Transforming agriculture: the challenge of financing (Episode 1)
The issue of financing agricultural activities and food supply chains has been central to the FARM Foundation since its inception. Its 2024 annual international conference was dedicated to this topic, bringing together more than 300 participants in Paris and 600 online, as well as some 20 experts, including representatives of international organizations, academics, and decision-makers from the public and private sectors. FARM published a series of three articles summarizing these discussions.
Around the world, many farmers, women farmers, and entrepreneurs in the agricultural and food sectors still lack access to the financing or banking services they need to operate. In sub-Saharan Africa, Asia, and Latin America, nearly 70 percent of the sector's financing needs remain unmet, according to the United Nations International Fund for Agricultural Development (IFAD). Faced with the challenges posed by climate change, rising demand, and the fight against poverty, such a lack of access to financial resources for production raises questions about the ability of these stakeholders to adopt sustainable practices that balance environmental performance, productivity, and fair remuneration. In this context, private and public investment, as well as the definition and implementation of coherent public policies for the transformation of agriculture, are essential.
By combining academic expertise and professional practices, participants at the FARM Foundation's international conference debated whether agricultural financing systems were adapted to this transformation ambition in multiple contexts and explored current initiatives or actions to achieve it. As highlighted by Marc Fesneau, Minister of Agriculture and Food Sovereignty during the introduction of the day, "depending on how they are granted, financing can constitute a major lever to support and accelerate these agricultural transitions." From bank financing to public schemes, including the involvement of private actors in the sectors, How can we develop the supply and access to financing that engages agriculture in transformation trajectories and under what conditions can public and private financing aligned with the Sustainable Development Goals (SDGs) be deployed?
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Episode 1: What “transformations” of agriculture are we talking about?
In a publication summarizing some of the discussions at the 2023 edition of its international conference, FARM revisited the debates relating to the impacts of the Green Revolution model. While the latter has enabled a significant intensification of agricultural yields through the use of the technological package (improved seeds, irrigation, mechanization, fertilizers, and plant protection products), it has also contributed significantly to soil erosion and depletion, the spread of pollution in the environment, and the decline of biodiversity. The Green Revolution model has therefore shown its limitations, and it is now necessary to imagine more complex agricultural models. These must simultaneously generate adaptation to climate change, improve the carbon footprint of the agri-food system while limiting the use of pesticides and synthetic fertilizers—or even developing alternatives—while providing decent incomes for producers and food and nutritional security for all.
The equation is therefore very complex and these necessary transformations must also take into account the social dynamics around income, transmission and the arduousness of jobs linked to agriculture, as illustrated by the social movements of the beginning of 2024 in Europe.[1]These mutations and reflections also occur in a context of research into food sovereignty and not just food security, which is not without consequences on the way of financing agriculture and value chains.
During the conference, Bernard Ader, farmer and President of the National Council for Food Resilience (CNRA) called for a reflective pause to "launch a beta version of new software" in order to abandon methods he considers outdated and to embark on a new phase of agricultural development. He also insisted on the fact that farmers are in favor of these changes but that they need public and private support to achieve them and anticipate the changes that they could not initiate alone. This transformation at the level of local practices also requires a holistic approach to address the environmental, social and economic challenges that arise, both in France and around the world. Indeed, as highlighted by Godfrey Nzamujo founder and director of the farms Songhai, a training, production, research and entrepreneurial development center based in Benin, any viable transformation will have to achieve a series of objectives with gains for both producers, processors and upstream and downstream actors, in terms of income, working time, stability and risk reduction but also for society and ecosystems.
In this context, an agroecological transformation of agriculture and food systems, adapted to the contexts, offers multiple advantages.[2]. Rachel Bezner Kerr, professor at Cornell University in the United States, recalled that agroecological transformation is an integrated approach encompassing social, economic and political dimensions, and offering much more than a simple range of technical practices. Agroecology promotes agricultural production systems that value biological diversity and natural processes. It constitutes a set of agricultural practices which maximize ecosystem services and interactions, while enhancing the economic, social and cultural potential of a territory.
However, this transformation is not without challenges. Its adoption requires new agricultural policies, adequate access to training, and appropriate financing mechanisms. As highlighted Pascal Lheureux, farmer and President of the FARM Foundation, The requirement is shared by all economic actors, it is about producing more efficiently while preserving the environment. However, he warned against inadequate financing conditions that compromise productivity and sustainability ambitions. This was also the meaning of the remarks of Godfrey Nzamujo who insisted on the valorization of natural capital and on the diversification of agricultural activities to increase the resilience of agricultural systems. He promotes, like Bernard Ader, a change of software which integrates both the agronomic dimension of farms and the financing models of the sectors. He advocates the transition from a logic of " stockholder to stakeholder » (from shareholder to stakeholder), with each individual becoming a full-fledged player in the transformation of the system, enabling the pooling of resources to mitigate risks. This is a real revolution for agriculture but also for the institutions that finance it, particularly in their management of short, medium and long-term risks, even though the sector remains largely underfunded today.
[1] Le Monde.fr. 2024, February 2. Farmers' anger: what to remember from the end of the mobilization. https://www.lemonde.fr/economie/live/2024/02/02/en-direct-la-colere-agricole-se-transforme-selon-le-president-de-la-fnsea_6213513_3234.html ;
[2] See here the debates on agroecological intensification, at the FARM Foundation International Conference 2023, Agroecological Intensification: Oxymoron or Reconciliation? – FARM Foundation (fondation-farm.org)
