Smallholder farmers all over Africa play a major role in food production, and a majority of these smallholders can be found in rural areas. Rural agricultural workers are sadly the poorest in Africa, with a poverty rate of about 50% across the continent. This statistic in mind, it is crucial that financing is tailored to meet the needs of smallholder farmers. These farmers have particular needs and do not have access to the finance that is available to large scale or commercial farmers.
Despite this fact, agriculture still employs over 65% the population and has been growing at about 3.3.% each year since the year 2000. With increasing population, unemployment all over the continent and serious food shortages in certain times of the year, there is a serious need for innovative and sustainable means of financing the sector.
In the session on “Innovative Financing and Investment in Agriculture,” held at the ongoing 6th Africa Agriculture Science Week, the speakers stressed the need for African stakeholders particularly in the Public, Private and Public-Private partnership to develop strategic means of financing rural agriculture. These means would need to be highly innovative to be able to meet the need of such a large continent.
Professor Victor Okoruwa of the University of Ibadan, Nigeria, stressed the following as practical means of increasing investment that would be sustainable:
- Governments in Africa need to increase their investment in the sector, meeting the minimum CAADP agreement of 15% least.
- The public sector needs to partner with private investors with the aim of creating employment opportunity, enhancing revenue and ensuring food security.
- ICT-based solutions like Mpesa in Kenya, FoodNet in Uganda, and Manobi in Senegal should be launched in other African states to allow rural farmers have access to mobile money.
- Cooperatives should be encouraged among farmers as they need a unified voice to access funding
- Investment should be made in innovative agri-business enterprises that seek to either create or adapt technologies for improving agricultural productivity.
Value chain development was also stressed in discussions at this session. Producers, buyers and financial agents need to have strong cooperation to enabling the producers needing financing to get it. Mechanisms to effectively allow for innovative financing shared by presenters and participants include:
- Warehouse Receipts systems
- Contract farming
- Out-grower schemes
- Repurchase Agreements
- Private Equity
- Leasing of equipment and machine
All in all, it is clear that for rural financing to take shape in Africa all relevant stakeholders need to be involved: The government, banks and other financial agents, farmers’ cooperatives, private non-financial companies, and donors. The mechanisms put in place must be innovative and readily acceptable by the farmers that need them. Financial institutions also need to believe that a sustainable link can be formed between smallholder farmers and financial markets that is not simply business-as-usual.
For me a young agriculturist, I cannot but help imagine the opportunities for youth to become key players as knowledge transferers, financial agents, innovative extension agents, and government, financial institutions and private sector workers. Let’s hope relevant stakeholders will take up some of these points and implement them in their various countries.
Blogpost by Olawale Ojo, a social reporter for AASW6.
Photo: F. Noy (UN)