1. Microcredit and Crop Agriculture: New
approaches, technologies and other
innovations to address food insecurity among
the poor
Microcredit Summit, November 2011
Vallaloid, Spain
Calvin Miller
Agribusiness and Finance Group Leader
Food and Agriculture Organization of the UN
Rome, Italy

2. Outline
1. The need for action: food insecurity and rural
poverty
2. The new context for agriculture: the challenge
to raise competitiveness among the poorest
3. Business models for inclusive agriculture
4. Microfinance products for agriculture
5. Use of innovations for competitiveness and
efficiency
6. Lessons and recommendations

3. The need for action
The population of developing countries
is expected to remain mostly rural until
2020. Most of the world’s poor are
concentrated in rural areas, with
livelihoods that are strongly linked to
agriculture.
Source: United Nations, 2004
Source: Chen and Ravallion, 2007

4. Food insecurity and rural poverty
Source: http://faostat.fao.org as cited by the World Development Report, 2008.
Note: The size of the bubbles represents millions of undernourished people, being most
severe in Sub-saharan Africa (SSA) and South Asia (SA).
Among the world’s poor, food insecurity continues to
have a significance incidence. Agriculture can play a key
role in making nutritious food available and ensuring an
income to purchase food.

5. The horizon is changing for small farmers;
improved approaches, tools and innovations can
address those challenges for a more secure future.

6. The new context for Agriculture
Note: agro-processed goods represent an expanding market in agriculture worldwide.
Source: http://faostat.fao.org and http://comtrade.org
Expanding high-rent markets in agriculture represent an
enormous opportunity to foster significant poverty
reduction

7. There is a need to build inclusive agricultural
value chains that benefit the poor – not as cheap
laborers, but as agro-entrepreneurs with access to
technologies, markets and capacity development.

8. The challenge is to raise competitiveness among
the poorest
Note: Higher human development is associated with greater agribusiness
development.
Source: Wilkinson and Rocha, 2009

9. Significant poverty reduction will require providing the
poor with tools to compete in expanding their agricultural
businesses. Access to financial services can play an
important role in enabling this process of inclusion.

10. Microfinance and business models for
agriculture
MFIs have comparative advantages to service the agricultural
sector, but also weaknesses.
A comprehensive approach for risk assessment is needed:
• Improvements in cash flow analysis for agriculture
• Terms that fit the conditions of clients given an
assessment of their relations with agents in the value
chain and a strategy to reduce risks (production, price,
market, weather, etc.)
• Diverse products and services that target not only
farmers but other segments of the value chain

11. Using the Value Chain for Financing Agriculture
Financial Service Support
Value Chain Actors
Institutions Services
Banks Exporters / Wholesalers
Technical Training
Non-bank Processors
Financial Institutions
Business Training
Private Investors Local Traders & Processors
& Funds
Specialized
Producer Groups
Cooperatives / Services
Associations
Farmers
Local MFIs / Governmental
Community Orgs Certification/Grades
Input Suppliers
Product Flows
Financial Flows

12. Microfinance products for agriculture
Some prominent financial products for agriculture are:
1. Bill discounting and factoring
2. Forward contracting and futures
3. Micro-leasing
4. Warehouse receipts and micro-warrants
5. Micro insurance
6. Guarantee funds for agriculture

13. Use of innovations for competitiveness and
efficiency
Innovative ICT applications (e.g. the use of mobile phones) can reduce
informational problems and transaction costs to service rural areas.
Number of Subscriptions per 100 people (millions)
80
70
60
50
40 2003
30 2008
20
10
0
Africa Asia Latin America
Mobile phone’s exponential growth in the developing world represents an opportunity
for MFIs to service agriculture.
Source: ITU World Communications as cited by Jensen, 2009

14. Use of innovations for competitiveness
and efficiency
Innovative tailor-made strategies to enhance agricultural
competitiveness require an integral view of agricultural
value chains.
A diverse set of services and products can be
designed for:
• Pre-harvest activities: e.g. input provision,
updated market information, contract
farming, forward contracts, insurance
• Post-harvest activities: e.g. warehouse
receipts linked to loans, local value
addition, improved marketing agreements,
product bulking

15. Use of innovations for competitiveness
and efficiency
Innovations in farmer organizations that improve
managerial skills in order to promote:
• Economies of scale and scope
• Strategic partnerships with suppliers and buyers to
secure sales
• Specialized support services from private or public
partners to comply with market requirements and
facilitate finance
• Lobby for improved regulatory framework that enable
investments in agriculture

16. For MFIs and other financial organizations:
• Diversification of financial products is required to service the
agricultural sector, fitting to the conditions faced by value
chain agents and reducing operation costs
• Partnerships with non-financial organizations may be
required to provide key support services and facilitate
marketing
• Specialized knowledge and access to data is important to be
able to assess the risks involved in agriculture
• Optimal risk management requires portfolio diversification
and insurance
• Agriculture is important for food security, which makes the
sector susceptible to political interference. This must be

17. For development agencies & policy makers:
Finance is only a catalyst for growth. Interventions are still
needed to:
•Support productivity, economies of scale, farmer organizations,
access to improved technologies and enhanced market linkages
•Support to provide specialized knowledge to access and
integrate agricultural value chain data into the financial analysis
•Support can be provided for the development of new insurance
products not only for farmers but also for their lenders
•Develop policies which clarify land tenure and can facilitate
finance to agriculture
•Support an enabling environment for the development of new
technologies that help bring down the transaction costs in
agriculture and finance