Three hundred bright minds from business and industry, science, governments, NGOs and farmers’ organisations, recently met in Brussels at an international conference called “The Art of Farming”. They explored the potential of sustainable business models that include small-scale farmers. Is this too good to be true?

Three hundred bright minds from business and industry, science, governments, NGOs and farmers’ organisations, recently met in Brussels at an international conference called “The Art of Farming”. They explored the potential of sustainable business models that include small-scale farmers. Is this too good to be true? What lies behind this new interest in small farmers? And what are the potential problems and opportunities? There are two main reasons for the global agro-industry’s interest in smallscale farmers. First, there is increasing demand from consumers for fair and sustainable products. This has alerted the industry to the importance of managing reputation. A recent example is the consumer campaign that led Nestlé to decide not to use palm oil produced on plantations cleared from rainforests. Second, and more importantly, agro-industry is keenly aware of the looming dangers of climate change, which they recognise could endanger supplies of raw materials. They see the wisdom of diversifying supplies and spreading their risks. Together, these two factors are pushing the industry to explore the possibilities of doing more business with smallscale farmers. Yet this brings the complexity of having to deal with large numbers of people, who are considered to be risk averse. They realise that they cannot manage this challenge on their own and are looking to establish innovative partnerships with NGOs and farmers’ organisations who can help them explore this new territory.

What might this mean for small farmers and the organisations that work with them? Is this going to be a win-win situation, as reports of some successful experiences suggest? Or will things be more complicated? Much will depend on the space these farmers get in these new partnerships. Will they be able to build on their own strategies towards risk diversification and maximising their options? Or will they be driven towards commodity production and become completely dependent on a single cash crop? While small-scale farmers need money, they also need to maintain a sustainable resource base. This is more than risk aversion: it is a very sensible strategy in a hostile environment. Many small-scale farmers are women. Yet the majority of speakers at the conference in Brussels were men. There is no easy match between the compelling financial logic of agro-industry and that of small-scale women farmers. Let us actively engage with agro-industry and farmers and try to make sense of it together.

Text: Edith van Walsum, director ileia

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Many countries are targets for expanding intensive agriculture. International agribusinesses, banking institutions, sovereign governments and wealthy individuals are being attracted to buy up or lease cheap land, where the use-rights are poorly defined.

Countries ravaged by conflict and sanctions are desperate to attract investment. Land in these countries can often cost less than $1 per year per acre to lease. While these investments appear to represent a win-win situation for both sides, appearances are often deceiving.

More than 124 million acres of land has been acquired by foreign investors responding to global food shortages, fluctuating oil prices and growing water shortages. The phenomenon is being exacerbated by the EU’s mandate that 10 percent of all transport fuel should be sourced from plant-based biofuels by 2015. This will require more than 43 million acres of new land for crop production, which is certainly not available in the EU. This will place enormous additional pressure on land producing food for local consumption, and possibly leave a large gap in the global supply of cereal crops. Increased shortages have already been experienced in recent years, leading to rampant food insecurity in developing countries which ineffective and unsustainable food aid has done very little to address.

While many see these investments as economic progress, the majority of food and biofuels produced in these schemes is designed for export. Simultaneously, indigenous people are being forced off their land or to work for these farms as underpaid labor, while lands used by pastoralists are being swallowed whole. These impacts are independent of the catastrophic ecological damage caused by the majority of commercial farms abusing local water and land resources, with little if any regulation from local government agencies.

Currently, East Africa is home to more than 80 million small holder farmers, each farming less than five acres of land. These farmers represent an untapped resource in the battle against the region’s excessive and repetitive food shortages, economic underperformance, child malnutrition and global food insecurity. The slow maturation of the microfinance sector, which aims to provide adequate access to technologies and capital, must now compete against the unrestricted private equity that is funding these colossal land grabs.

Local and international investment is urgently needed to increase the capacity of Africa’s small-scale farmers to ensure sustainable food production tempered by social equity. From personal experience, food aid is not only ineffective but pernicious. Africa must prioritise farming. Commercially viable agro-investment schemes can ensure that Africa is transformed into the world’s bread basket through partnership, not servitude.

Text: Rachel Zedeck

Rachel Zedeck (rachelz@medeagrp.com) is managing director of the Backpack Farm Agriculture Program in Nairobi, Kenya, an initiative that supports local agriculture co-operatives.

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New risk-profiling approaches offer the promise of helping the “missing middle”: farmers who are too small to attract loans or be of interest to commercial banks, and too large to benefit from microfinance institutes.

Many farmers in developing countries are too big to get support from microfinance institutions, yet too small for commercial lenders. The result is a group known as the “missing middle”: farmers who can’t get access to finance. Such farmers often have to depend on private financiers who provide high-interest loans that are often not very transparent and certainly not beneficial to the farmer.

Banks interested in supporting agriculture all aim at the same group of large, well established farms with a good track record, credibility and collateral. Transaction costs play a large role here: it is much more profitable to build long-term relationships with big farms, which need big loans, than with many clients who need smaller loans. Regardless of the size of the loan, a bank has to do the same amount of work in assessing the risks involved and providing financial services. The marketing process, the due diligence, the financial transactions and the monitoring process, all take the same time, whether it is for a loan of US$ 10,000 or one of one million dollars. In addition, bigger farms tend to be better managed; they can provide more information about the work they do and the risks they take. It is not surprising that banks prefer to work with them. At the same time, there are now microfinance institutions (MFIs) in many parts of the world.

They have been able to bridge this information gap by setting up social structures (often groups of entrepreneurs) which are then responsible for the financial behaviour of individual members. This significantly reduces the information and monitoring costs. MFIs have also pioneered the way of dealing with collateral by accepting “soft” collateral like contracts, links with other parties in the value chain, technical assistance, or insurance. MFIs are often involved in creating soft collateral themselves, helping their clients improve their business and thus securing their lending. This model has dramatically changed the opportunities for many of those at the bottom of the pyramid. However, this approach still follows a “relationship banking” model, which is time-consuming and expensive. Though the model is replicable, it is difficult to scale it up to reach those who are part of the “missing middle”.

Bridging the gap

While both the lower and the upper end of the finance market are served with “relationship banking” models, the missing middle can be served with a “transactional banking” model. With this model the bank bases its assessment of the creditworthiness of a farmer on secondary sources of information. Farmers can be assessed according to several indicators, which show how they are managing their farm and thus the likelihood of them defaulting on a loan. This kind of information is even more important when collateral is lacking, as is often the case with farmers in the “missing middle”.

Traditionally, banks look at two C’s: collateral and capital. Without one of these, they are not likely to provide loans. More progressive banks will also take into account two more C’s: crops and contracts, which can function as soft collateral for loans. However, those four C’s only look at the results of previous investments, without giving a full idea of the possibilities of success in the future. Withholding loans to farmers who can’t show one of these four C’s pushes them into a vicious circle: without investments, they can’t improve their business and they will never get the sufficient collateral, capital, contracts or crops needed to attract investments and improve their business.

Farmers can escape this vicious circle if banks are willing to take other kinds of collateral, or look at information which can show success in the future. Among this, a few more C’s can be included:

• Capacity and character: what is the farmer’s capacity to manage her farm? Does she have an entrepreneurial spirit? Does she receive technical assistance?
• Competitiveness: does the farmer know her market and is she able to adapt product, quantities and qualities to market demands?
• Context and chain: how is the farmer embedded in the value chain? Does she have long-term contracts with the same suppliers and processors or traders?
• Certification: is the farmer certified, and does this enhance good agricultural and management practices? Does the certification scheme generate a price premium?
• Cash flow: what are the future cash flows? Does the farmer have a financial management system?
• Credibility: what is the farmer’s financial track record?

By scoring a farmer on the basis of these additional factors, banks can get a more comprehensive insight, and this can serve as the necessary input for their own due diligence process.

Putting it into practice

Systematic risks
In agricultural finance, banks often consider the systematic risks to be the most important ones. These are the risks that are inherent to a whole sector and/or a whole region, such as weather risks, biological risks or price risks. If drought, flooding or a pest outbreak hits a region, it will affect most of the farmers. If prices are going down, all the farmers will be paid less for their products. One of the core strategies of a bank is to diversify their investments, in order to reduce these risks. (This is another reason why banks prefer to stay out of agricultural finance, as the sector is replete with systematic risks.)
Due to their nature, systematic risks are difficult for individual farmers to manage. However, there are risk management strategies which can – at least – mitigate against their effect. Drought can be managed or mitigated by crop diversification (not all crops are equally sensitive), irrigation or insurance. Price risks can be managed by storage facilities (helping farmers wait for better prices). Putting these strategies into practice is a clear indicator of good management and reduces systematic risk.

ForeFinance is a company that makes profiles of farmers based on the C’s mentioned above. This assessment is done at a group level, for several reasons. First, working with co-operatives (or other groups) can be more cost effective. Moreover, a group provides some of the essential “soft” collateral: adequate governance and management structures, links with the value chain, certification, financial management or links with technical assistance. ForeFinance has started business in Kenya, and aims to roll out this concept throughout Africa, Latin America and Asia.
The profiling process starts with a request from a group. A third party audit is conducted, which generates a profile of the group. This profile is stored in a database, which is accessible to banks. On the basis of this profile and their own due diligence, a bank can decide to provide a loan which, together with the repayment details, is recorded in the database. The link with those who provide technical assistance is very important, as they often have extensive experience with the farmer and can provide additional information. When a profile is made, it also generates insights of what has to be done to make the farmer(s) more bankable. This information can be delivered to those providing training or extension.
The relevant importance of these indicators varies between sectors and regions. Among Kenyan coffee farmers, for example, governance and credibility are two very important factors, as coffee co-operatives have a history of bad governance and debt forgiveness. The variables are weighted before they are put into a model which gives a producer group a credit rating from A to D. This serves as an input for the bank’s due diligence, which then allows the bank to concentrate on analysing systematic risks (see box).

Pieces of the puzzle

Certification schemes (in for example coffee, tea and cacao) have helped make whole sectors more transparent, efficient and sustainable, and have brought clear benefits to farmers. Although our work does not intend to be a certification scheme, we think it can lead to the same dynamics and benefits.
Of course, our methodology is only a small part of the puzzle which has to be in place to overcome the financing gap. Change has to come from different sources. Governments can help create a stable context for agriculture. They are responsible for providing the necessary infrastructure (roads, telecommunications) and can regulate and prevent market distortions. Non-governmental organisations have played, and continue to play, an important role in training and extension activities.
However, the major drivers of change have to come from the agricultural and financial sectors themselves. While the model can be a driver in making farmers more “bankable”, it is clear that banks have to become more farmer-friendly. They need encouragement and support in this. Encouragement can come from a first-loss structure, which can compensate banks in case of defaults. A fund to subsidise the initial profiling of farmers also seems necessary. Both schemes are currently being set up by the independent consultancy firm Agri Finance Program Management & Consultancy. These schemes are expected to help this model spread, helping more and more farmers get access to credit – and with it, get higher yields.
Text: Jaime ter Linden

Jaime ter Linden is program manager at ForeFinance. He has worked in the financial sector for many years as an analyst and portfolio manager.
E-mail: jaime.ter.linden@forefinance.nl

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One proposed mechanism to stimulate environmentally friendly farming is PES, or Payments for Environmental Services. Can PES help conserve biodiversity? How can such a mechanism be implemented?

Farmers’ fields make up 40 percent of the earth’s land mass and thus play a key role in conserving the world’s biodiversity. Farmers work hard with limited resources to feed a growing world population. The FAO says biodiversity is our best ally in the fight against hunger and that farmers are the first line of defence in conserving biodiversity.
Yet this must also be a shared responsibility, and governments have to play a supporting role by encouraging the development of farmer-driven local programmes, putting mechanisms in place to provide ecosystem services.
For example, in most developed countries farmers are paid to establish biodiversity corridors. There is a need to establish similar mechanisms in developing countries, adapted to the specific characteristics of each location. Some fringe farmers’ groups suggest that farmers in developing countries are against ecosystem services in Western countries as this is an unfair form of competition. This could not be farther from the truth. Farmers’ organisations in developing countries want their governments to establish similar programmes in their own countries. They want their governments to devote at least 10 percent of national expenditures to agriculture, as they promised in 2003 when they signed the Maputo Declaration.
To date, only eight countries in Africa have made good progress towards this target. So long as ecosystem service payments are not coupled to specific commodities, they are not trade distorting.
Farming has an enormous potential for mitigating against climate change through carbon sequestration. According to the Intergovernmental Panel on Climate Change, agriculture´s sequestration potential largely exceeds the emissions coming from farming, and 70 percent of this mitigation potential can be realised in developing countries through sustainable agricultural practices such as organic farming, agro-forestry, the production of renewable energies (such as biogas) and sustainable livestock management. Similarly, farming can play a role in maintaining water quality through watershed management. There are numerous concrete examples.
Such sustainable practices that benefit society as a whole come at a cost that is not always compensated by direct benefits. Farmers’ organisations have to work hard to get the entire international community to acknowledge this potential and the efforts required. Farmers can provide ecosystem services if they are provided with adequate incentives and the resources to do so. That is why IFAP encourages co-ordinated global policies, for more widespread programmes that support farmers in providing ecosystem services.

Text: Neil Sorensen
Neil Sorensen can be reached at neil.sorensen@ifap.org

Neil Sorensen, Communications Coordinator, International Federation of Agricultural Producers (IFAP).

The vast socio-economic and cultural diversity of farming communities has created an enormous diversity of crop varieties and livestock breeds. Traditional farming is a form of in situ conservation that complements ex situ conservation in gene banks and zoos and botanical gardens. Over the last century, farmers have increased their grip on agricultural systems, moving from diverse agroecosystems to specialised agroindustry by using external (often subsidised) inputs and high yielding varieties. Monocultures yield more “direct use” products and are more profitable, which makes them attractive from a private perspective.
Yet, specialised agriculture yields less services with a “public use” value, like water and soil conservation, and “future option” values, such as biodiversity. This should concern society as a whole, and clear social choices need to be made over the extent to which agriculture should focus on productivity for direct use, in order to prevent private benefits prevailing over public interest, and public services being lost.
Society cannot expect farmers to maintain that diversity if doing so is against their direct interests. Governments need to provide enabling policies and incentives to promote conservation. Dryland and mountain farmers, as well as hobby farmers, prefer local crop varieties and livestock breeds, and in so doing safeguard public good values. In humid and temperate areas, farmers are more likely to abandon traditional varieties and breeds, and they need support to keep them. This brings us to a financing mechanism, a form of PES to maintain diversity in varieties and breeds: Payment for Agrobiodiversity Conservation Services, or PACS. The first question is: who will “buy” PACS? It is difficult to identify the equivalents of “downstream” users of PES who will be willing to compensate “upstream” farmers and carbon emission buyers.
Other payment mechanisms are imaginable. Governments could reduce agricultural subsidies that have negative consequences for agro-biodiversity, or include agrobiodiversity within biodiversity conservation programmes; while consumers could buy niche market products, effectively becoming service purchasers.
Reward mechanisms might be individual or community-based, in the form of money, recognition, training, or infrastructure. They could, for example, support traditional knowledge systems. As poorer farmers are less likely to convert away from traditional systems, PACS schemes will tend to support equity and poverty alleviation goals. Their impact is still unknown, as is its influence on local communities. Bioversity International is currently carrying out a series of case studies in India, Peru and Bolivia to evaluate these impacts, help develop effective instruments and suggest supportive policy measures.

Text: Adam Drucker
Adam Drucker can be reached at
a.drucker@cgiar.org

Adam Drucker, senior economist, Bioversity International.

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Recent and expected future growth rates for both the organic and fair trade markets reflect a growing consumer awareness of global trade issues and a wish to consume sustainably, along ethical and environmental lines. In both Europe and the United States, market demand exceeds supply for many products, such as sugar, coffee and cocoa, and there is growing demand for imports of these products from Latin America, Asia and Africa. However, not all suppliers/farmers in these regions are able to fully grasp these market opportunities, in particular due to lack of access to (trade) finance.

Long-term partnerships

To tackle these challenges farmers need the support of committed buyers. Buyers in the organic and fair trade markets are, generally, committed to enter into a long-term and sustainable trading partnership with local companies.

The single most important precondition for building this partnership is timely payment to the farmers, upon delivery of their produce. This means that farmers don’t experience (often lengthy) delays in receiving payments. While Fair Trade and/or organic systems generally pay higher prices, farmers’ co-operatives generally lack the cash needed to bridge the period between sourcing the harvest and receiving payment from their buyers, and cannot immediately pay farmers from their own resources. This is where the need for pre-finance arises, which is a key instrument for building sustainable trading partnerships.

In most developing countries, agricultural lending is perceived as high risk and the banking system tends to avoid it. Where agricultural lending does exist, banks often require excessive hard collateral such as land and buildings. Farmer co-operatives generally do not have enough assets to raise the finance they need, especially during the cash-intensive harvest season. Value Chain Finance differs from traditional agricultural lending: instead of relying on hard collateral, it relies on strong and committed value chains. Sales contracts with solid and reputed buyers are actually more valuable than the expected sale value of a building. When the sales revenues from such contracts are flowing into accounts held by the bank financing the co-operative, this adds another level of security. Over the past ten years, this type of lending has been successfully pioneered by a few national and international financial institutions. Triodos Bank, together with Root Capita and Shared Interest, has been among the leading pioneers in this field. The evidence shows that Value Chain Financing can be done at an acceptable level of risk. The average annual loss rate on Triodos’ trade finance portfolio over the last five years was less than one percent. The few other players in this field have similar experiences.

Trade finance: How it works

To illustrate how trade finance works, let’s go to the Meatu district in the northwest of Tanzania, the country’s main cotton-growing region. In this district 2,000 cotton growers cultivate 11,000 hectares of certified organic cotton, producing around 8,000 tons of seed cotton a year for BioRe Tanzania, Africa’s leading exporter of organically certified cotton lint. This chain is co-ordinated by Remei AG, a Swiss firm that produces and markets organically grown textiles. The garments are sold in supermarkets and fashion outlets in Switzerland and other European countries. The cotton farmers have very little capital. Cotton is their only cash crop, so they urgently need money when it is harvested. If BioRe doesn’t pay in cash, the farmers might sell their crop to other buyers – even if at a lower price. In 2008, BioRe Tanzania needed US$ 3.5 million in cash to pay its contract farmers.
BioRe Tanzania requested loans from several Tanzanian banks, but they required mounds of documents, safeguards such as the firm’s office and training centre as collateral, and personal guarantees from the managers of BioRe Tanzania and Remei AG.

Many banks see that exporting cotton is a risky business, with several factors affecting an exporter’s capacity to repay a bank loan, including climate (risk of drought), price fluctuations on the world market, and also currency risks (BioRe Tanzania buys seed cotton in Tanzanian shillings and sells lint in US dollars). These factors mean that many banks are reluctant to provide loans to cotton exporters. Swiss Remei AG made contact with Triodos Sustainable Trade Fund, one of the special purpose funds of Triodos Bank, the leading values-driven bank in Europe. This fund offers simple and straightforward trade finance loans. Triodos Sustainable Trade Fund agreed to pre-finance up to 60 percent of the contract between BioRe Tanzania and Remei AG. The start of the loan period commences with the start of the cotton harvesting season and can continue until the last shipment of cotton has left Dar-es-Salam harbour.

Triodos Sustainable Trade Fund – Who is it for?
 
Triodos Sustainable Trade Fund lends to agricultural exporter organisations working with smallholder farmers located in Africa, Latin America or (Central) Asia. Organisations need to be dedicated to organic production and/or Fair Trade principles. Furthermore, they need to be financially and commercially sustainable, have access to export markets for commodities or related products, and a minimum annual turnover of € 400,000.
 
For more information go to: www.triodos.com/sustainabletrade, or email sustainabletrade@triodos.nl.

A central element of the loan is that all payments on the contract go through a Triodos Bank account in the Netherlands, and Triodos Sustainable Trade Fund withholds part of each payment until the loan is paid off. This continues throughout the sales period, so that the loan is fully repaid by the time all the cotton has been sold. Triodos’ willingness to finance this organic cotton chain is based on the strong relationship that exists between Remei AG and BioRe Tanzania. This, in turn, is based on proven up and down stream relationships: between BioRe Tanzania, the ginnery and the farmers of Meatu district, and between Swiss Remei AG, the firms that spin the yarn and turn it into cloth, and the retailers.

The only document underpinning the loan is the sales contract between BioRe Tanzania and Remei AG, specifying the amount and price of lint to be sold. Triodos’ loan is not based on securities, but on trust that the cotton lint will be produced and sold, and that it will generate sufficient profit to repay the loan. In financial jargon, the loan is based on cash flow projections, rather than securities from assets. The repayment agreement confirms the partnership between three mutually dependent organisations, which provides the basis for successful export financing.

Promising market

The question arises: why are only a few international players prepared to take up this role as financier? What about local banks? A parallel can be drawn with the development of the microfinance sector. Triodos started financing microfinance institutions in developing countries in 1994 when it launched two specialised microfinance funds. At that time Triodos was one of the few players in the world to offer this type of investment service. The number of international investors has since increased rapidly – especially in recent years as an increasing number of microfinance institutions have become financially sustainable.

The most important development, however, has been that mainstream local banks have learned to appreciate the microfinance sector as a promising market with large business potential and acceptable risk levels. In most developing countries, the sector is now recognised as having the potential to uplift the socio-economic development of hundreds of thousands or millions of individuals. Some microfinance institutions conduct a significant part of their activities in rural areas, which means that farmers can benefit from the financial services, ranging from credit facilities and savings accounts to payment services and micro-insurance. In many countries, microfinance institutions have a special status and are supervised by the central banks. Triodos is convinced that Value Chain Finance can go through the same development phases as the microfinance sector.

A very important key factor in this is the further professionalisation of suppliers (including farmers’ co-operatives) in developing countries. Currently, not all suppliers are able to fully grasp the market opportunity due to a lack of management capacity, commercial skills and the ability to meet end buyers’ quality requirements. Very often they have no solid financial reporting system. With substantial further professionalisation at the bottom of agricultural value chains, Triodos expects that more financial institutions will start providing Value Chain Finance, especially in commodities like coffee and cotton. Their risk perception will change as they become aware that providing finance to organisations without fixed assets can still be pretty good business.

Over the last seven to eight years, Triodos has had a loan loss of less than one percent, calculated over disbursements per year. That is far less than what many would expect. We think, and hope, that this will encourage other players in the financial sector to follow suit.

Text: Koert Jansen

Koert Jansen is Fund Manager at the Triodos Sustainable Trade Fund, e-mail: koert.jansen@triodos.nl

Further reading
The case of the Meatu district is described in more detail in “Value Chain Finance: Beyond microfinance for rural entrepreneurs”, a publication from the Royal Tropical Institute (www.kit.nl) and the International Institute of Rural Reconstruction (www.iirr.org).

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Researchers and policy makers also play a key role, as do farmers’ organisations, traders, multinationals and banks. In one way or another, their involvement shapes the decisions that farmers take. To what extent do these different stakeholders work together? And, does this increase learning?

The hunger experienced by many people in the world, and the likelihood that their numbers are bound to increase further due to climate change, gives a sense of urgency to the need to involve different voices in developing a more sustainable approach to farming. The December issue of Farming Matters will focus on how all these different stakeholders are learning to work together to make agriculture more sustainable, by developing new ideas and solutions or disseminating them. We want to explore how different stakeholders deal with difficulties, which might be related to a lack of funds or power issues, and whether by working together they are able to find solutions which lead to better farm practices.

We welcome your suggestions for articles, articles themselves, photographs, contacts of people you think have expertise in this area or ideas for topics you feel we need to address. Please write to Jorge Chavez-Tafur, editor, (j.chavez-tafur@ileia.org) before August 15th, 2010.

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Evelyn Mathias (ed.), 2010. LPP and LIFE Network / FAO, 142 pages.
Downloadable at: http://www.fao.org/docrep/012/i1283e/i1283e.pdf
Many livestock breeds found all over the world, such as Bactrian camels in Mongolia, or Umzimvubu goats in South Africa, are specifically adapted to local conditions. They survive under harsh weather conditions, are better able to resist diseases or to reproduce when food is scarce. But in spite of these advantages these local breeds are at risk of extinction as a result of an increasing preference for “modern” breeds. Finding niche markets for their products may be one way to avoid this fate. This book looks in detail at these two cases, together with six others, identifying the main advantages and challenges of niche markets.

Land grab? The race for the world’s farmland

Michael Kugelman and Susan L. Levenstein (eds.), 2009. Woodrow Wilson International Center for Scholars, 123 pages.
Downloadable at: www.wilsoncenter.org/topics/pubs/ASIA_090629_Land Grab_rpt.pdf
The lease of large areas of land in poor countries is very much in the news today. This process, however, is not really new: in Latin America in the 19th century the same processes led to the emergence of the original “banana republics” – with very negative social and environmental results. As the contributors to this publication show, the consequences today may be even bigger. This collection of essays looks at the implications of these new deals in terms of food security and poverty alleviation (especially when small-scale farmers and the rural population have no voice in the deals), and at the pros and cons of a suggested code of conduct for all parties covering issues such as local land tenure and uses.

Realising REDD+: National strategy and policy options

Arild Angelsen (ed.), 2009. Center for International Forestry Research, CIFOR, 390 pages.
Downloadable at: www.cifor.cgiar.org/Knowledge/Publications/Detail?pid=2871
Deforestation and changes in land use account for up to 20 percent of all greenhouse gas emissions. The idea of “rewarding” governments, companies, forest owners and users in the south for keeping and maintaining their forests would seem a logical step for any post-Kyoto agreement. Current discussions now focus on REDD+, a strategy that considers forest management and different approaches to enhance forest carbon stocks, which it is hoped might prove effective. But many details remain. Who owns the forests? And what institutions are required in order to make this work? This book aims at helping those interested in making such a system operational: looking at the “institutional architecture” which is needed and at policies and how these, via incentives or regulations, could help increase forest conservation.

Entering the organic market: A practical guide for farmers’ organisations

Freek Jan Koekoek, Marg Leijdens and Gerbert Rieks, 2010. Agrodok 48, Agromisa, 88 pages.
Downloadable at: www.agromisa.org/displayblob.php?ForeignKey=460&Id=303
In spite of the world’s economic crisis, global demand for organic products has continued to grow during the last two years. More and more organic farmers are benefiting from selling their products in international markets and many more are expected to join them. This is an easy-to-read and complete guide for those interested in exporting organic products. It draws on the experience of the EPOPA programme, which ran from 1997 to 2008 and benefited more than one hundred thousand farmers from Uganda and Tanzania. The booklet first gives an overview of the organic market and the importance of the certification process. This is followed by describing the steps involved in making a business strategy: a feasibility study, risk analysis, marketing, planning and evaluations.

Fair miles: Recharting the food miles map

Kelly Rae Chi, James MacGregor and Richard King, 2010. Big ideas in development series, IIED, 44 pages.
Downloadable at: www.iied.org/pubs/pdfs/15516IIED.pdf
In this short, concise and beautifully presented booklet, IIED and Oxfam GB look at “food miles”, a much discussed concept in recent years. The constant increase in food trade between developed and developing countries is often seen as an important source of greenhouse gases and as contributing to climate change. The authors dispel this perception somewhat, showing that transportation is only responsible for 10 percent of all emissions associated with the UK’s food chains. It also argues against the idea that locally produced foods are necessarily better in terms of global warming, since they often require more energy to grow. Equally, the term “local” can be misleading, if most inputs come from developing countries.

Trade, climate change and sustainable development: Key issues for small states, least developed countries and vulnerable economies

Moustapha Kamal Gueye et al. (eds.), 2009. Commonwealth Secretariat, 180 pages.
Some argue that increasing international trade can help to mitigate the effects of climate change. But is this true for the least developed countries? Or are these countries facing additional difficulties as a result of actions being taken against climate change? Although this book was finished before the Copenhagen conference at the end of last year, it addresses these questions in detail, looking at the opportunities and the main challenges which these countries face (and at the difficulty with issues such as “food miles”, which could easily become a hidden trade barrier). The different chapters cover issues such as energy efficiency and competitiveness in the global markets, showing the importance of resilience and diversification in all economic sectors – including agriculture.

More on agricultural and rural finance

A lot of interesting information on this issue is found online. Among these, readers can visit the sites of Microfinance Focus, the Rural Finance Network, the Microfinance Gateway, the Finance Alliance for Sustainable Trade, and of the Rural Finance Learning Centre. These websites include articles, documents, general information and also news items. The list of documents which can be downloaded includes “The missing middle in agricultural finance” (Alan Doran, Ntongi McFadyen, and Robert Vogel, Oxfam, 2009).

This presents a thorough analysis of the needs of small- and mediumsized enterprises, and of the challenges in supporting them. Although a few years old, two IFAD publications are also very relevant: “Managing risks and designing products for agricultural microfinance” and “Emerging lessons in agricultural microfinance”. A very complete (and recent) publication is “Expanding the frontier in rural microfinance”, edited by Maria Pagura (Practical Action and FAO). Drawing on 12 case studies, it gives a very complete overview, showing the many different strategies followed in the field. More specific documents include “Value chain finance” (KIT, 2010), “Assessing the role of microfinance in fostering adaptation to climate change” (Agrawala Shardul and Maëlis Carraro, OECD, 2010), and “Gender and rural microfinance” (Linda Mayoux and Maria Hartl, 2009). Finally, readers may also be interested in visiting the sites of microfinance organisations like Oikocredit, Triodos or the Grameen Bank.

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A lot of valuable training materials about rural finance are already out there, so instead of re-inventing the wheel, we bring together resources from around the world into one site,” explains Ake Olofsson, Rural Finance Officer at the FAO. Olofsson is also one of the editors of the Rural Finance Learning Centre (RFLC) website.

Going beyond simply offering publications, the RFLC gives people direct access to practical tools to learn and teach about finance issues. It includes downloadable modules to help trainers give short courses, as well as self-study and online interactive lessons on topics relating to microfinance, agricultural finance, savings and enterprise development.

Videos with examples from developing countries help bring the issues alive. Other tools include handouts and presentations, as well as ideas for group games to learn about accounting or setting up a business in a rural setting. According to Olofsson, “it is not easy to find good material and we rely on outside people, including subscribers to the site, to suggest resources. Where needed, we improve their format and fill in the gaps with new material.”

The site is a learning resource and can always benefit from more feedback and discussion, something that Olofsson welcomes. While the RFLC is set up to encourage the provision of better financial services it does

Rural Finance Learning Centre

The Rural Finance Learning Centre can be found at www.ruralfinance.org, or contacted via e-mail: rflc@fao.org. The RFLC is a joint initiative of the Food and Agriculture Organization of the United Nations (FAO), the International Fund for Agricultural Development (IFAD), the World Bank and the German Technical Cooperation (GTZ).

give a balanced view, providing access to publications and lessons that look critically at the limits of microfinance in meeting the needs of the poorest, and other specific social concerns. The site is user friendly and most of its resources are free and easily downloadable. Many materials are available in English, Spanish and French.

For those with weaker Internet connections, most pages are also viewable in a low bandwidth format. However, some resources, such as the online lessons need a fast connection to work properly. Also, the videos can be viewed with one kind of media player only.

Some of these problems will be solved in the near future as the site is about to be updated. And for those without internet access “we have been thinking of making a CD-ROM available”, says Ake Olofsson.

Text: Mundie Salm

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Farming Matters | 26.2 | June 2010

CENDEP was set up in 1999 as a farmer group, with the mission of assisting and training farmers in the sustainable production and marketing of Non Timber Forest Products.

We work in the Northwest and Southwest regions of Cameroon, focusing partly, but not exclusively, on the domestication of eru (Gnetum spp.), a forest vegetable with high economic and social importance, and on developing a value chain for it.

A short documentation process

A couple of years ago we received the manual “Learning from experience” from ileia, together with LEISA Magazine (as Farming Matters was then called). Interested in sharing the lessons we had learned from our work, we used this booklet to develop a set of guidelines for a documentation process and began documenting our work in September 2009. We organised meetings with all our stakeholders and collected a lot of information.

We used different indicators for our analysis, such as access to financial resources or the interest of participants, and also carried out a SWOT analysis. Some aspects of the process were not easy, but we were soon able to draft a first document in which we identified some of the factors that have contributed to the success of our project, and also the main difficulties we experienced. We feel it reflects what we have learned about our work.

This was our first attempt in documenting our project experiences. We started it because we wanted to make our work visible. As part of our “organisational scaling up” (as mentioned in the first issue of Farming Matters) we wanted to increase the capacity of our staff in documentation (learning by doing) without having to interrupt our activities in the field. We were also hoping to get advice from an organisation like ileia. Finally we thought this could arouse interest from donors to support the further implementation of our project. So we are now using the results of this work as a fundraising tool.

We strongly believe that it is useless to document an experience if the final product will stay on the shelves or in computers in an office. We therefore plan to share the final result with the organisations that we collaborate with in the field, as well as with other individuals and institutions who show interest in our work. This is an important lobbying tool for us and we are planning to make good use of it.

Wirsiy Eric Fondzenyuy

Wirsiy Eric Fondzenyuy (wirsiyef@yahoo.com), Monitoring and Evaluation Officer, CENDEP. P.O. Box 742, Limbe, Cameroon. More information can be found on CENDEP’s website and also on the documentation section of our site, where we have included two full PDF articles showing the work of CENDEP and the process they have gone through.

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Farming Matters | 26.2 | June 2010

Malawi: Better decision-making processes

Re-investment in the farm is a critical issue for the sustainability of any farming enterprise and for the enhancement of rural livelihoods. Farmers usually keep seeds of grains, legumes and cereals from their harvest for planting, or they sell their labour during the planting season in order to get paid with seeds which they can then plant. These efforts complement the formal or informal credit options which are sometimes available. But in villages like Katundulu, in Malawi, only nine percent of all households have access to credit. In contrast, many more receive coupons for subsidised fertilizer from the government. In some cases these credits are sold and the money then used for other needs.

The Enabling Rural Innovation (ERI) programme, supported by the International Center for Tropical Agriculture, aims to help farmers make better decisions, and thus make better use of the limited credit available to them. Their approach is to work with local organisations, helping them access and generate market information which farmers can then use. Better decision making patterns lead to better businesses. This, in turn, can lead to more credit options.

Want to know more?
Write to Mariam A.T.J. Mapila, at the Department of Agricultural Economics, Extension and Rural Development, University of Pretoria, South Africa.
E-mail: maleytata@yahoo.com

Nigeria: More options through a strong organisation

How to help farmers get credit without actually providing it? The PROSAB project (Promoting Sustainable Agriculture in Borno State) in Nigeria, implemented by the International Institute of Tropical Agriculture, focuses on the important role which Community Based Organisations (CBOs) can play. CBOs are formal, legal entities, rooted or based in a specific community. This project has trained farmers in 30 communities in Borno State on how to form and register a CBO, and assisted them in the process of doing so.

Over 200 CBOs were formed during the project’s six years life span. Many succeeded in securing loans from NACRDB, the Nigerian Agricultural Cooperative and Rural Development Bank. Others developed a system to provide financial resources using the savings of their members (following the examples of savings and credit co-operatives from many countries). Members of these organisations were also encouraged to work together – for example, by jointly buying inputs, or by making these available to others, with interest. Nowadays, farmers in Borno not only show a strong savings culture (even providing part of their harvests in order to secure future credits); their organisations also give them a stronger bargaining power.

Want to know more?
Write to Kolawole Ogundari, formerly at the PROSAB project, IITA, Ibadan, Nigeria.
E-mail: kolawole.ogundari@agr.uni-goettingen.de

England: Diversification into tourism

Beechenhill Farm is a 37 ha organic dairy farm in the Peak District National Park, in the centre of England. Together with her family, Sue Prince has lived and worked there for 25 years. Although they have access to banks and mortgage corporations, their main source of finance comes from their own tourism business.

At first they used a small bank loan to build two bed-andbreakfast rooms. Having repaid the loan, they used the profit from the B&B to convert an old stable into a romantic cottage for two. Later they converted the old milking barn into a cottage with wheelchair access. As a result, many tourists are able to stay at the farm, and enjoy the peace and the excellent local food. The income from this small business supports the farm and helps Sue and her family to continually improve the quality of the accommodation and services they provide. “Once we started the tourism business, alongside the farm, we didn’t need to borrow any more money – except to finance large developments like building a house for our daughter and son-in-law. And we haven’t had to change anything here to please the tourists: they come to stay because they want to see how we live and work.”

More information?
Please write to Sue Prince by sending an e-mail to the editors, Farming Matters, at ileia@ileia.org.

Brazil: Broad-based revolving funds

The north-eastern region of Brazil has an arid environment. For many decades, the authorities’ response to the difficulties faced by farmers was to build large scale infrastructure, such as dams and reservoirs, which were seen as promoting agriculture. But this hardly benefited small-scale farmers.

Since 1987, CAATINGA, a local NGO, has been promoting the dissemination and replication of locally specific solutions – in particular those which make the best of the little available water. As part of their approach they established a revolving fund. Farmers who receive a loan pay it back either in money or in kind, and this is then “transferred” to another family.

After several years, CAATINGA no longer works directly with families, but with local farmers’ associations. This change has helped them become more efficient and has led to greater involvement of the population. The associations determine the interest rate and assess grant applications. Working through farmer associations has helped CAATINGA reach a much broader audience. At the moment, they are directly working with 39 associations in the state of Pernambuco, and the fund that serves these associations now totals more than 700,000 reais (or US$ 400,000).

Want to know more?
Please write to Burguivol Alves de Souza (burguivol@caatinga.org.br) or to Giovanne Henrique Satiro Xenofonte (giovanne@caatinga.org.br), at CAATINGA

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