Picture: BLOOMBERG
Picture: BLOOMBERG

Rome — As harvests fall and hunger rises on a warming planet, the UN plans to use new financial tools and work with banks and other partners to help fill a gaping hole in agricultural investment over the next decade.

The revamp is part of efforts by the International Fund for Agricultural Development (IFAD), a Rome-based UN agency, to boost support for small-scale food producers in rural areas.

Despite producing half of the world’s food calories, most cannot access loans, while hunger and poverty are increasingly concentrated where they live and work, the agency said.

For the first time, IFAD plans to fund small agricultural businesses in some of the world’s poorest countries, either directly or by teaming up with other financial institutions.

Until now, it has funded governments, but in 2019 its mandate was changed to enable it to finance the private sector.

Paul Winters, IFAD associate vice-president, said most development funding does not get to the local business networks used by farmers on the ground.

But IFAD is well positioned to reach providers of seeds, fertilisers, transport and other goods and services, he said.

“The finance that is out there is often either too small or too big,” he said, adding it rarely targets the type of enterprises that work with small-scale producers. “This is new for IFAD but it is also new in general.”

The UN agency could, for example, work with local banks or the International Finance Corporation, the World Bank's private-sector arm, to back a business setting up cold storage units in places where IFAD is assisting fisher people, dairy farmers or vegetable growers.

Financial partners

Refrigeration could boost their income by allowing them to keep their catch, milk or produce for longer to avoid a glut in supply and fetch a higher market price.

Winters said IFAD was now looking for financial partners to make joint investments of $1m-$5m. “That’s the missing market,” he told journalists.

Another IFAD project in the works involves partnering with food industry giants such as Danone and Mars to prepare small farmers in Ghana to meet growing demand for shea butter.

The new financial approach, unveiled on Tuesday at a two-day meeting of IFAD’s governing council, could include tapping a growing global pot of climate finance and providing loans in line with project results.

IFAD president Gilbert F Houngbo said the aim was to “tackle interrelated challenges of climate change, poverty and hunger in rural areas, where three-quarters of the poor and food-insecure people live”.

“Many others are working on climate finance. However, IFAD is the only one that specifically targets small-scale producers,” he said.

The number of hungry people worldwide has increased for three years in a row after a decade of progress.

Scientists say climate change is likely to worsen the situation, with recent studies warning of simultaneous falls in food production from both farming and marine fisheries, as water shortages jeopardise crop yields.

Eliminating hunger by 2030, a goal agreed by world leaders in 2015, requires annual investment of more than $115bn, the UN has said.

But wealthy governments only provide about $10.5bn a year in development aid for agriculture, according to the Donor Tracker website.

The odds of government assistance rising are slim, Winters said, stressing the need to be “clever” in finding extra resources.

Much more could be achieved by focusing efforts on remote farming communities where IFAD has been working for decades, he said.

“If you want to end hunger, if you want to end poverty … the road goes straight through rural areas,” he added.

Thomson Reuters Foundation