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Re: Innovative financing for agriculture, food security and nutrition

Jérôme Bossuet International Crop Research Institute for the Semi-Arid Tropics, France
06.07.2012
Jérôme Bossuet

Dear All,

As innovative financing source for smallholder agriculture, I don’t think social entrepreneurship and social impact investments (eg Acumen Fund, Voxtra,...) were mentioned.

NGOs such as International Development Enterprises India (IDEI) have developed micro-irrigation technologies specifically adapted to the needs of poor smallholder farmers. 90% of farmers are rainfed. Private irrigation companies were not investing in developing products adapted to poor small farmers because initial investments (R&D, marketing, distribution) were considered too high compared to expected returns. Governmental subsidies programmes are not fit to poor remote farmers.
International Development Enterprises India follows market-driven pro-poor development approach to scale up agricultural innovations adapted to smallholder farmers in a mixed public-private business model.
IDEI has developed new technologies taking into account the needs of such farmers : low-cost, easy to maintain, small-scale (from 20 to 1000m² drip systems for instance). The initial stages (R&D, marketing and set up of local supply chain) need initial support from foundations / grants to create a local demand and a local supply chain... The idea is that after several years of maturation, the market is created and is financially sustainable. A new rural economy is developed. Like in the North where we have public support for start-ups.

Base of the Pyramid (BoP) Approach is also used by some corporate companies to address undeserved population. Either it is part of their CSR or totally integrated in their business. Unfortunately most of the initiatives are not for the rural poor.

About Payments for Environmental Services mentioned by several contributors. We may separate global public goods (eg mitigation efforts against global warming – carbon credits ) and local public goods (eg forestry protection, water...). Different scales, different management and financing mechanisms. CDM is for large-scale projects and it is a challenge to customize carbon credit for smallholder agriculture. You need big numbers, and good methodology to reduce the cost of certification while not damaging the credibility. The nascent carbon markets should give a share for the poor households as a leverage for development - IDEI one of the first NGO to get carbon credit for smallholder carbon-reduction technologies (treadle pump – 60% of buyers were using diesel pumps before). They are involved also in an interesting pilot initiative, called Water Benefit Partners , a project supported by First Climate and SDC to see if water credit can be a new source of financing for non-for-profit water projects [as mentioned by Suman KA] Water benefits Certificates are a kind of “currency” to finance water projects according to the impact on water footprint / water access to the poor.

Question : how can the developed countries develop social impact investment funds, and is there a risk to withdraw fundings from traditional aid towards these new funds? Or corporate sector using this “positive “labelling for social washing? Look at SRoI network to see what standards are built for social investment.

For such environmental and social good markets, it is essential to build a strong accreditation / certification system to ensure the seriousness of such “ethical markets”. With social media, you can see more and more initiatives drawing private donations and low or zero-investment for great projects / ideas to tackle social problems such as food insecurity / rural poverty. The increasing fair trade market shows there is a market for ethical goods. IDEI 20 years experience shows that farmers are willing to pay for impactful equipment (on average IDEI’s technology brings 400$ additional annual income for the farmer, a doubling of income), but to help the set up of social enterprises you need appropriate funding for such organisations. When you see many development programmes failing after closing down the funding, it would be good that donor communities think about developing more social impact investment lines for “risky ventures” dealing with rural poverty.

To leverage private investment for agriculture/FS/nutrition for the Base of the Pyramid; there is a part of change behaviour of the consumer I believe (communication / PR to promote more ethical approach of corporate so that “being more social” becomes a competitiveness factor ... big companies fear about negative publicities ) and part of public policies (eg obligation of a percentage of sustainable development / social impact investment for stock-exchange companies).

But public spending in developing countries towards smallholder farming has to increase as well. See how the Maputo Declaration target of 10% public spending in agriculture is not yet fulfilled in many countries in Africa, after nearly 10 years, although more than 70% of active population depends on agriculture. Investing in farmer’s organisations, lobbying operations such as One’s petition to give the rural poor a voice is very important for the years to come I believe.

Last thing, about agriculture research and innovative financing, I wanted to mention also the recent CGIAR reform for better coordination and work in partnerships of global agricultural research programmes ; CGIAR research programmes are now more impact-oriented on smallholder farmers and to scale up innovations / research outcomes such as microdosing, bio-reclamation of degraded lands or agroforestry practices, various public-private partnerships are experimented. Innovative financing go hand to hand with innovative partnerships. For instance, encourage the private sector to invest in BoP programmes, eg private seed or fertilizer companies experimenting small packets approach to respond to the needs of smallholder farmers. [attached is my contribution with useful internet links - the copy and paste seems not accepting the form and links]