This, by the way, is a good year: predictable weather, high yields and nobody getting sick.
This cycle has forced farmers -- as well as laborers and traders who also rely on agriculture -- to find increasingly innovative ways to manage their cash flows and diminish risk. Many derive a portion of their incomes off-farm, taking informal odd jobs or migrating to cities for work. However, returns on these other activities are often low and don’t offer the sort of steady income diversification needed to mitigate the risk of shocks to a farmer’s livelihood.
Financial picks and shovels
Often in agriculture, poverty is both a symptom and a cause. Rural families determine their strategies for survival
in a context of failed markets. High transaction costs (water, transportation, and inputs), insufficient and unequal access to information, imperfect competition and government failure to provide public infrastructure combine to create insurmountable barriers to development.
In short, small farmers start poor and, without financial support, often remain so.
Support has been in short supply. Existing financial instruments in most countries -- industrialized and developing alike -- are ill-suited to addressing farmers’ low, irregular incomes. And governments tend to invest in collective or large-scale farms over smallholders. Still, between 60 and 99% of the population
that lives in rural areas depend on agriculture for a living. Farming persists because, for some, it remains their best option.
At Kiva, we believe that supporting small shareholder farmers is the key to unlocking a second green revolution in the developing world. After all, it was China’s shift from promoting collective farming to full-scale financial support for smallholder farms that ignited its own rapid development -- not to mention the significant improvements in productivity that allowed for the Industrial Revolution
in North America and Europe.
Kiva works with organizations like One Acre Fund
and Soro Yiriwaso Mali
to provide financial tools for farmers. These groups have developed innovative services
to help smooth the peaks and valleys of rural income earners.
One Acre Fund packages these services as a complete “market bundle” for smallholder farmers. It includes inputs (at lower, off-season prices), training, finance and market facilitation. It also provides deep rural distribution, reaching farmers in some of the most remote villages and providing tools and training that allow them to take greater risks and strive for higher productivity.
After all, it’s this calculation between risk and survival that farmers make each day. Consistently getting the answer right means Víctor and others can blaze a pathway out of poverty. Our job is to maximize the likelihood of their success.
Ian Matthews is an intern on Kiva’s strategic initiatives team, looking for new partners and loan products to extend opportunities and access to even more people around the world. Ian has an MSc in
Global Politics from the London School of Economics and Political Science, and has previously done field work in Honduras. Send him your feedback on this blog series at firstname.lastname@example.org
This is part of a larger series on Kiva’s strategic initiatives and innovative loan products, which are designed to expand opportunities for more borrowers. Kiva is excited to partner with companies and organizations that provide innovative options for farmers.
Photos courtesy of Peter Nijenhuis, Bread for the World, Franz88, IITA Media Library, CIAT