ISSUES OF RURAL POVERTY AND THE FATE OF SMALLHOLDER AGRICULTURE ISS-SID-MOFA, THE Hague 23 June, 2011

1. ISSUES OF RURAL POVERTY AND THE FATE OF SMALLHOLDER AGRICULTURE ISS-SID-MOFA, THE Hague 23 June, 2011 KEVIN CLEAVER ASSOCIATE VICE PRESIDENT IFAD June 23, 2011

2. The need to expand investment in agriculture, including through investment with smallholders has been studied intensively in past 3 years

3. The case for expanded Donor and government investment in developing country agriculture • Rising food prices • About 1 billion people hungry (FAO) • Need to double food production by 2050 (FAO, IFPRI) • Environmental issues and climate change • Agriculture and rural development effective for poverty and hunger reduction (World Bank, World Development Report and IFPRI)

4. Rising food prices primarily reflect global imbalance between rapidly increasing demand for food and slower growth in supplies Source: Food prices, “The consequences of costly nosh”, The Economist, 22 January 2011

5. Why are food prices rising; and why greater volatility? Due to rapidly rising global and local demand for food, at about 2% per annum and rising (Chatham House) In turn caused by income growth, population growth, dietary changes, bio-fuels Combined with a slowing of the increase in supply 5

6. Agricultural productivity growth highest in high-incomecountries; almost stagnation in sub-Saharan Africa Source: WDI dataset, 2010

7. Agricultural productivity improvements have already been below population growth

8. Why is agriculture production growth in developing countries increasingly problematic? • Low investments in agricultural research: 0.42% of agricultural output in Asia, 0.65% in Africa, 1.1% in Latin America • Compared to over 5% in OECD countries • Lack of agriculture investment and consequent reduction in productivity growth • Cereal yields increasing at 1-2% p.a. now, compared to 3-6% p.a. in the 1960s-1980s • Transport, marketing and farm input price increases as oil prices increase • Land degradation • Substitution of bio-fuels for food (for maize) • Government policy deficiencies, panic in food markets • Climate change may be exacerbating the slow food production response

9. Agriculture growth has high economic pay-off and high poverty reduction pay-off • A 1% p.a. increase in agriculture growth, on average leads to a 2.7% increase in income of the lowest 3 income deciles in developing countries (World Bank World Development Report, 2007) • Agriculture is 2.5 to 3 times more effective in increasing income of the poor than is non-agriculture investment (World Development Report, 2007) • “Agriculture growth, as opposed to growth in general, is typically found to be the primary source of poverty reduction (IFPRI, 2007) • The contrary is also true; a decline in agriculture growth throws many poor people into poverty, and explains some of the increase in developing country poverty and hunger in the past two years.

10. Investment in developing country farming will: • Help meet global and local food needs • Contribute to environmental management and adaptation to climate change • Reduce rural poverty (to meet MDG-1 and half global hunger by 2015)

11. What does investment in developing country farming mean? Improving basic foods and staples Including cash crops: exports are growing Integrating livestock to match rising demand Developing private agroprocessing and marketing

12. Peru: Management of Natural Resources in the Southern Highlands Project – agriculture services

13. Guinea: Fouta Djallon Agricultural Rehabilitation Project – farmer training

14. India: Tamil Nadu Women’s Development Project – women’s groups

15. Senegal: Village Management and Development Project – women’s training

16. Niger: Second Maradi Rural Development Project – irrigation

17. Mauritania: Agricultural Rehabilitation Programme II – reforestation

18. Ethiopia: Rehabilitation Programme for Drought Affected Areas

19. Issue #1 - How to make agriculture projects in fragile states more effective • Focus more on institution building in fragile states, and less on targeting • Introduce longer term approach, with 10-15 year partnerships reflected in 2 to 3 consecutive projects • Don’t shy away from involvement in fragile states with poor governments • Work through civil society, NGOs, private sector 19

20. Issue #2 – Governments and donors need to modernize their instruments to deal with the private sector VALUE CHAIN APPROACH The market and the private sector are increasingly driving agriculture. Input industry Producers Consumers Food retail industry Food process industry Research Extension service

21. Supporting markets for smallholders ●Inputs Storage● ●Processing Marketing●

22. Issue # 3: Rural environmental issues and climate change have larger impact on small farmers than previously thought • Deforestation, groundwater depletion, salinization of irrigation areas, destruction of rural biodiversity, soil loss (see UNEP Atlas of Africa) • Agriculture both a cause and victim of environment problems • 5 to 10 million hectares of agriculture land lost annually to severe land and water degradation (WDR 2008) • Agriculture uses 85% of fresh water withdrawals in developing countries - water getting scarcer • Agriculture contributes 13% of green house gases • Rural environment problems to worsen due to climate change (IPCC)

23. SOLUTIONS: Countries to better incorporate adaptation to climate change and environmental concerns in investments and policies Drought resistant cultivars Crop diversification Alternative tillage and erosion control Research for environmental services Weather insurance Drought contingency and early warning systems Water management, including flood response 23

24. Issue # 4 Overcoming special constraints facing rural women • Rural women often have less access to assets than do men • Educational • Land • Finance • Technical Advice • Gender and age disaggregated project components l

25. Issue #5: Obtaining impact on a larger scale is urgent: Most donor projects impact limited number of people • About 1 billion hungry people in the world, relatively stable since the 1990s • 2 billion people live on less than $2 per day • IFAD’s ongoing projects bringing about 36 million out of poverty • Donors and governments need to help scale up proven solutions to impact more people • Question: how to obtain significantly broader impact on more people without a large expansion of donor resources?

26. Scaling up for broader impact is the biggest challenge for governments and donors • Planning for operation and impact at scale to begin in Government Agriculture plans and Strategies • Each project design to plan for operating at scale • Deepen country and local leadership in strategy, project design and execution • Donor-financed projects to use local systems; but build capacity for self management • Operating at scale requires institutional development at national and local government, farmer organization and civil society • Impact at scale requires enabling government policy and public expenditure program, and measurement of impact

27. Innovative tools can break specific bottlenecks along the value chain; need to be scaled up Effective interventions often build on: • Links with research institutions • Community organizations • Risk-sharing tools • Telecom • Targeted regulations • Local capacity building

28. Innovative tools … (cont’d) Effective interventions often build on: • Links with research institutions • Community organizations • Risk-sharing tools • Telecom • Targeted regulations • Local capacity building Source: Realizing a new vision for agriculture: A roadmap for stakeholders, World Economic Forum, 2010, and IFAD.

29. Conclusions • Smallholder agriculture in poor countries and poor regions of countries to become central focus, including strong focus on farmers groups • Expanding to encompass the landless, who can be employed on-farm or in non-farm rural enterprises • Treat farmers and small rural enterprises as business development, not as objects of safety net or poverty alleviation; incorporating value chain approaches • As a corollary, private sector development in rural areas • And more exploitation of rural-urban linkages • More focus to overcoming special constraints facing rural women • Aggressive conservation of natural resources and adaptation to climate change • More work on land issues, and land rights of indigenous people • Policy advice and scaling up success to national level • Always working in partnerships with other institutions • International advocacy and participation in international debate and analysis of agriculture issues • Facilitate South-South cooperation • Greater differentiation in donor supported projects and programs between country types (fragile states, MICs, and other low income borrowers)

31. How much money should be put through donors for agriculture and rural development? • Conclusions: • Total requirements exceed ODA available for agriculture and rural development

32. % of projects found marginally satisfaction or better on the indicators IEE: Independent External Evaluation of IFAD, 2005 ARRI: Annual Report on Results and Impact (prepared by the Independent Office of Evaluation) PCR: Project Completion Report RMF – Results Measurement Framework Business model has worked for project quality: Key project performance indicators for IFAD’s development results