that generally focus on making political commitments to address food security issues. The Forum provides a unique opportunity to discuss concrete investment plans to increase investments to strengthen food security in the region. Mr Nwanze stressed that long-term growth in agricultural productivity is imperative for food security. Productivity growth expands supplies, reduces prices, increases the incomes of smallholder farmers and ensures affordable and adequate food for poor and disadvantaged people. There is significant potential to raise agricultural productivity and food production in the region by providing crop management, expanding the use of modern varieties, strengthening rural infrastructure, improving post-harvest technologies and funding research and development. There is also a need to strengthen livelihoods in the face of greater climatic uncertainty. Although the challenges are many, there are promising opportunities such as the development of agri-food industry led by private sector investments, market openings that provide important linkages between small producers and markets, and a high level of political commitment among national governments to making long-term investments in agriculture. ADB, FAO and IFAD are developing a regional partnership framework to support countries through coordinated food security engagements that take into account their specific priorities and constraints, hoping that other development partners will also join this initiative.