Month: February 2013

Small Farmers, Big Opportunity

How can we feed the growing  world? By empowering one small scale farmer at a time.

by Lisa Wong, WAM UK Communications and Blogger.

Bean Farmer in Sri Lanka. Image courtesy of UN WomenWatch.

Bean Farmer in Sri Lanka. Image courtesy of UN WomenWatch.

The global population, having ballooned over the last century, is likely to reach 7.5 billion people within the next decade. How are we to feed everyone?

Large multinational food companies have been thinking about securing their food supply for some time and have put a lot of energy and advancement in improving the productivity of their usual suppliers: big plantations and farms. But as these corporations look ahead to a swelling consumer base from a growing global middle class coupled with increasingly fragile food stock as climate change threatens crops, they are forced to focus beyond large farms and co-ops to make sure that their food supply grows apace with demand.

Increasingly, they are considering ways to include small scale farmers into their supply chains – those previously excluded from the global food industry and often some of the poorest and most marginalized. A recent report, Catalyzing Smallholder Agricultural Finance, by the development consultancy, Dalberg, found that this sector is no small fry: there are an estimated 450 million small holder farmers in the world – that’s more than the US and Japanese populations combined. With this new focus, it might finally be the big time for the small farmer.

By 2018,  Dalberg, predicts that food consumption worldwide is expected to increase by nearly 30% compared to 2005. Our eating habits aren’t also just preoccupied with the amount of food available; many of us, especially in developed countries, expect a stable food supply and prices. We’re accustomed to having strawberries all year round for roughly the same cost, not to mention coffee – perhaps our most popular global addiction? If we don’t work harder at improving global food production, the stability of our food system is under threat. Factors such as climate change, population growth, and an expanding global middle class — as many emerging countries are getting richer — are placing increasing strains on the world’s food supply.

Those with a sweet tooth might be horrified to learn that if cocoa consumption continues to grow at its current pace, then we’re on track to see a large cocoa deficit of one million tonne by 2020 if we don’t expand our production. A secure and sustainable crop is no longer a luxury for a business, instead smart companies are waking up to the significant food challenge ahead and realize it is a core business threat. Five of the top international chocolate manufacturers — Kraft, Mars, Nestlé, Ferrero and Hershey’s — have made public commitments to sustainable cocoa. Unilever, a major innovator and business leader in sustainable supply chains, has pledged to sustainably source 100% of its tea by 2015 — and their tea production amounts to 12% of the world’s black tea supply. This change in corporate direction  for sustainable and inclusive production can have huge implications for our global development.

With so many demands upon food production, and large farms operating at near maximum capacity, the spotlight is now cast upon the small farmer. The small scale farmer is usually defined as having less than two hectares in land and often plighted with a high vulnerability to weather due to old farming technology and outmoded practices resulting in low yields and low quality crops. Adding to their troubles, small scale farmers often lack market access as they work in remote areas, therefore forced to rely on middle men to collect their goods to take to market giving them little control or awareness over how much they can sell their crops for, keeping them mired in poverty and unable to develop their business.  Microfinance — the practice of providing financial services, such as savings and small loans, to those excluded from the formal financial system — could have a  major role to play in unlocking the potential of these marginalized small scale farmers. With an appropriate loan designed for the  farmer’s needs, such as working with harvesting seasonality, small scale farmers can upgrade their tools, buy more resilient seeds, and generally have access to capital to help improve their crop.

Dalberg estimates that small holder farmers require $US450 billion of agricultural-based lending. Unfortunately, Dalberg also estimates that only about $US350 million has been lent to small scale farmers thus far, mostly through social lenders such as Root Capital, Oikocredit, and Triodos. Although both numbers are directional estimates, it paints a stark picture and shows an incredible market gap, that if invested into and managed sustainably can not only secure our global food chains, but improve the livelihoods of 450 million farmers and their families worldwide.

To find out how aid and grant donors, investors, technical assistance providers, and multinational corporations can work together to engineer financing to make our global food supply chains more inclusive and improve the lives of farmers, I strongly recommend Dalberg’s report. Better yet, join the lively debate between businesses, NGOs and governments on the Business Fights Poverty discussion forum on affordable finance for small farmers, started by Citi Microfinance’s Business Director and WAM UK co-founder, Safiye Ozuygun.

By engaging large corporations into responsible inclusive business practices and designing financial products to support small scale farmers, we can not only address the impending cocoa deficit by 2020, but we can also unlock a significant force to improving the livelihoods for some of the most challenged in our world by placing corporate responsibility at the heart of business.

To find out more about inclusive business and microfinance, follow @lisavwong on Twitter.
This post first appeared on the International Museum of Women blog, Her Blueprint, on 18th February, 2013