Within a climate of uncertain global markets, development funding from many donors has increasingly been on the chopping block. The added dimension of the urgent need to adapt to climate change means that agriculture-focused poverty solutions are increasingly more complex. However, new forms of financing, through both partner country institutions and directly from newer social impact funds are breathing new life into agricultural markets that were once considered investment taboos.
Focusing on this year’s theme of accessing markets amid climate change at the annual Cracking the Nut Conference, which focused on addressing some of the development community’s most pressing agricultural challenges, some 250+ participants took head-on the challenge of leveraging private sector funding to find new solutions as well as increase the impact of traditional donor interventions.
For example, to supplement traditional donor models of value chain financing, impact investment institutions like the Calvert Foundation are stepping in to provide long-term financing to entities that commercial banks in many developing countries would not consider touching. New mechanisms are also coming online, as firms like Dalberg, KfW, and AgDevCO partner to ensure that working capital is available to the “missing middle” (i.e. too large for microfinance, too small for commercial banks), agricultural SMEs working in mostly rural areas.
Innovative methods of “traditional” access to finance continue to gather steam, as commercial banks and other financial institutions like credit leasing firms see the agriculture sector as increasingly viable. Chemonics is doing its part through initiatives like the USAID-funded AgroInvest project, under which Chemonics is facilitating Development Credit Authority loan guarantees for five of AgroInvest’s partner credit unions, and USAID-funded Uganda Feed the Future Commodity Production and Marketing Activity, through which Chemonics is promoting the use of mobile ICT platforms to assess farmers’ readiness for agriculture loans from the Uganda Development Bank.
Despite the progress, though, it is clear from the many sessions devoted to the topic at Cracking the Nut that there is a long ways to go. As Connexus’ Nikolas Eichman noted in the closing remarks, the “what” seems to be generally agreed upon – the question is now “how” to scale up appropriate interventions. Will increased interest from the part of the private sector continue in agricultural development, or is it a fad that will pass as yet other sectors become more viable? A concerted effort on the part of development actors could help keep this momentum going and help achieve widespread rural poverty reduction.
Justin Kosoris is manager of Chemonics' Agriculture and Food Security practice.