Microcredit and Crop Agriculture: New
approaches, technologies and other
innovations to address food insecurity among
the ...
Outline
1. The need for action: food insecurity and rural
poverty
2. The new context for agriculture: the challenge
to rai...
The need for action
The population of developing countries
is expected to remain mostly rural until
2020. Most of the worl...
Food insecurity and rural poverty

Source: http://faostat.fao.org as cited by the World Development Report, 2008.
Note: Th...
The horizon is changing for small farmers;
improved approaches, tools and innovations can
address those challenges for a m...
The new context for Agriculture

Note: agro-processed goods represent an expanding market in agriculture worldwide.
Source...
There is a need to build inclusive agricultural
value chains that benefit the poor – not as cheap
laborers, but as agro-en...
The challenge is to raise competitiveness among
the poorest

Note: Higher human development is associated with greater agr...
Significant poverty reduction will require providing the
poor with tools to compete in expanding their agricultural
busine...
Microfinance and business models for
agriculture
MFIs have comparative advantages to service the agricultural
sector, but ...
Using the Value Chain for Financing Agriculture
Financial Service
Institutions

Value Chain Actors

Banks

Support
Service...
Microfinance products for agriculture
Some prominent financial products for agriculture are:
1. Bill discounting and facto...
Use of innovations for competitiveness and
efficiency
Innovative ICT applications (e.g. the use of mobile phones) can redu...
Use of innovations for competitiveness and
efficiency
Innovative tailor-made strategies to enhance agricultural
competitiv...
Use of innovations for competitiveness and
efficiency
Innovations in farmer organizations that improve
managerial skills i...
Lessons and recommendations
For MFIs and other financial organizations:
• Diversification of financial products is require...
For development agencies & policy makers:
Finance is only a catalyst for growth. Interventions are still
needed to:
• Supp...
THANK YOU!
FAO
www.fao.org/ag/ags
Rural Finance Learning Centre
www.ruralfinance.org
Calvin Miller

Calvin.Miller@fao.org
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C miller microcredit-and_crop_agriculture-mc_summit_v3

  1. 1. Microcredit and Crop Agriculture: New approaches, technologies and other innovations to address food insecurity among the poor Microcredit Summit, November 2011 Vallaloid, Spain Calvin Miller Agribusiness and Finance Group Leader Food and Agriculture Organization of the UN Rome, Italy
  2. 2. Outline 1. The need for action: food insecurity and rural poverty 2. The new context for agriculture: the challenge to raise competitiveness among the poorest 3. Business models for inclusive agriculture 4. Microfinance products for agriculture 5. Use of innovations for competitiveness and efficiency 6. Lessons and recommendations
  3. 3. The need for action The population of developing countries is expected to remain mostly rural until 2020. Most of the world’s poor are concentrated in rural areas, with livelihoods that are strongly linked to agriculture. Source: United Nations, 2004 Source: Chen and Ravallion, 2007
  4. 4. Food insecurity and rural poverty Source: http://faostat.fao.org as cited by the World Development Report, 2008. Note: The size of the bubbles represents millions of undernourished people, being most severe in Sub-saharan Africa (SSA) and South Asia (SA). Among the world’s poor, food insecurity continues to have a significance incidence. Agriculture can play a key role in making nutritious food available and ensuring an income to purchase food.
  5. 5. The horizon is changing for small farmers; improved approaches, tools and innovations can address those challenges for a more secure future.
  6. 6. The new context for Agriculture Note: agro-processed goods represent an expanding market in agriculture worldwide. Source: http://faostat.fao.org and http://comtrade.org Expanding high-rent markets in agriculture represent an enormous opportunity to foster significant poverty reduction
  7. 7. There is a need to build inclusive agricultural value chains that benefit the poor – not as cheap laborers, but as agro-entrepreneurs with access to technologies, markets and capacity development.
  8. 8. The challenge is to raise competitiveness among the poorest Note: Higher human development is associated with greater agribusiness development. Source: Wilkinson and Rocha, 2009
  9. 9. Significant poverty reduction will require providing the poor with tools to compete in expanding their agricultural businesses. Access to financial services can play an important role in enabling this process of inclusion.
  10. 10. Microfinance and business models for agriculture MFIs have comparative advantages to service the agricultural sector, but also weaknesses. A comprehensive approach for risk assessment is needed: • Improvements in cash flow analysis for agriculture • Terms that fit the conditions of clients given an assessment of their relations with agents in the value chain and a strategy to reduce risks (production, price, market, weather, etc.) • Diverse products and services that target not only farmers but other segments of the value chain
  11. 11. Using the Value Chain for Financing Agriculture Financial Service Institutions Value Chain Actors Banks Support Services Exporters / Wholesalers Technical Training Non -bank Financial Institutions Processors Business Training Private Investors & Funds Cooperatives / Associations Local Traders & Processors Producer Groups Specialized Services Farmers Local MFIs / Community Orgs Governmental Certification/Grades Input Suppliers Product Flows Financial Flows
  12. 12. Microfinance products for agriculture Some prominent financial products for agriculture are: 1. Bill discounting and factoring 2. Forward contracting and futures 3. Micro-leasing 4. Warehouse receipts and micro-warrants 5. Micro insurance 6. Guarantee funds for agriculture
  13. 13. Use of innovations for competitiveness and efficiency Innovative ICT applications (e.g. the use of mobile phones) can reduce informational problems and transaction costs to service rural areas. Number of Subscriptions per 100 people (millions) 80 70 60 50 40 30 20 10 0 Africa Asia Latin America Mobile phone’s exponential growth in the developing world represents an opportunity for MFIs to service agriculture. Source: ITU World Communications as cited by Jensen, 2009 2003 2008
  14. 14. Use of innovations for competitiveness and efficiency Innovative tailor-made strategies to enhance agricultural competitiveness require an integral view of agricultural value chains. A diverse set of services and products can be designed for: • Pre-harvest activities: e.g. input provision, updated market information, contract farming, forward contracts, insurance • Post-harvest activities: e.g. warehouse receipts linked to loans, local value addition, improved marketing agreements, product bulking
  15. 15. Use of innovations for competitiveness and efficiency Innovations in farmer organizations that improve managerial skills in order to promote: • Economies of scale and scope • Strategic partnerships with suppliers and buyers to secure sales • Specialized support services from private or public partners to comply with market requirements and facilitate finance • Lobby for improved regulatory framework that enable investments in agriculture
  16. 16. Lessons and recommendations For MFIs and other financial organizations: • Diversification of financial products is required to service the agricultural sector, fitting to the conditions faced by value chain agents and reducing operation costs • Partnerships with non-financial organizations may be required to provide key support services and facilitate marketing • Specialized knowledge and access to data is important to be able to assess the risks involved in agriculture • Optimal risk management requires portfolio diversification and insurance • Agriculture is important for food security, which makes the sector susceptible to political interference. This must be adequately anticipated to mitigate risks
  17. 17. For development agencies & policy makers: Finance is only a catalyst for growth. Interventions are still needed to: • Support productivity, economies of scale, farmer organizations, access to improved technologies and enhanced market linkages • Support to provide specialized knowledge to access and integrate agricultural value chain data into the financial analysis • Support can be provided for the development of new insurance products not only for farmers but also for their lenders • Develop policies which clarify land tenure and can facilitate finance to agriculture • Support an enabling environment for the development of new technologies that help bring down the transaction costs in agriculture and finance
  18. 18. THANK YOU! FAO www.fao.org/ag/ags Rural Finance Learning Centre www.ruralfinance.org Calvin Miller Calvin.Miller@fao.org

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