1. Comprehensive credit, guarantee and insurance policies geared towards smallholder farmers - Unfortunately, credit is either very costly or not available at all for the majority of smallholders: most banks refuse to lend without collateral. However, many farmers do not even hold the titles to their land. To help address this gap, governments can create a pool fund which guarantees up to 85% of the loan principal – allowing private sector lenders to collateralize loans through the payment of guarantee fees. Smallholders must also contend with the risks of bad weather, pests and disease; in light of this, the availability of crop insurance helps to protect both the farmer and the creditor. This combination of credit and operational risk-mitigation products makes it possible for smallholders to tap into the resources of the formal banking sector, and invest for the future.
2. Loans not just for working capital, but for farm establishment and rehabilitation - Often, creditors are willing to lend farmers money for one harvest cycle, but not for much longer than that. In order to increase yields and productivity over the long run, investments into new planting materials, fertilizers and irrigation systems are often required. But these investments tend to be quite sizeable and may take several years to be fully repaid. Which the need for more appropriate and “patient” capital for smallholder farmers.
3. High-quality (not free) planting materials, farm inputs and technical support - Free or low-cost planting materials and fertilizers might sound like a good idea, at least initially, but these can actually be harmful to smallholder farmers if they are of poor quality, or otherwise poorly suited to the area’s soil and weather conditions. High-quality planting materials and farm inputs are quite literally the ingredients for a good harvest, especially when combined with hands-on technical support from trained staff, who can teach farmers about the latest and best agronomic practices. The focus should be on quality, not cost.
4. Availability of an assured market for all produce – not just the best - Farmers need to be able to sell all their produce, not only those products that meet the quality requirements of multi-national buyers. For a farmer earning just a few hundred dollars a year, the cost of transportation and logistics can be considerable. There are few things worse for a smallholder than to spend hours of his or her time and tens (if not hundreds) of dollars to deliver produce to a buyer, only to have most of it be rejected on the spot. Often, it takes a few years before smallholder farmers can deliver the majority of their products at a consistently high quality, so along the way, a market needs to be available to buy all their produce. This requires multiple types of players, both high-end and lower-end.
5. Presence of local entrepreneurs to drive implementation and connect the dots - Without parties to keep an eye on the big picture – driving the coordination, development and delivery of the ingredients mentioned above – it is unlikely that smallholder farmers will be able to adopt new crops and modern farming practices efficiently and at scale. Local enterprises can indeed be an effective force for change: working hand-in-hand with the public sector, organizing and channelling resources to smallholders, and in the best of cases, even shaping the trajectory of an entire industry. With some creative thinking, collaborative partnerships, and a great deal of hard work, there is a brighter future for farmers.
Source: www.weforum.org
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