That banks are well-positioned to support their clients in the food, agriculture and land use is not in doubt. For them to achieve this, financial institutions must align their lending portfolios in a manner that boosts resilience on farms and guarantees reasonable returns.
This was the basis of a panel discussion I was proud to be part of on the sidelines of the African Green Revolution Forum (AGRF) 2022 Summit in Kigali this week.
The summit emerged as a unique opportunity for participants to share experiences with regard to channeling green financing toward the financial inclusion of small producers who often lack access to markets, credit, knowledge, and technology.
At the foundation of food systems are farmers—small-scale growers who produce roughly a third of Kenya’s food, are critical to food security. Yet millions of them live in poverty, and they also need to adapt to climate change to survive. We, therefore, need to strengthen efforts towards ensuring that farming communities’ economic base is secured to overcome income inequality and lack of social protection.
The agricultural sector needs financial backbone and support to create the much-needed impact . This implies creating new lending frameworks and products and actively working with the agricultural sector to price farming loans to encourage sustainability.
Climate-smart agricultural solutions must be tailored to the financial needs of individual farmers, with particular care to listen to and support farmers who have experienced discrimination in access to finance or predatory finance.
The transition to a more sustainable and climate-smart agricultural system that can meet future demand without exacerbating environmental degradation and climate change has become an urgent priority.
Many of our most pressing environmental challenges, from widespread deforestation to biodiversity loss and rising carbon dioxide emissions, can be linked to agricultural expansion. Major barrier to farmers adopting sustainable practices has been a lack of access to affordable financing.
This is due, in part, to the perceived risk lending institutions have ascribed to the agricultural sector. A lack of understanding of how the sector works, combined with high transaction costs with dispersed farmers, has created a reticence among financial institutions to innovate in this space.
For many smallholder farmers, access to essential resources (farm inputs) for investing in boosting the production and value of their crops, such as credit facilities and insurance programmes remain inaccessible.
Market accessibility, fertiliser and value-add also remain a big challenge. The implication of this is that, very soon, if care is not taken to encourage more youth participation in agriculture, there will be a decline in innovation and productivity which will ultimately have a negative effect on Africa's economy.
As global leaders continue to ponder on how to support the transition to sustainable agriculture, there is a need for all stakeholders to align and collectively show resolve that will accelerate the transition to a greener economy.
