Growing the business of smallholder agriculture

Transforming the lives of poor rural people

By Dr. Kanayo F. Nwanze, President of IFAD

When world leaders promised last year to mobilize US$22 billion towards developing country agriculture, their actions recognised the fact that investing in agriculture is essential if we are to meet the first Millennium Development Goal (MDG) of halving the proportion of people living in extreme poverty and hunger.

With only five years left to meet the first MDG targets, we still have a long way to go. In 2009, the number of hungry people in the world reached a historic high of 1.02 billion and there are still around 1.4 billion people who struggle to survive on less than US$1.25 a day. Most of these men, women and children live in the rural areas of developing countries.

In order for the US$22 billion, pledged at the G8 Summit in L’Aquila, to have its greatest possible impact on improving food security and reducing poverty, it must be directed towards creating business opportunities in the agricultural sector. Recognizing today’s and tomorrow’s farmers as entrepreneurs will go a long way in transforming the lives of poor rural people. Agriculture is a business and a powerful tool for eradicating extreme poverty and hunger But even beyond the MDGs, an investment in agriculture is a sound investment. Agriculture has driven economic growth through the centuries, from 18th century England, to 19th century Japan, to 20th century India, to Brazil, China and Viet Nam today. Gross Domestic Product growth generated by agriculture has been shown to be at least twice as effective in reducing poverty as growth in other sectors.

The transformative capacity of investments in agriculture is often underappreciated. But if one takes a snapshot of the rural landscape in large parts of the developing world, the potential for change is astounding.

Agriculture – spanning crop production, fishing, livestock, forestry and pasture – is not an urban activity, farmland exists in rural areas. In sub-Saharan Africa, agriculture provides jobs to around 60 per cent of the working population and small holder activity is the backbone of the agricultural sector. Young women and men, in particular, need to know that they have the potential to become tomorrow’s food producers, or the exodus from rural to urban areas will increase.

An investment in agriculture is therefore an investment in economic development, in rural areas, in young women and men and in food security.

For this investment to take hold, agriculture, whatever its size, must be seen as a business in order for poor rural people to transform themselves from subsistence farmers to small agribusiness entrepreneurs. But it takes the right type of investment for this to happen. Investments – whether by the international development community or developing country governments, as well as the private sector – need to be smart and targeted. Poor rural producers need: infrastructure and roads; transportation to get their products to market; irrigation and storage systems for their products; and communication and technologies to receive and share the latest information on prices. They also need access to rural financial services so that they are able to establish viable agribusinesses.

Vibrant rural economies need private sector partnerships

The right business environment, based on partnership between the public and private sector, is another essential element in creating a vibrant rural economy. Indeed, the private sector is more important than ever as a driver of economic growth in the developing world. Linking smallholder farmers to the private sector is critical to building the economies of developing countries. Additionally, partnerships with the private sector can provide essential assistance, including in leveraging investments and bringing knowledge, technology and infrastructure to rural areas in developing countries.

‘We can accelerate progress in meeting the Millennium Development Goals, and achieving a world without poverty and hunger, not only because it is the right thing to do, but also because it makes financial sense.’
The experience of the AECF

Poor rural people, including the 2 billion who live and work on the world’s 500 million small farms, have tremendous potential to contribute to a country’s economic growth and food security. They also have much to offer the private sector – not the least of which is a sustainable supply of high-quality agricultural produce.

The experience of IFAD has shown that agriculture is a business, and our business is to make smallholder agriculture a profitable agro-enterprise. With the right support, smallholders can contribute to a vibrant rural sector, where locally-produced products and services meet growing local demand. This, in turn, can spur sustainable off-farm employment growth in services, agro-processing and small-scale manufacturing.

The challenge today is to help build the capacity of smallholders and their organizations so that they can deliver what large businesses require, and in turn to encourage businesses to adapt their models to be inclusive and supportive of small-scale agricultural producers. We can accelerate progress in meeting the Millennium Development Goals, and achieving a world without poverty and hunger, not only because it is the right thing to do, but also because it makes financial sense.

A Model for Success

On the island of São Tomé, IFAD has linked cocoa farmers with KAOKA, a French organic chocolate-maker, securing a guaranteed market for their harvest. In 2005, an IFAD-supported programme brought in the French operator to analyse the country’s cocoa sector. The study concluded that Sao Tome’s cocoa varieties could produce superior quality beans, and that traditional farming methods could be easily adapted to organic production. Farmers received technical advice and financial support from both IFAD and KAOLA to help them make the change. An international company certified that the local cocoa was organic, and the French chocolatier agreed to purchase as much organic cocoa as the farmers could supply. The farming families that took part in the programme saw their incomes rise to 8 per cent above the poverty line, on average, from 25 per cent below. In 2005, the farmers formed an export cooperative and signed a five-year contract directly with KAOKA, guaranteeing them a stable minimum price, along with a premium to be invested in social services benefiting local communities. In 2009, farmers in the eastern part of the island signed another contract with Cafedirect in the United Kingdom to provide fair trade cocoa to the United Kingdom’s hot drinks industry.

Read the article as featured in MDG review


M. Ortgage said…
Our social reporting blog tells that we can grow the business of smallholder agriculture. Thanks a lot.
This is a golden act of the government. Helping the people in agriculture farm to stand and survive.

With their help it won't be hard to achieve their goal. If everyone will cooperate it will really bring success to everyone.
hot micro news said…
Thanks to share this post.