Access to Finance
Financial institutions often face challenges in providing services and lending to the agricultural sector, in particular to smallholder farmers who are the bulk of farmers in developing countries. Shut out from traditional forms of banking, these farmers have little access to formalized financing. Many have undocumented credit histories, unstable incomes, and limited collateral, as well as exposure to extreme uncertainties in weather, production, and markets. Access to financial services allows these farmers to raise productivity, enable better access to markets, and promote better management of risks. Financing helps them access better inputs and invest in new technologies, contributing to longer term food security, and allowing farmers to move from the subsistence/semi-commercial level to the commercial. Access to finance also helps increase their resilience to the effects of climate change. GAFSP works to help connect smallholder farmers with financial intermediaries on the ground in developing countries. Through GAFSP financing, these financial intermediaries, including local banks, small, and medium enterprises, can offer loan facilities with affordable rates to small farmers.
Climate change directly impacts agricultural practices with droughts, floods, rising temperatures, and changing weather patterns. In 2016, 400 million people worldwide were affected by drought. According to current projections, our warming climate could cut global crop yields by more than 25 percent. Climate change also increasingly threatens crops, fisheries, and livestock production, and pushes vulnerable communities deeper into poverty. If such adverse climatic trends continue, more than 100 million additional people could be in poverty by 2030.
Agriculture can and must be part of the solution, through the adoption of sustainable and climate-resilient practices, policies, and investments that maintain or even increase food production to meet future demand, strengthening farmers’ resilience, and reducing its climate footprint. Nearly 50 percent of GAFSP public sector funds have elements that contribute to climate change co-benefits, either adaptation and/or mitigation, through various climate-sensitive interventions. These elements include both traditional and innovative agronomic techniques and agroclimatic risk management technologies for improved climate resilience and reduced carbon emissions.
While the agricultural sector can be adversely affected by conflict and violence, it is often also the most agile in helping fragility, conflict, and violence (FCV) affected countries by rapidly absorbing large amounts of labor, rebuilding household economies, providing access to food, and providing decent employment. The agricultural sector can also play a role in reducing internal migration and other factors that contribute to further destabilization in FCV affected countries. By improving food and nutrition security and sustainable agricultural development in the world’s poorest countries, GAFSP helps address both immediate needs and long-term development and stability. Through the Public Sector Window, GAFSP has provided more than $340 million in grant financing to 12 projects in nine FCV countries—Burundi, The Gambia, Haiti, Liberia, Mali, Myanmar, Sierra Leone, Togo, and Yemen—to governments and farmers, and producer organizations through the MMI. Through the Private Sector Window, GAFSP has supported 32 projects worth $51 million in 14 FCV countries, including Madagascar, South Sudan, Liberia, Sierra Leone, and the Solomon Islands.
Hunger and food security remain significant challenges for women and girls, who are often the last to eat at mealtime. Despite their high participation in the agricultural workforce, in many countries most women have very little decision-making power, even within their own households. Globally, if women had the same access to productive resources and information as men, they could increase farm yields by up to 30 percent, thereby raising incomes and reducing the number of people facing hunger by up to 17 percent.
Ninety percent of GAFSP Public Sector Window projects address elements of good gender mainstreaming for public investment projects: gender analysis during preparation, inclusion of gender actions, and gender-disaggregated Monitoring & Evaluation. Overall, GAFSP Public Sector Window projects have a high proportion of female beneficiaries—as high as 70 percent in Nepal and at or above 50 percent in The Gambia, Kenya, Kyrgyz Republic, Liberia, Malawi, Mali, Niger, Sierra Leone, Tanzania, Togo, and Zambia. The GAFSP Private Sector Window has been working to improve gender equality, increasing the number of female smallholder farmers participating in GAFSP investments through the development of gender diagnostic tools and farmer training.
Over one and a half billion people across the world are engaged in smallholder agriculture. They include seventy-five percent of the world’s poorest people who live in rural areas, toiling on tiny plots of land that yield barely enough to support their family’s basic needs and necessities. Despite their critical role as food producers, the commercial prospects for millions of poor smallholders remain challenging due to poor infrastructure, inadequate financial services, high transfer and transaction costs, and price volatility in food markets. This creates food-surplus areas that are unable to sell produce as well as food-deficit areas unable to access food from markets. Studies from several countries in Africa and Asia show that 50-70 percent of smallholders are not transitioning from subsistence to commercial farming.
GAFSP supports countries, farmers, and businesses in efforts to overcome these challenges and to accelerate smallholder farmers’ access to markets. Farmers who are linked to larger local/national and global value chains can not only have more stable incomes but increase their competitiveness in the long run, gaining a better understanding of market standards, developing relationships with other buyers and securing access to improved inputs and technology. At the farm level, a more stable and efficient farmer supply chain can help secure stable supplies that leads to improved operations and new opportunities. These projects can help transform farmers from subsistence and semi-commercial producers into commercial farmers, thereby increasing both livelihoods and food security.
In 2017, 815 million people worldwide did not receive their minimum dietary energy needs, marking an increase from 2016 due largely to conflict- and climate-related shocks. Undernutrition in children accounts for nearly one-half of all child deaths around the world, and contributes to stunting in 156 million children under the age of five. While rates of undernutrition are declining, rates of overweight and obesity are rapidly increasing.
Agriculture has an important role to play in improving nutrition and increasing access to nutritious and diverse foods through farming activities to increase women’s discretionary income; the development and adoption of biofortified varieties; food fortification that adds micronutrients to processed foods; crop diversification to foods with high nutrient content; decreased food losses and waste; and increased nutrition education. Out of close to $193 million of GAFSP funding, about three-quarters of the nutrition-related spending is on nutrition-sensitive agricultural activities, while about one-quarter is for direct nutrition-specific activities, including the distribution of micronutrient supplements (such as folic acid and iron to pregnant women, women of reproductive age, and adolescent girls, or sprinkles for children), behavioral change campaigns, and improving home conditions.