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FAO, IFAD sign agreement to promote smallholder financing

11 February 2013, Rome - The UN Food and Agriculture Organization and the International Fund for Agricultural Development (IFAD) have signed an $875 000 agreement aimed at helping small farmers and rural households in developing countries gain improved access to agricultural and rural finance, thereby enabling their investments.

The three-year grant agreement is intended to generate new policy tools and training materials for public-sector agencies, donors, financial institutions and NGOs working to enhance smallholder access to financial services including credit, savings and insurance.

The knowledge gained will be disseminated world-wide through the Rural Finance Learning Center (RFLC), a jointly supported web platform managed by FAO which has been operating since 2004.

The grant agreement was inaugurated here last Friday during the annual meeting of the Improving Capacity Building in Rural Finance  (CABFIN) partnership, which groups the German International Cooperation Agency GIZ, the World Bank, the UN Capital Development Fund (UNCDF) as well as FAO and IFAD. The grant will support CABFIN's work plan for 2013-15. 

"Many development agencies said finance for agriculture was too risky and difficult. The CABFIN Partners believed otherwise and 10 years ago initiated a plan to jointly address learning on polices, products and models by sharing information on how it can be done, by creating the RFLC information gateway and by jointly developing technical guidance documents and working together on strategic initiatives in the sector. The continued and growing commitment of the partners is testament to the global success and impact from the collaboration," said FAO Senior Agribusiness and Finance Officer Calvin Miller.

"This  is a real model of coordination, cooperation, and harmonization in the field of rural finance and agricultural investment. It not only promotes sharing information among local public and private partners, it supports an environment of knowledge sharing and dialogue across regions," said Michael Hamp, IFAD Senior Technical Adviser, Rural Finance.

Rural Finance Learning Centre.

The RFLC is a key component of the CABFIN partnership. It ensures lessons and advice collected from around the world is broadly disseminated among the relevant stakeholders promoting access to agricultural and rural finance. It currently offers more than 3,000 selected and abstracted documents that governments, financial institutions and other organizations can use to design improved financial services, strategies and innovations to serve rural communities.

The RFLC is also the largest source of training courses and capacity building resources on the topic. The online centre serves visitors in three languages, who come from an average of 130 countries each month.

Smallholder agriculture and related businesses currently suffer from under-investment. The objective of the CABFIN partnership is to turn the situation around by enabling local institutions to learn, from others, how to offer improved, specifically-tailored financial products and risk management strategies that make such investments more attractive, including investments by rural households themselves. CABFIN also offers policy tools and advice to governments and public stakeholders.

Smallholder finance

Credit schemes designed for smallholders must, for example, take account of the agricultural cycle and provide flexible repayment plans that fit in with the cash flow of small farmers, who have little income between the planting and harvest seasons.

As an example of CABFIN initiatives, the Rabobank Group collaborates with FAO and other CABFIN members to share its experiences working with producer organizations in sub-Saharan Africa, in order to jointly develop this appropriate agricultural credit product as well as complementary products such as insurance, savings and local institutional development.

FAO has been acting as a facilitator in bringing stakeholders together, drawing and sharing lessons from such experiences.

According to FAO's flagship publication, The State of Food and Agriculture 2012, "only by catalyzing investments by farmers and directing public investment appropriately can we achieve a world in which everyone is well nourished and natural resources are used sustainably."