Yesterday, TOP co-hosted a lively seminar discussion with the All Party Parliamentary Group on Agriculture & Food for Development, raising awareness of the vital need for finance to help lift smallholders out of poverty. We were joined by panellists from the NRI, Microensure and Opportunity International.
Recent estimates have calculated the current global demand for small holder finance at $450 billion, almost none of which is being met. This lack of affordable finance is a key barrier, preventing smallholders from entering global value chains.
The discussion focussed on the key role financial inclusion and investment in the developing world can play as the catalysts to helping small scale producers and manufacturers, especially in the agricultural sector, join global value chains and allow them to trade their way out of poverty.
Agriculture accounts for 30% of Africa’s GNP and 70% of all Africans depend on agriculture for their livelihoods, but its vulnerability to unpredictable weather and diseases makes it a risky and unattractive investment to economic institutions. It was emphasised that insurance must be combined with other financial services in an integrated approach to provide a safety net against disasters and therefore provide a more certain environment for loans and savings.
Development aid to Africa has increased by 250% since the 1980s, but the allocation to agriculture has halved – this coupled with a serious infrastructure deficit is obstructing financial inclusion and economic growth for smallholders. Institutions must start using more informed lending techniques that take into account the many pressures on smallholders including non-agricultural factors such as school fees. But this must be accompanied by a considerable effort from national governments and aid donors to ensure that development budgets are being used to their greatest effect, allowing these producers to begin to help themselves.