Global Forum on Food Security and Nutrition (FSN Forum)

What are some of the challenges facing social relations and networks in food and nutritional security

Social relations among farmers provide many important services and promote food security. In relation to this forum the group would like to focus on the manner in which credit has influenced food security. It is a widely accepted fact that while small farmers are important in a world where the population is growing they are also hampered by a variety of problems which may include: price volatility and limited access to credit and insurance.  In Guyana, it can be observed that the rural area which is home to many farmers has a closely knit community in which farmers engage in barter whether it’s in the form of gifts or loans. Small farmers are assumed to have a preference for or are likely to pursue the acquisition of funds via the informal market. The informal market in this instance refers to money lenders in the form of a neighbor, a familiar trader, or family. It is also assumed that small farmers prefer not to use the financial institutions (formal market) because  they lack sufficient collateral. Thus, the general consensus is that small farmers prefer to utilize the informal market because they may be unable to access loans through the formal financial institutions due to a lack of capital and also because they may be perceived as high risk clients thereby attracting higher interest rates.

Small Farmers due to financial constraints are unlikely to hold liquid assets and more likely to hold assets such as a land in a nearby community or livestock. As a result, when farmers need credit they are most likely to acquire funding from money lenders within the rural community. However informal markets also have their shortcomings in that farmers are exposed to the exploitative behavior of the “loan sharks” since they are likely to pay an above market interest rate or farmers may be coerced into purchasing the trader’s input only .These exploitative behaviours may only serve to impoverish small farmers and this creates a serious challenge for food security.

It can be observed that governments have experimented with the use of varying policies to promote food security. It is also well agreed upon by all that the credit policy is the best alternative because it does not inject any form of distortions within the market .The importance of credit is not to be understated since it promotes the use of capital and inputs by farmers .To remedy this credit problem donor agencies and government have utilized programmes which are supply led credit policies which are unsustainable because they have a high default rate and poor supervision of the loans. Governments invest heavily in these programmes because small farmers generally have a slow adoption rate of technology.

On the other side of the coin, the problem of fungibility exists whereby farmers utilize the credit but not for its designated purpose. For example, the farmer may divert the money from increased farm inputs to increased food consumption. This may result in slower growth in the agricultural sector and may even put programmes and financial institutions at risk. In other studies done the market driven approach has been highly successful as adduced in the case study of Mozambique.

“impressive progress in rural production and development has clearly been achieved. With market-driven approach and an improved policy environment focused on small-scale producers, the process of rural recovery has started. The total production of cereals increased from 239 000 tons in 1992 to 1.8 million tons in 2001, and the north and the centre of the country now regularly generate surpluses for export”[1]

In conclusion, the group believes that a public private partnership between financial intermediaries(whereby the financial intermediaries supervise the farmer's allocation of resources) and the government(provide technical expertise and subsided loans) can aid in the alleviation of these problems faced by farmers.