Knowledge for a sustainable world

Gideon Edu Onumah, Hanneke Lam

In the lead up to the G8 summit in June, Hanneke Lam, Economist at the Natural Resources Institute (NRI), gave a presentation yesterday at a Parliamentary hearing on 'Financial Services for Smallholder Farmers'.

The event was hosted by the All-Party Parliamentary Group (APPG) on Agriculture and Food for Development, and the APPG on Trade Out of Poverty, with a high level panel from 'Microensure' and microfinance organisation 'Opportunity International'.

Smallholder farmers make up almost 65% of the workforce in many developing countries, and can be catalysts in driving pro-poor growth in the rural economies of their respective countries. However they often lack finance to procure productivity enhancing technologies, as the high pre- and postharvest risks they face, and absence of suitable collateral, disable them from accessing financial services.

Hanneke's talk focussed on promoting the management of risk for smallholder farmers in Africa through mechanisms to enhance their financial inclusion.

She mentioned that African agriculture is underperforming, leading to a high and rising dependence on food imports. Hence, there is a need to empower smallholder farmers, as they are the ones that can turn farm sector performance around.

Hanneke's presentation described innovative approaches, which integrate tools such as agricultural insurance, collective action by farmers, and strengthening market institutions (e.g. Warehouse Receipt Systems and market information systems), and addressing policy constraints to reduce farm risk and foster financial inclusion for smallholder farmers.

The EU funded FARMAF (Farm Risk Management for Africa) project is a good example of promoting innovative finance. This project is implemented by AGRINATURA in partnership with African farmers' organisations, and led by major expert in the field of agricultural finance, Dr Gideon Onumah of NRI.

Hanneke says "Increasing smallholder capacity is important, and to improve access to finance it is crucial to focus on risk mitigation, with a holistic approach. We do this under FARMAF with the aim that the lessons learnt through the project in Burkina Faso, Tanzania and Zambia will be transferable to other African countries."