Regenerating Rural and Agricultural Development
From increased droughts to higher temperatures, erratic rainfall and rising sea levels, climate change is one of the biggest threats to smallholder farmers around the world. How to reduce the impact of climate change while regenerating rural and agricultural market development globally will be the focus of the upcoming Cracking the Nut 2016 conference, which will take place in Washington, D.C. on March 1-2, 2016. In advance of the event, conference organizer, Connexus, spoke with Rob Henning, Agriculture and Food Security Practice Director at Chemonics International.
Rural and agricultural communities around the world are seeing their livelihoods threatened due to the impacts of global climate change. Depleted soils, scarce water supplies and deforestation are common issues that smallholder farmers face. How can the public and private sectors collaborate to restore such agricultural landscapes while still improving productivity?
Chemonics’ experience has shown time and time again that any investment into production must be driven by end-market demand. Over our 40-year history, we have seen too many examples in which investments in technology and techniques have succeeded in increasing farmers’ production, but the product rots away because it does not meet the demands of the market. To address this issue, any climate-smart agriculture investment must start with a value chain analysis. This analysis begins with the end market and works backwards toward production to identify and then address the resiliency and productivity problems that hundreds of millions of smallholder farmers face across the globe.
Environmentally sustainable development is more advantageous in the long run for developing nations, but it can be more costly than traditional approaches. What are some approaches Chemonics has used or seen to facilitate access to finance so that farmers can improve their production through climate-smart methods and technologies?
Based on our broad experience working with smallholder farmers and the value chains in which they operate, there are two approaches that can reduce the cost of financing. The first approach is value chain financing models in which anchor firms or aggregators identify blocks of farmers with common financing needs and demographic traits. This aggregation, and the ability for the anchor firm to control and verify the flow of products and cash, can reduce risk and transaction costs. A second means to reduce transaction costs is technology. For example, one of our projects has successfully used basic smartphones to create profiles of smallholder farmers This data is then integrated into existing lending processes to decrease default rates and reduce risk.
What steps can governments take to encourage investment in climate-smart agriculture and how can they work with the private sector to increase investments while at the same time maintaining a balance with environmental protection?
To build climate-smart and resilient ecosystems in collaboration with the private sector, it is essential to ensure that all investors (both public and private) have a positive return on investment. In ideal cases, private investments in climate-smart agriculture are 100-percent aligned with interventions to enhance resiliency and environmental protection. When these goals do not completely align, due to market failure, governments and international donors can provide incentives in the form of low-cost capital or grants to motivate the private sector.
In your opinion, to what extent is climate change going to increase risks associated with agricultural markets, investments and finance and how can these risks be mitigated?
Climate change is already affecting the profitability of agriculture at all levels. From the smallholder farmer who may lose an entire crop to the extremes of drought or flooding, all the way to global exporters who have sources of supply disrupted by the same meteorological events, entire industries and individual livelihoods are at risk. In the short term, development of insurance products to protect all actors in the chain is required. In the medium to long term, the private and public sector must collaborate to invest in climate-smart technologies and techniques that mitigate the effects of climate change. At a national and global level, financing mechanisms such as Reducing Emissions from Deforestation and Forest Degradation (REDD)+ can slow the long-term buildup of CO2 emissions.
Chemonics is a sponsor of the upcoming Cracking the Nut 2016 conference which will highlight innovations and best practices in regenerating rural and agricultural market development and financial inclusion in developing countries, with a focus on the subjects mentioned in the previous questions. Why is Chemonics interested in participating in this event and what do you hope to get out of the conference?
Chemonics is both passionate about and responsible for learning and contributing to best practices in the field. Because Cracking the Nut is a vital forum to share ideas about climate-smart agriculture and inclusive agricultural market systems, our interest in participating in this event is to:Contribute our lessons learned and best practices from our global project portfolio;Learn about innovations from our peers in order to apply these ideas to existing projects; Catalyze discussions to identify the next generation of disruptive approaches, with the goal of creating inclusive market systems and enhancing prosperity for all stakeholders.