INNOVATIVE FINANCING AND INVESTMENT IN AGRICULTURE: AFRICA’S EXPERIENCE
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INNOVATIVE FINANCING AND INVESTMENT IN AGRICULTURE: AFRICA’S EXPERIENCE

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Prof. V. Okoruwa's presentation given the the Africa Agriculture Week. ...

Prof. V. Okoruwa's presentation given the the Africa Agriculture Week.
The role of agriculture in an economy is a major factor in determining the economy‟s state of development (Hazell and Diano, 2005). Most African countries are mainly agrarian since agriculture contributes immensely to their economies. Agriculture‟s contribution to GDP in the Africa is between 30% and 40% on the average. The sector accounts for almost 60% of total export earnings in the continent, provides the dominant occupation for about 65% of Africa‟s population and has been growing on the average at about 3.3% each year since 2000 (IFPRI, 2009). Despite this impressive contribution of agriculture to Africa‟s economy, the sector remains largely under-developed. Most farmers are still at the subsistence level and small scale, having less than 2ha of land. The level of technology is also low, production remains weather-dependent and consequently, farmers‟ incomes are low. Poor market access, weak infrastructure and limited ability to influence government policy also characterize the sector (Quartey et al, 2012). Majority of Africa's agricultural population live in rural areas and the rural population comprises over 60% of the entire population. Further, over 600 million people in sub-Saharan Africa are youths under the age of 30 years and about 65% of this number, work in subsistence agriculture. Rural agricultural workers are among the poorest in Africa with poverty rate averaged at about 50% (UN/ECA, 2010).
Agriculture has the potential to serve as a strong

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    INNOVATIVE FINANCING AND INVESTMENT IN AGRICULTURE: AFRICA’S EXPERIENCE INNOVATIVE FINANCING AND INVESTMENT IN AGRICULTURE: AFRICA’S EXPERIENCE Document Transcript

    • 0 INNOVATIVE FINANCING AND INVESTMENT IN AGRICULTURE: AFRICA’S EXPERIENCE Professor Victor O. Okoruwa Department of Agricultural Economics, University of Ibadan Paper presented at The 6th Africa Agricultural Science week, International Conference Centre, Accra, Ghana. 15th to 20th July 2013
    • 1 INNOVATIVE FINANCING AND INVESTMENT IN AGRICULTURE: AFRICA’S EXPERIENCE 1.0 Introduction Key importance of agriculture and the need to finance it The role of agriculture in an economy is a major factor in determining the economy‟s state of development (Hazell and Diano, 2005). Most African countries are mainly agrarian since agriculture contributes immensely to their economies. Agriculture‟s contribution to GDP in the Africa is between 30% and 40% on the average. The sector accounts for almost 60% of total export earnings in the continent, provides the dominant occupation for about 65% of Africa‟s population and has been growing on the average at about 3.3% each year since 2000 (IFPRI, 2009). Despite this impressive contribution of agriculture to Africa‟s economy, the sector remains largely under-developed. Most farmers are still at the subsistence level and small scale, having less than 2ha of land. The level of technology is also low, production remains weather- dependent and consequently, farmers‟ incomes are low. Poor market access, weak infrastructure and limited ability to influence government policy also characterize the sector (Quartey et al, 2012). Majority of Africa's agricultural population live in rural areas and the rural population comprises over 60% of the entire population. Further, over 600 million people in sub-Saharan Africa are youths under the age of 30 years and about 65% of this number, work in subsistence agriculture. Rural agricultural workers are among the poorest in Africa with poverty rate averaged at about 50% (UN/ECA, 2010). Agriculture has the potential to serve as a strong driver of growth and poverty reduction in Africa (Nin-Pratt et al, 2011). Agricultural investment is the most important and effective strategy for poverty reduction in rural areas (World Bank, 2008). Investing in agriculture reduces poverty and hunger through multiple pathways. Farmers‟ productivity and incomes are enhanced, thus generating demand for other rural goods and services, creating employment and incomes for the landless rural poor. In addition, there is increased availability of food in the market which leads to lower consumer prices thus, making food more accessible to rural and urban consumers. These benefits ripple from the village to the broader economy (Alston et al. 2000).
    • 2 African agriculture has however, been greatly impeded by lack of adequate investments, funds and credit (Sogo-Temi and Olubiyo, 2004). Inadequate access to finance has been a prevalent feature of agriculture and a key impediment to improving the efficiency of African farmers in production and adopting better technologies. Farmers typically face seasonal income, long maturation periods and are exposed to considerable risks. The seasonal nature of agriculture arising from temperature or variable rainfall, causes price fluctuations of inputs and products and crop failure due to pests and diseases. Credit constraints have adverse effects on farm output, profit, investment and efficiency thus, lowering farmers‟ risk bearing ability which results in under-investment and consequently, inability to break out of poverty (Guirkinger and Boucher 2008). More importantly, women and youths in agriculture have been more disadvantaged as a result of poor access to and or insufficient finance (Okpupara, 2010). Okpupara, (2010) observed that women were likely to have less credit than men since they have fewer assets than men while older farmers are more likely to have credit than younger ones. This has implications for agricultural development since women and youths make up the larger proportion of the agricultural labour force. Therefore, if agriculture is to become a chief player in eradication of hunger and poverty, the issue of agricultural finance is pertinent. African governments have been the main source of agricultural finance over the years although; the supply of official finance to the sector has been found to be only about 5% (FAO, 2013) despite the 2003 Maputo declaration of 10% government allocation to the sector. The restricted and unpredictable nature of public funding, especially in times of crisis, indicates that new ways of financing (i.e. innovative financing) which are specifically tailored to suit the prevailing conditions are required for agricultural development (Quartey et al, 2012). This paper therefore sets out to discuss the concept of innovative financing, the need for it and to examine areas around the world where it has been used and to look at success stories from around Africa in this respect. Thus, section two gives a global perspective of innovative financing, section three highlights some case studies of innovative financing from around Africa while section four concludes the paper and advises on the way forward.
    • 3 2.0 Innovative Financing in Agriculture: A Global Perspective Agricultural development cannot be possible without innovation. It is a major source of improved productivity, competitiveness, and economic growth throughout advanced and emerging economies (IFM, 2012). The inherent risks associated with agriculture, such as dependence of output and prices on weather patterns and other external factors; underscore the need for innovative approaches in financing agriculture for development. Further, since economic growth alone cannot accelerate the reduction of hunger and malnutrition (FAO, 2012b), the world will depend on primary economies, to satisfy global food demand as they have the greatest potential for food production. Africa will require the most efforts because of the low level development of agriculture and high agricultural risks that characterize the small holder production systems (Kimathi et al, 2008). The limited access to finance for agricultural development with the attendant negative effects thus, emphasizes the need for innovative thinking in financing the sector. This has given rise to what is called “Innovative financing”. Innovative financing in agriculture, refers to new ways of raising funds, often from extra-official sources, to foster development in the sector. Innovative financing can be a catalyst for private sources, which have been far below their potential in developing countries, to contribute to development through public-private and private innovations. It could be said to rely on new partnerships between a wide range of stakeholders: countries of diverse levels of development, local authorities and private sectors. However, it must be sustainable and based on a supportive policy environment. Innovative financing in agriculture must be innovative in source i.e., raising capital from new funders or existing funders in new ways, or leveraging private capital, and mobilizing public resources. Again, innovative financing must be innovative in use, i.e., changing the way in which existing capital is deployed or spent, and introducing financial solutions to increase efficiency, effectiveness and overall impact within both the public and private sector (IFM, 2012). 2.1 Rational for innovative financing and investment in Agriculture Figures from International Expert Report (2012) reveals global food supply is expected to increase dramatically in order to meet the world demand. By 2050 the world‟s population will reach 9.1 billion, 34 percent higher than today, in particular in developing countries. This
    • 4 population growth, combined with increasing per capita meat consumption, will require a 60 percent increase in global food and feed production. Among developing countries, Africa is the world region where the challenge will require most efforts. Africa lags behind as concerns productivity gains on major crops and food dependency. The region is facing severe threats as concerns the maintenance of soil fertility, (already low to start with, because of the nature of the soil) because of a fragile environment, increasing land pressure and very low adoption of effective soil conservation practices. Fertilizer consumption is only 9 kg/ha/year (in nutrient content), against 140 kg in average in developed countries. Meanwhile, Sub-Saharan Africa is the region where population growth will be highest, where hunger index is alarming and which will be most likely the most affected by climate change. In addition, challenges from climate change represent major risks for long-term food security and nutrition especially for the African continent where agricultural output up to 2080-2100 could be between 15 and 30 percent if required efforts to adapt agriculture to climate change are not made in due time. Meeting these challenges will require a considerable scaling-up of investment in Africa‟s agriculture. Estimates emanating from the FAO‟s report (How to feed the world by 2050) suggests developing countries will need to invest USD 83 billion per year (net of the renewal cost of existing equipment) or USD 209 billion including this cost, as compared to a current level of investment of USD 142 billion in order to cope with the challenge. Considering the enormousity of the challenge and the existing budget constraints, it is of necessity to find innovative ways of sourcing funds to help meet the challenge confronting the continent. Recent innovations taking place around the world in the field of agricultural finance and investments have been in the areas of rural leasing, providing financial education for farmers, providing non-financial services, providing market linkages, innovations in marketing, technology adoption and risk management (Kloeppinger-Todd and Sharma, 2010). Rural leasing: Rural leasing is a form of credit that provides a means to acquire productive assets. It is increasingly being used to fill the void of medium term capital investment needs of farmers, especially landless or marginal farmers who often do not have access to capital and hence, unable to offer security against loans. Rural leasing also accommodates farmers with
    • 5 medium or large sized holdings to assess productive capital to access higher technologies without the availability of such forms of sustainable financing. This new model of agricultural finances operates through the use of intermediated agents. These are primarily for financing working capital needs of farmers (individual liability loans), and there is no peer monitoring or savings requirement, which is how the program differentiates from a traditional microcredit program. The loan intermediaries are incentivized with commission on loan requirement. A 2006 World Bank case study of three profitable providers of leasing in rural areas showed that in all three cases, the rural portfolios were as profitable as their urban portfolios. For instance, Amendadora John Deere, the largest provider of farm machinery leases in Mexico, had nearly US$63 million in farm equipment leases. Networking Leasing Corporation Limited, a leading micro-leasing provider in Pakistan, had a lease portfolio of more than US$2.4 million in rural areas. Low lease losses, strong client demand for asset financing, and a favourable legal and policy environment made rural leasing a profitable business for these companies. For clients, access to finance at a reasonable cost, low or no collateral requirements, quick processing, and easy access to the provider appear to be significant benefits. Financial education for farmers: Most small farmers in developing countries have little education and limited exposure to modern financial instruments. Additionally, many small farmers in developing countries live in remote rural settings, where urban-based retail banking is unavailable. As rural banking takes hold in developing countries, it has also attracted the attention of institutions in developed countries that have traditionally served farmers. The Netherlands-based Rabo bank, for example, made investments in countries as varied as China, Paraguay, and Zambia and successfully provided access to financial services in the rural areas of these countries. Rabo Development (RD), which is an offspring of the Rabo Bank, participates in financial institutions and provides management services and technical assistance in these countries. It works with cooperative “enterprises” and financial institutions that want to increase their own access to financial services. In 2010, a recent research linking financial education to behavior changes among low-income microfinance clients in Bolivia and Sri Lanka, provides insights into a successful innovative
    • 6 finance approach. Two years after receiving financial education, clients increased their knowledge of loan products and debt capacity. Positive changes in savings behaviours included reducing expenses as well as recognizing the value of saving three times the amount of monthly income for emergency purposes. Those given budgeting training identified the primary function and different parts of a budget and were able to work within their own budgets. Bundling financial and non financial services: In addition to financial constraints, small farmers in developing countries also face market constraints in acquiring needed inputs (such as fertilizer, seeds, and extension services). Returns to financial services are thus highly conditional on access to other nonfinancial services. For instance, Bhartiya Samruddhi Investment (BASIX) in India, provides services such as soil testing and health monitoring of livestock, along with credit, to farmers in a way that maximizes returns to credit services. This innovative approach, as was observed by Mahajan and Vasumathi (2012), helped farmers to access fertilizer adequately and also apply it appropriately and this helped to improve agricultural yield and made repayment possible. There is also the case of a local Argentinian bank BICE. The bank established a fund for both individual farmers and cooperatives, with the help of the government in charge of the province of Charco and Sancor Seguros. The fund is based on two principles: Firstly, the producers sell their crops to the fund under a contract specifying the date of delivery and price. The crops are insured against climate risks. This future production serves as collateral for the fund, to borrow on the capital markets and bonds are insured against the risk of non-delivery of the crop or default buyers. Funds are lent to farmers for the purchase of inputs such as seeds and fertilizers for the next growing season. Producers pay back their loans either by selling their crops to a third party and then using the proceeds to pay back the credit (this occurs when the current price is higher than the contract price) or by selling their produce to the fund which in turn, sells to a pre- identified buyer. Risk Management: Covariant risks, such as droughts, floods, and large scale collapses in price affect a large number of people at the same time. On the other hand, individual or idiosyncratic risks may affect one farmer, or a small group, and the effects are not large scale. Managing
    • 7 different types of risks requires appropriate tools, in the absence of which, farmers usually rely on traditional informal coping strategies and mitigation techniques, many of which are inefficient and unsuitable. For instance, a study on the determinants of purchasing a rainfall insurance product offered to smallholder farmers in rural India, revealed that insurance take-up decreases with basic risk between insurance payouts and income fluctuations, increases with household wealth and decreases with binding credit constraints. However, surprisingly, it was found that risk-averse households are less likely to purchase insurance. The major question is: which of these innovative approaches can contribute meaningfully to financing rural and agricultural sector? In other words, which models and institutional types are suited for rural areas? The answer is that each model has its strength and weaknesses for offering adapted financial services for agricultural and rural needs. 3.0 Innovative Financing and Investment in Africa: Success Stories Despite the myriad of problems facing agricultural financing in the continent concerted efforts are being put in place not only by the governments but also the private individuals in agriculture, local and foreign investors. The contribution of the some governments in the provision of basic infrastructure and ensuring security of life and property is highly commendable but more still needs to be done in the area of electricity, security in the sub region so that more foreign and local investors can be encouraged. Many of the regional governments are also adopting market- friendly policies and committing more resources to the sector. Government‟s role in the innovative financing and investment in the continent has been dual. For example,, direct government financing with examples in Nigeria, Kenya, Ghana and Uganda, Ethiopia etc and government partnership with private investor. In either case (public or public-private partnership), the aim of the governments remain the same: creation of employment opportunity, enhance revenue (which sustains economy of most countries in the continent) and ensuring food security. A strong indication that the rest of the world is appreciating current efforts and achievement is investors‟ wake up to Africa‟s potential. Figures from Info agra and McKinsey (2010) indicate forty-five private equity firms plan to invest $2 billion in the region‟s agriculture in the next three to five years. Consequently the continent‟s agricultural output could treble from the current $280 billion a year to $880 billion by 2030.
    • 8 On the farmers‟ part, resources are also being pulled together through cooperatives to assist one another and great achievements have been recorded in terms of number of beneficiaries and loan repayment. Kenya, Ghana, Tanzania and Uganda are examples of countries where this is well established. Local and foreign investors in the continent are involved in production, processing, marketing and provision of improved farm inputs to farms. Examples are found in Ghana, Nigeria, Ethiopia, Uganda and Tanzania. Case studies of successes as well as challenges of innovative financing and investment in Africa are highlighted as follows: 3.1 Public Financing and Investment The Youth Enterprise with Innovation (tagged YouWin) is a successful youth empowerment government initiative in Nigeria. The modus operandi involves equipping aspiring young entrepreneurs with necessary managerial skills by attaching them to well established business organisation in Nigeria. Fund is made available to the trainee after the completion of training for establishment of small scale enterprises with potential for growth. The motive is to generate jobs by encouraging and supporting aspiring entrepreneurial youth in Nigeria to develop and execute business ideas that will lead to job creation. Although the programme is young, the potential to create jobs for unemployed Nigerian youths is not doubtful. The programme is projected to generate 80,000 – 110,000 new jobs for currently unemployed Nigerian youths in the first three years of its existence. The cocoa industry in Ghana is dominated by the state-owned marketing monopoly, Cocobod. Through Cocobod, Ghanaian cocoa raises over a USD 1bn per year in short-term finance on international markets. It distributes some of this finance through an extensive network of private sector buyers, who extend seasonal credit and provide a significant degree of organisation to the value chain. Cocobod also heavily subsidises long-term investment into the industry, specifically through replantation, and also has strategic arrangements with processors which has resulted in a significant local processing capacity. The replanting is an important programme in cocoa business because the yield from the old trees is dwindling over the years and for Ghana to remain relevant in cocoa business, new high yield cultivars is required to replace the old trees.
    • 9 The Kenya Tea Development Authority (KTDA) is another success story of public financing and investment in agriculture. Kenya currently produces about 16 percent of the world's black tea. It ranks second after Sri Lanka in tea exports and third after India and Sri Lanka in production. There has been rapid growth both in acreage and production, with the major expansion coming from the smallholder sector whose share of total output rose from a mere 2 percent in 1963 to 62 percent in 2000. This remarkable growth is attributable to a number of factors including favourable investment policies, institutional support, attractive world-market prices and the land redistribution policy adopted by the government at independence, which was completed in the mid-1970s. The government bought land from large-scale settler farmers, subdivided it and re- allocated it to smallholders. The previous policy, which had restricted Africans from growing cash crops, was abolished, paving the way for smallholder tea production. In terms of institutional support, smallholder tea growers are provided with extension services and inputs; they are also helped to collect, process and market green leaf tea. The Ethiopian Commodity Exchange (ECX) is an initiative sponsored by the Ethiopian government to better regulate and more efficiently trade major agricultural commodities. The exchange is currently trading a number of commodities (of which coffee is only the most important) and hopes to move into sesame in due course. The government has mandated that all trade in certain commodities must be directed through the exchange so it is effectively a monopoly. Buying and selling members buy a seat on the exchange, and the exchange also takes a margin on all trade, which underpins operating costs. The ECX has a network of warehouses throughout the country where produce can be stored securely, and correctly measured and graded. On the basis of a receipt from the issuing warehouse, a seller can then instruct his agent to make a deal in the open outcry market. The buyer can then collect the specific produce from the warehouse on production of the required paperwork. The company has ensured ready market for coffee farmers. The reward for coffee by farmers can be improved if the coffee market is deregulated to allow the forces of demand and supply to determine the price of coffee. 3.2 Public-Private Partnership The resuscitation of Nigeria Fertilizer Industry through government partnership with Mitsubishi - Notore has not only conserved the foreign exchange expended on importation of fertilizer but
    • 10 also the input is made available to farmers at reasonable price. Production has continued to experience significant increase since 2009 from 13.5MT of urea to 235 and 402MT in 2011 and 2012 respectively. Private sector is allowed to sells fertilizer to farmers at market price “minus” the fertilizer voucher discount provided by government. States and Federal Governments ensure the distribution of fertilizer vouchers to targeted farmers. The need for government to avoid undue interference in the day to day management of the industry and ensure that the sale of fertilizer is not for political jobbers is imperative for its sustainability. 3.3 Private Financing and Investment Maendeleo Agricultural Enterprise Fund (MAEF) Farm Africa's Maendeleo Agricultural Enterprise Fund (MAEF) is a grant-making fund that aims to sustainably improve the livelihoods of smallholder farmers in East Africa by investing in innovative agri-business enterprises that seek to either create or adapt technologies for improving agricultural productivity, increasing profitability and linking smallholder farmers to viable, profitable and sustainable markets. The MAEF invests in innovative ideas with recognised potential at an early stage. It helps grantees to refine and strengthen their ideas and, where appropriate test their modifications/adaptations at a limited scale (a few farmers groups with about 100 farmers). The fund has particularly been helpful to women farmers in eastern Africa trying new ways of working, setting up businesses and finding profitable new markets. Since 2002 more than 150,000 households across Kenya (e.g. Mango jam-making in Kenya), Uganda (e.g. sorghum for beer brewing in Uganda) and Tanzania (e.g. seaweed farming in Zanzibar) have been reaping the rewards of MAEF projects which has substantially boost agricultural productivity by investing in innovative technologies that can be replicate by other farmers, add- value to harvest by farmers turning crops into more finished products, take farmers products to more profitable markets and generate income, enabling ryral families to trade themselves out of povert into a better life. Savannah Integrated Export Processing Farms (SIEPF) Savannah Integrated Export Processing Farms (SIEPF) located in Bornu state operates a scheme; SIEPF scheme for tomato farmers. SIEPF lends land to farmers to produce tomatoes for its processing plant. The company works with twenty two registered commodity groups and does
    • 11 not deal with individual farmers directly. The company also supports the farmers by providing seeds and extension advice in addition to mechanized land preparation. It provides a guarantee to farmers to buy the products of a certain quality at a fixed price. This has helped to increase output for the company when compared with their own past efforts to grow the crop. However, financing agrochemical inputs such as fertilizers and herbicides still remains a challenge to the company as farmers have little or no collateral to provide. OLAM OLAM, a rice processing mill, started a scheme to multiply rice in Nigeria. It provided inputs such as seeds and fertilizers to farmers on loan in return for procurement of high quality rice from the farmers in order to compete with imported rice. The loan does not usually exceed 10% of the product value. OLAM started with 250 rice farmers but the number grew to 22,000 by 2008 after which the company could not cope with the risks and rigors of managing so many farmers, hence, it switched to collecting cash payments for inputs to farmers. Gatsby Gatsby (African Agricultural Capital) provides access to markets for smallholder farmers in East Africa by stimulating new value chains, adding value to agricultural products and connecting smallholders with buyers and customers. AAC provides farmers with higher prices for their produce and also open up new categories of product for which no market previously existed, examples are avocado and honey business. Gatsby has attracted over 350,000 additional smallholder farmers who have benefited. AAC‟s original investment has had a positive impact on 1.4m smallholder farmers across Kenya, Tanzania and Uganda, mostly through sales of improved seed and fertilizer. Like other foreign investors in African agriculture, they often dictate the choice of crops (cash crops) to farmers at the expense of staple crops that will enhance food security in the continent. The major complain of Gatsby is low return to capital invested. Weinco Maize Project Weinco Maize Project is an input supply company in Ghana. The company supplies small farmers in groups/associations with technical support, quality seeds and fertilizer that allow
    • 12 yields up to 5 tons/ha instead of the traditional 2 tons/ha. The input supply project is funded by a bank credit guaranteed by the company. After harvest and the farmers have removed the proportion for own consumption, „Weinco‟ collects the grains at a minimum price that has been set in the contract. Through hedging on the future market, „Weinco‟ eliminates the risk in the fall in the world price of maize. The repayment of the input credit is done by reduction on the proceeds of the sales paid on the farmers‟ bank account. The project allows producers to more than double their maize production and therefore their income. „Weinco‟ also makes a profit on the distribution of agricultural inputs (its core business) and on the processing and sale of maize to feed producers. Blue Skies Blue Skies is a major processor and exporter of fresh cut fruit which it exports by air from Ghana to Europe. This organisation has been of assistance to farmers Ghana through buying of fruits, thus reducing postharvest loss of farmers due to lack of storage facilities. Blue Skies operates directly with individual farmers, helping pre-finance production and providing technical assistance. The company stresses it is not an out-grower scheme though, and does not have formal arrangements with suppliers. Farmers generally bring their fruits to the factory gate where it is graded and a potential deal struck. Payment is made in 14 days. There is no gainsaying that farmers have benefitted from this company, but the price paid to farmers is nothing to write home about. 4.0 Conclusion Innovative financing, whatever the form it takes, must be sustainable and based on a supportive policy environment. The success of innovative financing and investment in agriculture rests on private investment, public private partnership venture and free market economy where the forces of demand and supply dictate the prices of tradable commodities. Government is expected to provide enabling environment in terms of security of life and property as well as provision of basic infrastructures (electricity, good road network among others) for both local and foreign investors who expect reasonable returns on their investment. The success in innovative financing and investment in agriculture witnessed in the developed economies compared to what obtains in
    • 13 sub-Saharan Africa may be attributed to provision of basic infrastructure by government and the operation of free market economy couple with other incentives for local and foreign investors. The most imperative factor for sustainability of innovative finances particularly in the private sector type, is the ability of the group to get borrowers to repay their loans in a timely way (Kloeppinger-Todd and Sharma, 2010). In addition, the principles of social cohesion among farmers and financing through the supply-chain must be strengthened to ensure success and sustainability of innovative finance and investments. The Way forward for Africa The continent still has a lot to do in order to make agriculture play its statutory roles effectively. We should not be carried away by the moderate successes recorded by few countries in the continent through innovative financing and investment in agriculture. Many farmers are still poor and agriculture is still regarded as harbinger of poverty in the continent. The gravest risks to sustainable agricultural financing often come not from inherent business risks or the inability of financial institutions to design profitable financial products for the rural population, but rather from misguided government interventions such as lack of or non-enforcement of appropriate rules and regulations. A lot still needs to be done by the individual country and the continent in general to be able to rub shoulders with Brazil, India, Indonesia, Malaysia, and Argentina in terms of their achievements in agricultural development through financing and investment. It is pertinent to know that these aforementioned countries share almost the same agro ecological characteristics with many countries in Africa. Using these successful countries as models, the following are suggested for the African countries in order to surpass the present achievement from innovative financing and investment in agriculture:  Promote and encourage voluntary contribution from consumers, firms and employees and/or by food and nutrition correlated industries. Lotteries can also be considered  Promote the use of migrant remittance which can be considered both as new and renewable sources of financing as well as existing private capital that may be channeled into agriculture. It is estimated that about USD 400 billion annually flows from the
    • 14 industrialized to developing countries. Such fund could be mobilized through financial institutions and diasporas bonds, which corresponds to mobilizing new financing for governments  Seek ways of accessing funds generated by carbon emission allowances auctions in the European Union Emission Trading Systems (EU ETS)  Improved provision of basic infrastructure and security of life and property is germane to encourage investment in agriculture.  Encourage private participation on insurance programmes which are specifically tailored to suit the peculiarities of African farmers particularly the vagaries of weather.  Encourage the participation of more local and foreign investors in innovative agricultural financing that develops into successful, sustainable, scalable, replicable and viable commercial businesses that leads to profitable and improved livelihoods of smallholder farmers in Africa ACKNOWLEDGEMENT - I wish to acknowledge my PhD students, Fatai A. Sowunmi, Cecilia Nwigwe and Ogheneruemu Obi-Egbedi; in the Department of Agricultural Economics, University of Ibadan for their contributions to this paper. References Dwyer, R. (2013): “Food and Agriculture Finance: Brazilian Agro-Investments Set to Rise.” Euromoney magazine. Available on: www. Euromoney.com/Article/2899094/Financing- the-food-crisis.html FAO (2012): “Innovative Financing for Agriculture, Food Security and Nutrition: Report of High Level Expert Committee to the Leading Group on Innovative Financing for Agriculture.” Food Security and Nutrition. International Expert Report, December 2012. FAO Report (2009): “How to feed the world in 2050.” Based on Schmidhuber, Bruinsma & Baedeker. FAO Report (2009): “How to Feed the World in 2050.” http://www.fao.org/fileadmin/templates/ wsfs/docs/expert_paper/How_to_Feed_the_World_in_2050.pdf
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