Home Агро Scaling Up Access to Finance for Agricultural SMEs Policy Review and Recommendations

Scaling Up Access to Finance for Agricultural SMEs Policy Review and Recommendations

The objective of the G-20 Work Stream on Agricultural Finance is to identify appropriate approaches to assess or reduce the main risks and costs that inhibit access to financial services in the agriculture sector in developing countries. Strengthening the productivity and capacities of agricultural small and medium enterprises (SMEs) and farmers through enhanced access to finance is at the core of this subgroup’s focus.

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Around the world, agriculture is and will continue to be a major building block in the achievement of the Millennium Development Goals (MDGs). Recent statistics show that agricultural production needs to increase by 70 percent by 2050 in order to feed the world, while demographic growth, climate change, and urbanization put pressure on available cultivable land. Three-quarters of the world’s poor live in rural areas, and more than 80 percent of them either directly or indirectly depend on agriculture for their livelihoods.

Hence, in low-income countries, the agriculture sector is vital for economic growth, as it provides about 60 percent of total employment and 20 percent of GDP. However, agriculture in developing countries is still characterized by low productivity; without a renewed effort to accelerate growth in the agriculture sector, few countries will be able to reach the MDGs, especially the goal of halving poverty and hunger by 2015. Increased agricultural productivity can enhance food security, poverty reduction, job creation, and economic growth.

Therefore, this brings new attention to the issue of agricultural finance. After more than a decade of low recognition, international donors, politicians, and specifically the G-20 are putting a renewed focus on this topic. Within the financial system’s development expert community, the debate on effective solutions to sustainably support agricultural development has been renewed. The issue of agricultural finance is frequently on top of the international development agenda. Now, with the triple shocks of the recent years — food, fuel, and finance — the urgency of food security has increased greatly and created political pressure to act immediately. There is now broad support for more and better investments to increase agricultural production, improve the marketing of commodities, and combat poverty.