As the needs to both conserve nature and feed the world grow increasingly urgent, innovative agricultural finance has become a hot topic. How can we use finance to turn agriculture from a source of environmental harm and social inequalities into a driver of conservation and social inclusiveness? And how do we ensure that financial incentives support the livelihoods of the poorest people in rural communities? These issues were front and center on November 16, 2021, when CoSAI led the second in a series of regional dialogues on innovative financial mechanisms for agriculture. The dialogue was co-organized with the International Union for the Conservation of Nature’s (IUCN) Asia Regional Office and the Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA).
The presentation of emerging evidence from CoSAI, together with a wide-ranging panel discussion, allowed the regional dialogue to highlight the urgent need for more innovation in equitable financial instruments to support environmental objectives in Asia. Importantly, meeting participants also shared ways in which the design of these instruments can be changed to improve their replicability and scalability to better support sustainable and equitable development. Acknowledging the importance of national contexts in the development and implementation of financial instruments, the panelists shared real-life experiences of these instruments across Asia.
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The recommendations that came out of the panel discussion included:
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Regulatory approaches and enabling environment
Dr Gamini Samarasinghe, Additional Secretary (Agriculture Technology) at Sri Lanka’s Ministry of Agriculture, talked about the role of the state in incentivizing farmers to produce sustainably. He described how Sri Lanka’s Department of Agriculture locally funds projects while monitoring internationally-funded projects to ensure farmers benefit. Dr Samarasinghe also raised two major issues in the Sri Lankan context. First, establishing the marketing system or marketing value chain is ideal for a successful project. Second, an information management system of lands, production, subsidies and value chain needs to be strengthened.
Design and implementation
Dialogue participants then heard from Ms Irish Baguilat, Coordinator for the UN Decade of Family Farming and Women Farmers Agenda for the Asian Farmers’ Association for Sustainable Development (AFA). She shared farmer perspectives on the need for positive incentives as well as some of the issues that can arise in practice. Ms Baguilat highlighted how farmers’ organizations can work with their members to innovate new green financial instruments. She cited the AFA, which has already been working with member organizations and agricultural cooperatives in a joint project with FAO in Bangladesh, a partnership that has allowed the project to reach a larger scale.
Dr Prasun Kumar Das, Secretary General for the Asia-Pacific Rural and Agricultural Credit Association (APRACA), shared innovative financial instruments from APRACA’s experience as one of the largest agricultural development banks in Asia. He highlighted some of the main challenges facing farmers, including insufficient income to prove their credit worthiness, the fear of getting indebted, a lack of insurance coverage or guarantee, the volatility of the borrowers’ business, and a lack of technical knowledge. To address these challenges, Dr Das suggested that financial instruments should address specific environmental, social and governance contexts, and use both offline and online platforms to widen their reach. Service providers, meanwhile, can adopt a blended structure, combining credit insurance guarantees and technical assistance.
Lessons from the private sector
Ms Erin Sweeney, Lead for Sustainable Investment and Inclusion for Grow Asia, drew from her organisation’s experiences as one of the lead implementers of the ASEAN Guidelines for Promoting Responsible Investment in Food, Agriculture and Forestry. She stressed the need for greater collaboration across the value chains, promoting known solutions into broader forums and using case studies to move from piloting to actual scaling. Ms Sweeney also highlighted the barriers preventing small-scale farmers from adopting voluntary certifications. She argued that policies to assist capacity building and technical support can bridge the gap between the farmers’ needs and the requirements of voluntary sustainability standards, as well as allow farmers to perceive a higher price premium.
Mr Eelko Bronkhorst, Managing Director for Financial Access, referred to the disconnect between the investment opportunities and the requirements for investment in sustainable agriculture. His observations on the difference in the available capital for the Global South versus the Global North – and the drivers of these differences – were in line with the findings from CoSAI’s Innovation Investment Study. Mr Bronkhorst stressed the importance of bringing together different models and pilots from across the globe to see how they can be scaled and replicated.
Next steps
CoSAI’s next regional dialogue will cover Africa, and will be hosted with the support of IUCN Regional offices in West and Central Africa (PACO) and in East and South Africa (ESARO).
CoSAI’s latest study, ’Paying for Nature and Society: Can economic incentives designed for environmental conservation support the sustainable intensification of agriculture?’ will be published at the end of November.