Policy responses

Several countries adopted economic stimulus packages (e.g. UK, US, Spain, France, Germany, Japan, Russia, Ivory Coast, Kenya, South Africa) that support the stability of the SME sector through a series of financial and non-financial interventions. Most of these packages do not specifically target the agricultural sector, with the financing needs of smallholder farmers being addressed within the frame of the broader MSME sector stimulus-response.
Summary of options available to policy makers: In relation to specific smallholder farmers’ financial support, policy makers could consider the following interventions:
• For farmers with outstanding loans, having banks waiver fees, extending payment due dates, or offering alternative repayment accommodation that can ease the pressure on farmers who cannot work or sell their produce due to the pandemic;
• An injection of funds in the agricultural sector, for example through a grant or dedicated lending schemes (usually at preferential conditions and for short-term needs), can help agri-MSMEs, casual labourers, and salaried staff that are unable work, to weather the crisis while all business stops. A common practice in the MSME sector of several developed countries at the moment is to provide short-term loans with minimal interest to face the current disruptions. With that being said, expecting timely loan repayments from small agricultural actors in developing contexts might probably be too optimistic, in the current scenario;
• Monetary and financial policy measures to inject additional liquidity into the system by expanding financial institutions capacity to lend (e.g. reduction of bank reserve requirements, countercyclical capital buffers, enhancement of USD liquidity provision) and reduce the cost of money (reduction of bank rates);
• Ensure policy transmission to end beneficiaries through incentives to participating financial institutions for passing on favourable conditions to customers and credit mediation programmes to enhance MSMEs access to financial support. Similar measures were effective during the 2008-2010 crisis;
• Use of public guarantee products as risk transfer instruments to limit the reduction of lending activity (e.g. strengthening existing facilities, expanding eligibility and simplifying procedures to increase outreach, increasing level of guarantee);
• Introduce regulatory, fiscal and financial incentives such as interest rate reductions, tax holidays or deductions; deferred VAT payments; postponed payments or the possibility to renegotiate loans; inputs subsidies, temporary moratorium on bankruptcy applications, temporary halting of credit reporting systems to safeguard credit history;
• Grants for working capital to re-start the production cycle following the crisis, avoiding the distribution of seeds and other inputs as this measure can distort the markets and drive out local actors out;
• In contexts where the transition to digitization is already on the way, encourage this process by increasing limits imposed and waving public taxes on digital payment transactions and other digital financial transactions, such as G2P, P2G, P2P, B2B payments, solidarity donations and access to social/business support schemes can encourage shifting from cash to digital, although this will have a beneficial impact only on agricultural sectors that are already developed from a digital standpoint.
• Foster the expansion of e-commerce platforms and delivery systems;
• Introduce reforms in the regulatory framework that provide a clear set of rules of engagement related to digital services for potential service providers (e.g. st.rengthening consumer protection and online security).

Country examples:
Italy: a new decree law introduced on March 17th , named “Cura Italia” (Heal Italy), will allocate funds and provide incentives for agriculture, among other sectors. The decree allocates 100 million euro to support agricultural enterprises engaged in farming, fishery and aquaculture, to cover the interests of loans and mortgages (art. 78, par. 2, D.L. n. 18/ 2020).

Italy: A contribution of 50 million euro will be provided to support food distribution for poor and vulnerable people (art. 78, par. 3, D.L. n. 18/ 2020). Farmers will be able to request an advanced payment of 70% for annual non-repayable contributions, instead of the usual 50% under the Common Agriculture Policy (art. 78, par. 1, D.L. n. 18/ 2020). A compensation of 600 euros will be transferred to those agricultural workers with short-term contracts for the month of March, who are able to prove that they provided at least 50 days of agricultural work during the year of 2019 (art. 30, par. 1, D.L. n. 18/ 2020). National policies are in place to ensure access to agricultural services, including the supply of seeds, plant protection and fertilizers.

Brazil: The National Confederation of Rural Workers and Family Farmers suggested a number of financial interventions, including the postponement of rural loan payments due in 2020, and the creation of new credit lines to support family farming. These credit mechanisms include:
• Dedicated credit lines for short-term lending to cooperatives and agribusinesses to finance product storage and commercialisation, at below market rates;
• An emergency credit line that smallholder farmers in the value chains most affected by the crisis (e.g., horticulture, dairy, aquaculture and fisheries), and the beneficiaries of the National Programme for Strengthening of Family Farming, can access at preferential conditions.

China: The Ministry of Commerce allocated 100 million Yuan from State central financial funds to Hubei Province, to protect the agricultural product supply chain. The Ministries of Finance and Agriculture and Rural Affairs issued a notice on how to effectively support stable production and supply of agricultural products during the prevention and control of the COVID-19 outbreak, including five financial support policies and measures:
• Reduction and exemption of agricultural credit guarantee-related expenses.
• Allocation of disaster relief funds for agricultural production as soon as possible, support for the prevention and control of rice, wheat, vegetable pests and diseases, and promotion of spring plough preparation and stable production and supply of local vegetables.
• Support for cold storage and preservation of agricultural products, with a focus on supporting family farms and cooperatives to improve field refrigeration and preservation facilities.
• Focusing central government's funds for agricultural production and development on epidemic-stricken areas.
• Increasing the coordination of local fiscal funds, and requiring localities to support the production of "vegetable basket" products.

The Agricultural Bank of China has reduced the operating interest rate of small and micro enterprises, self-employed industrial and commercial households and private owners in Hubei Province by 0.5 percentage points. Additionally, a series of financial support policies have been issued for all industries affected by the epidemic, which are applicable to small and medium-sized enterprises and self-employed individuals engaged in agricultural and food value chains. In addition, the Ministry of Industry and information Technology issued a series of policies that focusied on providing support to SMEs in response to the epidemic (especially relevant SMEs engaged in agricultural production and agri-food value chains), which included the increase of fiscal and taxation support, as well as credit support.

In ensuring that financial measures equally benefit men and women, responses may include:
• Putting in place financial services support mechanisms targeting rural women`s economic activities as producers, processors, traders and entrepreneurs.
• Providing loans at zero or low interest rates to businesses and to productive activities led/carried out by women (RWCF, 2020), and supporting self-help and community group loans by providing relief from repayments, or freezing of interest payments;
• Strengthening both formal and informal loan mechanisms (susu clubs, village savings and loans associations) (Korkoyah & Wreh, 2015) and savings and credit cooperatives (SACCO);

Country examples of gender sensitive financial measures:
• Colombia: the Government launched a call for proposals within the context of 'El Campo Emprende' (Rural business program), to support the livelihood of rural communities by co-financing and strengthening associative productive projects. The 2020 plan intends to benefit more than 9,000 rural families with high vulnerability investing $ 35,560 million. To ensure that gender equality objectives are reflected and to ensure that the crisis does not amplify gender inequalities, the Government has established that more than 50% of the beneficiaries in 2020 will be rural women. In addition to financing producer’s businesses, the program will provide training to stimulate savings and other good practices for managing finances.
• Colombia, Mexico and Paraguay: young rural women have pioneered and promoted the use of electronic financial systems, through the initiative Young Rural Women (Implemented in between April 2017 and December 2019, ) of Fundación Capital and the International Fund for Agricultural Development’s initiative (IFAD). Young women’s have strengthened their financial capabilities and access to the financial system with the use of technological tools: electronic wallets, as well as products that allow them to save safely, to send and receive money, recharge and pay for services from their place of residence at no cost. The initiative laid the foundations for more than 13,000 women to be better prepared to face Covid-19.
• India: Bank sakhi is an informal term for female banking agents, who are collectively known in India as business correspondents (BCs). Equipped with smartphones, tablets, or laptops and biometric scanners, they provide basic banking services and financial access for women, self-help groups and many others in some 20,000 difficult-to-reach villages in rural India.
During the COVID-19 lockdown, the government has classified the service of BC agents as essential and granted them BC agents exemption from movement restrictions. In several states, bank sakhis have continued working to provide cash flow in their villages since the lockdown. They now wear gloves while conducting the transactions, regularly sanitize their devices and require all customers to wash or sanitize their hands before completing the required biometric scanning. While they’ve had to discontinue service delivery at their customers’ doorsteps during this period, they’ve set up services from home, roadsides, and are helping with information dissemination in communities, ensuring that their customers are aware of COVID-19 guidelines on quarantine, handwashing and social distancing.
• Costa Rica: On 22 May 2020, the Government launched “the +Women + Nature" initiative to grant women access to credit with favorable conditions to finance their activities. It is a programme linking nature, gender equality and women’s empowerment as a way to respond to the challenges posed by Covid-19. The program seeks to make the biodiversity sector a cornerstone to strengthen the ventures carried out by women, move many of them to formality, as well as give them more opportunities and decent work conditions.

Links and references

Italy: Ministero della Giustizia. 17 March 2020. Gazzetta Ufficiale Della Repubblica Italiana. Edizione Straordinaria. Anno 161 -Numero 70. https://www.gazzettaufficiale.it/eli/gu/2020/03/17/70/sg/pdf;  

Fotina, C. 16 march 2020. Negozi, spettacoli, agricoltura, editoria, taxi: tutti i bonus in arrivo. Il Sole 24. [online]. [Cited 18 March 2020]. https://www.ilsole24ore.com/art/negozi-spettacoli-agricoltura-editoria-taxi-tutti-bonus-arrivo-ADqDIhD

Governo Italiano, 19 March 2020b. Coronavirus, le misure adottate dal Governo.  Presidenza del Consiglio dei Ministri, Governo Italiano. [online]. [Cited 19 March 2020]. http://www.governo.it/it/approfondimento/coronavirus/13968

Brazil: https://www.agrolink.com.br/noticias/contag-e-fpaf-cobram-medidas-urgentes-em-defesa-da-vida-e-dos-povos-do-campo--da-floresta-e-das-aguas_431595.html

China: The Ministry of Finance and the Ministry of Agriculture and Rural Affairs jointly issued notices to support agricultural products during the prevention and control of coronavirus epidemic，http://www.moa.gov.cn/xw/zwdt/202002/t20200214_6337133.htm

Notice of the General Office of the Ministry of Agriculture and Rural Affairs on effectiveness in guaranteeing agricultural resources during the period of coronavirus epidemic prevention and control，MARA, the Notice on coping with the impact of the Coronavirus outbreak, expanding employment in rural labor forces and increasing farmers' income，http://www.moa.gov.cn/gk/tzgg_1/tfw/202003/t20200304_6338197.htm

OECD (2010). As+K51sessment of Government Support Programmes for SMEs’ and Entrepreneurs’ Access to Finance in the Global Crisis. OECD Working Party on SMEs and Entrepreneurship (WPSMEE), Bologna+10’ High Level Meeting on Lessons from the Global Crisis and the Way Forward to Job Creation and Growth. Paris, 17-18 November 2010. Paris: OECD

Gender related links ans references:

IFAD, 2020. Stay at home! Savings, contingencies and electronic wallet use. IFAD. Rome. (Also available at https://www.ifad.org/en/web/latest/story/asset/41913094)

Korkoyah, D.T.Jr. & Wreh, F.F. 2015. Ebola Impact revealed an Assessment of the differing impact of the outbreak on women and men in Liberia. UN Women; Oxfam; Ministry of Gender and Development of Liberia; Liberia Wash Consortium. (Also available at https://www-cdn.oxfam.org/s3fs-public/file_attachments/rr-ebola-impact-women-men-liberia-010715-en.pdf)

Ministerio de Agricultura y Desarrollo Rural, 2020. MinAgricultura abre convocatoria para el “Campo Emprende”, con el cual busca beneficiar a más de 9 mil familias vulnerables. Ministerio de Agricultura y Desarrollo Rural. (Also available at https://www.minagricultura.gov.co/noticias/Paginas/MinAgricultura-abre-convocatoria-para-el-“Campo-Emprende”,-con-el-cual-busca-beneficiar-a-más-de-9-mil-familias-vulnerables.aspx)

Oliver Wyman, 2020. Can COVID-19 Spur Gender Balance in Finance?. Oliver Wyman. (Also available at https://www.oliverwyman.com/content/oliver-wyman/ow-v2/en/our-expertise/insights/2020/apr/can-covid-19-spur-gender-balance-in-finance.html)

Pinto, A & Arora, A. 2020. Gender Gap Narrowing “Bank Sakhis” Take Crucial G2P Support the Last Mile During COVID-19. Center for Financial Inclusion (CFI). (Also available at
https://www.centerforfinancialinclusion.org/gender-gap-narrowing-bank-sakhis-take-crucial-g2p-support-the-last-mile-during-covid-19

RWCF (Restaurant Workers’ Community Foundation). 2020. Resources for Restaurants and Workers Coping with the COVID-19 Emergency. (Also available at https://www.restaurantworkerscf.org/news/2020/3/15/resources-for-restaurants-and-workers-coping-with-the-covid-19-emergency)

UNDP, 2020. Costa Rica lanza programa financiero para mujeres que protegen los recursos naturales. UNDP. (also available at https://www.cr.undp.org/content/costarica/es/home/presscenter/pressreleases/2019/costa-rica-lanza-programa-financiero-para-mujeres-que-protegen-l.html)

Pros Economy-wide stimulus packages and livelihood support interventions protect those whose incomes are most affected, address the short-term cash flow crisis among businesses, and limit disruptions in critical segments, including food supply chains. Monetary and financial policy interventions are useful to counteract tightening financial market conditions. Grants and dedicated lending schemes can provide businesses with the resources to continue their operations and carry out short- to medium-term investments. The use of public guarantees schemes can be a valid instrument to promote lending to actors in agri-food value chains who lack sufficient bank-worthy collateral. Loan restructuring can be particularly beneficial for those individuals and entities with the least diversified income flows, as well as those facing a rapidly deteriorating repayment capacity (e.g., women, youth and poor farmers). Fiscal and financial incentives can contribute to the sustainability of the agri-food system and also trigger investments in clean technologies and improvements in equipment and assets, with a view to accelerating crisis recovery. The expansion of digital financial services can contribute towards mitigating the impact of the COVID-19 emergency, especially in developing and emerging contexts where the financial digitisation process is still at an early stage and thus holds the most potential to have a positive impact on the current scenario. The shift can reduce the dependency on cash transactions and physical agents. The expansion of e-commerce platforms and delivery systems can mitigate the loss in market access for food produces and help contain the virus. Online banking, e-credit platforms and digital solutions can facilitate business’ access to various support schemes, as well as timely payment of cash transfers, salaries and solidarity funding. Italy: The implemented measures served to provide immediate relief, ensure the continuity of production and minimize the short-term impact of the crisis on SMEs and farming households. The government provided access to food for those who needed it, by purchasing food surpluses from producers who have been affected by the market disruptions. Immediately available fiscal resources ensured continuity of production and could be re-invested in rehabilitating the farm activities once the crisis will be over. Offering gender sensitive financial services means for financial services covering a missing market.

Cons Monetary, financial and fiscal measures are bound to put additional pressure on public budgets. They might not be sufficient, given the uncertain expectations for future economic conditions, so especially the least developed countries will most likely require external emergency assistance. In these countries, economy-wide support might not be sufficient to provide adequate support to the agri-food sector. Support to on-lending, at favourable conditions should take into account borrower characteristics (e.g., CF patterns), ability to pay will be affected by the crisis, especially in agriculture given specificity. Lending schemes, even concessional, must be part of a more comprehensive package of support for small producers, esp. agri., to counter further deteriorating ability to pay. Public guarantee schemes can be affected by moral hazards and adverse selection problems and internal incentives should be built to limit problems of opportunistic behaviours. Some companies may need to re-think, and re-start their approach to better reach rural women and respond to their needs.

Minimum conditions There has to be sufficient fiscal space to implement these measures. Furthermore, the public sector must have the capacity to identify businesses and households targeted by these measures, as well as to roll out these measures in a timely manner and with minimum human contact. Countries with limited fiscal space must be in the position to contract further debt or receive grants to finance these measures. Companies and financial service providers need to disaggregate data by sex to better understand the needs of rural women

Governance Most of these measures fall under central Governments.