SPECIAL REPORT: Inclusive Finance in Africa Amid the Current Food and Climate Crises, in Anticipation of SAM 2023 in West Africa

In anticipation of SAM 2023 (Semaine Africaine de la Microfinance 2023), its organisers convened a panel discussion on October 19 as part of Accion’s Financial Inclusion Week. The panel illustrates the commitment of SAM’s organisers to nurture ongoing dialogue on the issues faced by the inclusive finance sector. The objective was to share and question the strategies being used to address issues faced by the agricultural sector, which remains one of the least financed due to investors’ perception of it as high-risk.

Climate change coupled with social and political turmoil is negatively impacting agricultural value chains in particular and global food security in general. The conflict between Ukraine and Russia is lowering food security and agricultural production in many developing countries, as the warring nations are two of the largest exporters of key agricultural commodities such as wheat, corn, sunflower oil and fertiliser. The Horn of Africa could suffer the worst effects of the war because of its ongoing food crisis following three years of severe drought, the COVID-19 pandemic and protracted local conflicts. Market volatility and rises in energy costs, input costs, interest rates and perceived risk are expected to lead to higher costs of borrowing, credit crunches, and unmet working capital and liquidity needs.

Addressing these issues at the Financial Inclusion Week panel were:

– Jacques Afetor, Executive Director of Assilassimé Solidarité, a Togolese MFI supporting small-scale farmers in increasing food security despite the effects of climate change.

– Nadia Ouriemchi, a senior project manager with the Luxembourgish NGO ADA, whose work includes tailoring financial and non-financial solutions for smallholder farmers to facilitate access to value chains, markets and tools to adapt to climate change.

– Emmanuel Vuillod, an investment officer with SIDI, a French investor and active partner of the Smallholder Safety Net Upscaling Programme, which is coordinated by ADA and co?financed by the Swiss, Liechtensteiner and Luxembourgish governments.

– Renée Chao-Beroff, Managing Director of the France-based microfinance network Pamiga Finance.

During the forum, the panelists discussed a wide range of strategies for improving the livelihoods of various underserved (and overlapping) groups, such as smallholder farmers, women and young people. For example, some farmers need encouragement to grow their operations. This might take the form of business training or funding to mechanize their operations. For a cattle rancher, a collateral-free loan can be used to purchase feed and engage a veterinarian.

In addition to financial services, non-financial services can help farmers reduce climate risks by supporting them in preventing erosion and adopting ecologically gentle fertilizers and pesticides. Farmers also can adapt to climate change by switching which crops they grow or diversifying their activities. A maize farmer might start raising cattle. Another farmer might switch to growing farro, a grain that is adapted to drier growing conditions. In Burkina Faso, SIDI worked with farmers to switch to growing organic potatoes, encouraging them with subsidies that were phased out as the crop was proven successful in the region.

Another way to help farmers is to support producer organizations, which often need to improve their financial management and governance. Boosting access to international markets also can increase incomes, but it requires technical assistance for producers to improve their food safety standards, for example with lab testing, packaging and better hygiene practices. ADA is offering exporters loans of up to EUR 300,000 to help them increase their sourcing from smallholder farmers. Egypt’s Green Hope, for example, is expanding its efforts to buy organic products from smallholders. ADA is supporting the company by digitizing its training materials to help farmers meet Green Hope’s quality standards.

Online platforms can help farmers scale by making better choices – such as seed selection and the timing of planting and harvest – and commanding better prices after harvest. Other examples of digital services include insurtech solutions that cover cattle in Senegal as well as several youth-led e?commerce firms that are active in the food sector. One challenge of digital services is making sure they are customer-centric and accessible by members of underserved groups. In addition to lacking technology literacy, members of these groups often lack access to land or paperwork to prove land ownership. They also are more likely to need support to mechanize their farms.

Overall, the panelists find that recent crises have done more to exacerbate existing challenges than to create new ones. However, they argue that creating networks and taking holistic, long-term approaches can allow for greater impact. And, even though measuring this impact is expensive, it is worth the cost.

These challenges, models and opportunities are just a few of the many that we invite you to explore during the next SAM, to be held in 2023 in a West African country that will be announced soon! To receive updates on SAM 2023, please subscribe to ADA’s SAM newsletter.

This feature is part of a sponsored series bridging to next year’s SAM 2023, which will take place in West Africa, from SAM 2021, which was held in Rwanda. SAM is organized by ADA and the Microfinance African Institutions Network with the support of the Directorate for Development Cooperation and Humanitarian Affairs of Luxembourg and the government of each respective host country. MicroCapital has been engaged to promote SAM since 2015.

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