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ISSUES OF RURAL POVERTY AND THE FATE OF SMALLHOLDER AGRICULTUREISS-SID-MOFA, THE Hague 23 June, 2011

KEVIN CLEAVER

ASSOCIATE VICE PRESIDENT

IFAD

June 23, 2011

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The need to expand investment in agriculture, including through investment with smallholders has been studied intensively in past 3 years

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The case for expanded Donor and government investment in developing country agriculture

• Rising food prices• About 1 billion people hungry (FAO)• Need to double food production by 2050 (FAO,

IFPRI)• Environmental issues and climate change• Agriculture and rural development effective for

poverty and hunger reduction (World Bank, World Development Report and IFPRI)

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Rising food prices primarily reflect global imbalance between rapidly increasing demand for food and slower growth in supplies

Source: Food prices, “The consequences of costly nosh”, The Economist, 22 January 2011

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Why are food prices rising; and why greater volatility?

• Due to rapidly rising global and local demand for food, at about 2% per annum and rising (Chatham House)– In turn caused by income growth, population growth,

dietary changes, bio-fuels

• Combined with a slowing of the increase in supply

Agricultural productivity growth highest in high-incomecountries; almost stagnation in sub-Saharan Africa

Cereal Yield (kg per hectare)

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1000

2000

3000

4000

5000

6000

1980 1990 2008

High income countries

Low income countries

Sub-Saharan Africancountries

Source: WDI dataset, 2010

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Agricultural productivity improvements have already been below population growth

Least Developed Countries: Agricultural productivity and population

0

100

200

300

400

500

600

700

800

900

Population, million

Agriculture value added perworker (constant 2000 US$)

Cereal yield ( 10 kg perhectare)

Source: WDI dataset 2010

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Why is agriculture production growth in developing countries increasingly problematic?

• Low investments in agricultural research: 0.42% of agricultural output in Asia, 0.65% in Africa, 1.1% in Latin America

- Compared to over 5% in OECD countries

• Lack of agriculture investment and consequent reduction in productivity growth

- Cereal yields increasing at 1-2% p.a. now, compared to 3-6% p.a. in the 1960s-1980s

• Transport, marketing and farm input price increases as oil prices increase

• Land degradation

• Substitution of bio-fuels for food (for maize)

• Government policy deficiencies, panic in food markets

• Climate change may be exacerbating the slow food production response

Agriculture growth has high economic pay-off and high poverty reduction pay-off

• A 1% p.a. increase in agriculture growth, on average leads to a 2.7% increase in income of the lowest 3 income deciles in developing countries (World Bank World Development Report, 2007)

• Agriculture is 2.5 to 3 times more effective in increasing income of the poor than is non-agriculture investment (World Development Report, 2007)

• “Agriculture growth, as opposed to growth in general, is typically found to be the primary source of poverty reduction (IFPRI, 2007)

• The contrary is also true; a decline in agriculture growth throws many poor people into poverty, and explains some of the increase in developing country poverty and hunger in the past two years.

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Investment in developing country farming will:

• Help meet global and local food needs• Contribute to environmental management and

adaptation to climate change• Reduce rural poverty (to meet MDG-1 and half

global hunger by 2015)

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What does investment in developing country farming mean?

Improving basic foods and staples

Including cash crops: exports are growing

Integrating livestock to match rising demand

Developing private agroprocessing and marketing

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Peru: Management of Natural Resources in the Southern Highlands Project – agriculture services

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Guinea: Fouta Djallon Agricultural Rehabilitation Project – farmer training

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India: Tamil Nadu Women’s Development Project – women’s groups

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Senegal: Village Management and Development Project – women’s training

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Niger: Second Maradi Rural Development Project – irrigation

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Mauritania: Agricultural Rehabilitation Programme II – reforestation

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Ethiopia: Rehabilitation Programme for Drought Affected Areas

Issue #1 - How to make agriculture projects in fragile states more effective

• Focus more on institution building in fragile states, and less on targeting

• Introduce longer term approach, with 10-15 year partnerships reflected in 2 to 3 consecutive projects

• Don’t shy away from involvement in fragile states with poor governments– Work through civil society, NGOs, private sector

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Issue #2 – Governments and donors need to modernize their instruments to deal with the private sector

VALUE CHAIN APPROACH

Research

Extension service

Input industry

ProducersFood

process industry

Food retail

industryConsumers

The market and the private sector are increasingly driving agriculture.

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Supporting markets for smallholders

●Inputs

Storage●

●Processing

Marketing●

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Issue # 3: Rural environmental issues and climate change have larger impact on small farmers than previously thought

• Deforestation, groundwater depletion, salinization of irrigation areas, destruction of rural biodiversity, soil loss (see UNEP Atlas of Africa)

• Agriculture both a cause and victim of environment problems

- 5 to 10 million hectares of agriculture land lost annually to severe land and water degradation (WDR 2008)

- Agriculture uses 85% of fresh water withdrawals in developing countries - water getting scarcer

• Agriculture contributes 13% of green house gases

• Rural environment problems to worsen due to climate change (IPCC)

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SOLUTIONS: Countries to better incorporate adaptation to climate change and environmental concerns in investments and policies

• Drought resistant cultivars• Crop diversification• Alternative tillage and erosion control• Research for environmental services• Weather insurance

• Drought contingency and early warning systems• Water management, including flood response

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Issue # 4 Overcoming special constraints facing rural women

• Rural women often have less access to assets than do men– Educational– Land– Finance– Technical Advice

• Gender and age disaggregated project componentsl

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Issue #5: Obtaining impact on a larger scale is urgent: Most donor projects impact limited number of people

• About 1 billion hungry people in the world, relatively stable since the 1990s

• 2 billion people live on less than $2 per day• IFAD’s ongoing projects bringing about 36 million out of

poverty• Donors and governments need to help scale up proven

solutions to impact more people• Question: how to obtain significantly broader impact on

more people without a large expansion of donor resources?

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Scaling up for broader impact is the biggest challenge for governments and donors

• Planning for operation and impact at scale to begin in Government Agriculture plans and Strategies

• Each project design to plan for operating at scale

• Deepen country and local leadership in strategy, project design and execution

• Donor-financed projects to use local systems; but build capacity for self management

• Operating at scale requires institutional development at national and local government, farmer organization and civil society

• Impact at scale requires enabling government policy and public expenditure program, and measurement of impact

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Innovative tools can break specific bottlenecks along the value chain; need to be scaled up

Water user associations

Farmers manage irrigation systems

BT cotton, India and China

Insect-protected seed now planted on majority of cotton hectares, significantly boosting both farmer profitability and overall production

Zero-tillage soy cultivation, Argentina

Soil-conserving and emission-reducing process championed by researchers and farmers that cultivates soy in narrow trenches rather than tilled soil and retains biomatter on field

Pradan, India Technical livelihood training (farm and off-farm) and socio-behavioral skill-building with rural womens’ organizations in poorest regions

Rentable solar energy, Brazil

Home electricity systems leased monthly by Sistemas de Tecnologia Adequada Agroeletro to rural households off the electricity grid, drastically increasing rural incomes and reducing fossil fuel use

“Biogesters”, China Farm-based units which convert manure into biogas and provide low-cost energy to rural households, piloted with Nestle suppliers

Mobile banking, Kenya

Safaricom service allows mobile-phone transfer of currency credits, facilitating rural liquidity

Micro-credit revolution

Saving and loans for small-scale farming and enterprises throughout the developing world

Effective interventions often build on:

• Links with research institutions

• Community organizations

• Risk-sharing tools

• Telecom

• Targeted regulations

• Local capacity building

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Innovative tools … (cont’d)

Water harvesting Concentrating rainwater through micro collectors to grow crops in arid areas

Sustainable beekeeping, Kenya

Advanced hives sold to farmers on a lease-to-own basis along with extension and fair/immediate payment for harvest from Honey Care Africa, mitigating producer risk and improving quality

E-choupals, India Private internet kiosks set up by ITC in villages to transmit relevant data on markets, legislation, weather, and prices to local producers

Homestead gardens, Bangladesh

Diversified gardens and nutrition training provided by Hellen Keller International to female-headed households in order to address malnutrition, micronutrient deficiencies

Door-to-door retail, India

Hindustan Level Ltd outsources rural distribution to female entrepreneurs who receive products by mail and sell them throughout village

Flour fortification, Egypt

Addition of iron and folic acid to wheat flour to address malnutrition among children and the poor, led by GAIN, WFP, and the government

Effective interventions often build on:

• Links with research institutions

• Community organizations

• Risk-sharing tools

• Telecom

• Targeted regulations

• Local capacity building

Source: Realizing a new vision for agriculture: A roadmap for stakeholders, World Economic Forum, 2010, and IFAD.

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Conclusions

• Smallholder agriculture in poor countries and poor regions of countries to become central focus, including strong focus on farmers groups

• Expanding to encompass the landless, who can be employed on-farm or in non-farm rural enterprises

• Treat farmers and small rural enterprises as business development, not as objects of safety net or poverty alleviation; incorporating value chain approaches

• As a corollary, private sector development in rural areas• And more exploitation of rural-urban linkages• More focus to overcoming special constraints facing rural women • Aggressive conservation of natural resources and adaptation to climate

change• More work on land issues, and land rights of indigenous people• Policy advice and scaling up success to national level• Always working in partnerships with other institutions• International advocacy and participation in international debate and analysis

of agriculture issues• Facilitate South-South cooperation• Greater differentiation in donor supported projects and programs between

country types (fragile states, MICs, and other low income borrowers)

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How much money should be put through donors for agriculture and rural development?

Global estimates of investment needs for developing country agriculture to meet MDG-1

US$ billion

per annum

World Bank (2007)

IFPRI

FAO

L’Aquila

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16

83

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Conclusions:•Total requirements exceed ODA available for

agriculture and rural development

ODA for agriculture and rural development

US$ billion

2002

2007

2010

4

6

8

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Business model has worked for project quality: Key project performance indicators for IFAD’s development results

IEE: Independent External Evaluation of IFAD, 2005ARRI: Annual Report on Results and Impact (prepared by the Independent Office of Evaluation)PCR: Project Completion ReportRMF – Results Measurement Framework

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1020

3040

50

6070

8090

100

IEE

ARRI 2010

PCRs 2009/2010

RMF target 2012

IEE 100 67 45 55 40 40

ARRI 2010 97 77 57 86 95 65

PCRs 2009/2010 98 86 66 84 88 79 76

RMF target 2012 90 90 75 90 80 75 75

Relevance Eff ectiveness Effi ciencyRural poverty

impactGender

Innovation,

learning/scaling Sustainability

% of projects found marginally satisfaction or better on the indicators