We are pleased to present this guest post from the United Nations Food and Agriculture Organization covering much of the outstanding work they are engaged in, in pursuit of their recent Campaign Commitment.
For the Food and Agriculture Organization (FAO) the topic of financial inclusion is of the utmost relevance. Enabling the rural population to access a wide set of financial services that meet their needs and help them accomplish their aspirations is one of the several important conditions required to attain sustainable agricultural development and food security. This is why as part of FAO’s Agribusiness and Finance Group, we are thrilled to have made a Microcredit Summit Campaign Commitment to join forces with a vast network of organizations working to expand the delivery of financial services to those underserved population segments in the developing world.
We are happy to bring our focus on smallholder households and the rural small and medium enterprises they participate in. This target group represents a financially under served clientele of about 475 million households. Various estimates made derive from the World Census of Agriculture, which FAO has been helping Governments around the world to implement since 1950. For an interesting reference on this subject, click here.
Both the development and business case of enabling sustainable financial services to smallholder households has never been stronger. On the one hand, mounting evidence shows how growth in agriculture, enabled through greater finance and investment in the sector, reduces extreme poverty significantly more than growth in the non-agricultural sector in the context of least developed countries. On the other hand, world agricultural markets have been booming, mainly because of the rise of a middle class in developing countries that demand various agricultural products. This has created new agribusiness opportunities that hold the potential to greatly benefit the rural poor. But this opportunity will not become a reality unless we figure out how to solve those challenges limiting the delivery of rural financial services, which should include credit, insurance and savings.
Given the prominent role of agriculture in rural areas and its development and business potential, we at FAO have been focusing on fostering broad access to agricultural financial products, as part of the mixed bundle of financial services required by the rural poor. For this we are leveraging on the presence in over 143 countries of the CABFIN partners, which includes FAO, IFAD, GIZ, UNCDF and the World Bank. Our current work plan includes the screening of innovations led by pioneer organizations around the world that have been able to design and sustainably deliver different agricultural financial products for smallholder households, enabling them to exploit rising opportunities in the agricultural sector and improve their incomes, food security and nutrition. We are in the process of analyzing these innovations to draw evidence-based training toolkits on how financial institutions, Governments and agricultural value chain actors can join forces to effectively scale them up and make them more inclusive of the rural poor. This means solving challenges in the supply and demand side of rural finance. You can see some of the training material we have developed over the years here. These new findings will be disseminated through the Rural Finance Learning Centre, the largest on-line multi-language gateway specialized in the topic of rural and agricultural finance, hosting policy guidance, training guides, news and events produced by development finance practitioners from all over the world.
FAO and the CABFIN partners look forward to sharing these new insights as part of the campaign commitments made. We hope to provide intervention alternatives that recognize the leading role of agricultural value chain actors with important advantages related to client information; promote efficient ways for financial institutions to partner with them and develop more flexible and feasible financial products; make use of modern MIS and telecommunication technologies to enable product delivery, and put in place more effective policies that encourage wider and deeper exposure of the financial systems in rural areas.