Public development banks: Part of the solution to ending hunger
Public development banks are “part of the solution” to ending hunger and transforming agri-food systems, as they have the power and reach to narrow funding gaps and consolidate bridges between stakeholders, QU Dongyu, Director-General of the Food and Agriculture Organization of the United Nations (FAO), said today.
With their unique combination of development mandate, long-term perspective and ability to finance both the private and public sector, such banks can inject not only more financing into agri-food sectors, but also to provide better financing geared to promoting a more sustainable agriculture around the world, he said.
The Director-General spoke at the second “Finance in Common” summit, held in Rome and hosted by Italy’s state-controlled Cassa Depositi e Prestiti (CDP). Representatives of more than 500 public development banks and other key stakeholders are participating in the two-day event, held to reinforce the coordination and cohesion of these institutions in a shift of their investment patterns and activities to contribute to the achievement of the Sustainable Development Goals (SDGs) and the Paris Agreement on climate.
Transforming agri-food systems is a key driver of both the SDGs and tackling the climate crisis, and Qu noted they also offer critical opportunities to improve livelihoods for the poorest and most vulnerable, create jobs, bolster gender empowerment and preserve biodiversity. He also added that they play a decisive role with the five prerequisites of agri-food systems: food, feed, fiber, fuel and friendly environment.
At the same time, the basic financial needs of many agri-food actors are still far from being met and the Director-General noted that “80 percent of smallholder farmers’ demand for finance is currently unmet in developing countries. That annual funding gap amounts to around $65 billion in sub-Saharan Africa alone”.
Deepening the bond: FAO and CDP
On the sidelines of the summit, Qu and CDP Chief Executive Officer Dario Scannapieco signed a Letter of Intent paving the way to intensified collaboration.
The agreement recognizes the shared aim for the transformation of agri-food systems, rural development and natural resource conservation, with a focus on increased and improved investments in areas needed the most. It foresees a unique opportunity for scaling up investment and innovation with higher impact thanks to the synergies available between the CDP, with its wide range of financial instruments and vast network of financial institutions, and FAO, with its knowledge, expertise, technical and policy assistance support through decentralized offices and headquarters.
The collaboration is particularly aimed at boosting financing for smallholder farmers and small and medium-sized agri-food enterprises, using blended finance to support greater private investment in sustainable agri-food systems, and the prospects for formulating and implementing joint projects financed by the Green Climate Fund. Other promising areas include the Italy-backed, FAO-hosted Food Coalition and FAO’s Hand-in-Hand Initiative, with a focus on the Near East and North Africa, Africa, Latin America and the Balkans.
FAO and CDP have been engaged in dialogue for some time, and both parties agreed that the Italian Presidency of the G20 offered a unique opportunity to intensify their ties, citing food safety issues, rural development and financial inclusion as areas of special attention.
The Director-General pointed out that FAO has long partnered with public development banks. It is the oldest partner of the World Bank, works closely with the International Fund for Agricultural Development as well as national institutions, supporting them in improving the quantity and quality of their agricultural loan portfolios. In 2020, FAO supported the design of 38 large programmes worth more than $6.6 billion and has had seven projects worth more than $337 million approved by the Green Climate Fund Board. The FAO Investment Centre reviewed more than 70 proposals, representing nearly EUR300 million of potential financing to the private sector.
“All this required significant and responsible investments,” Qu said, emphasizing that there are many low-cost, high-impact interventions that can help hundreds of millions of people get rid of hunger.
What is key is finding bankable projects to exploit the scaling-up power of public development banks, he said, noting that FAO has a lot to contribute. “Professional knowledge is the first de-risking instrument,” FAO’s Director-General said.