Despite their significant contributions, smallholder farmers face numerous challenges that threaten their livelihoods and exacerbate prevailing disparities. “Smallholder farmers, who operate on modest plots of land, play a critical role in global food production. They contribute around one-third of the world’s food supply, with five out of six farms falling into this category,” emphasizes Sylvian Morel, Vice President, Business Relations and Development, Agriculture and Agri-Food Markets at Desjardins.
The year 2023 brings both worrisome trends and promising opportunities for smallholder farm innovation. Global food insecurity persists due to conflicts, insufficient investments and geopolitical challenges, resulting in high food prices. However, advancements in precision farming techniques and increased investments in sustainable practices offer hope for improving productivity and livelihoods. Nonetheless, smallholder farmers are particularly vulnerable to climate change, with projected impacts leading to decreased crop suitability and agricultural productivity. Additionally, new legislation aimed at combating deforestation poses challenges for smallholder farmers, who often lack the necessary digital records to comply with traceability requirements.
Smallholder farmers face numerous struggles, including limited digital access, financial constraints, and difficulties in establishing connections with buyers and accessing larger markets. They also lack crucial agricultural knowledge and face challenges in adopting sustainability standards. These issues highlight the urgent need for collaborative efforts from the public and private sectors to bridge the digital divide and provide smallholder farmers with the necessary tools and opportunities to thrive.
Fortunately, numerous financial institutions are driving change and empowering smallholder farmers worldwide. José A. Carrera Espinosa, Senior Advisor for International Relations at Banco Pichincha, sheds light on their approach: “By providing custom-made products, extending the grace period and terms of the loans, adapting the frequency and the payments to meet the cycle of the crop and the cash flow, we are better serving our agricustomers. We use alternative data to create models and specialized credit scorings that help the bank in risk reduction and decision making."
Farmers are the economic backbone of many developing countries, such as South Africa, where Nedbank is striving to support the sector through innovative technologies, partnerships, new product development and a relationship-based approach. “Nedbank views agriculture as a long-term investment which plays a vital role in our economy – not only in terms of economic activity, exports and job creation, but importantly in ensuring food security. A vibrant, competitive and inclusive agricultural sector is paramount for South Africa, and we continually seek to enhance and innovate our offering to South African farmers and agribusinesses,” explains John Hudson, National Head of Agriculture and Business Banking at Nedbank.
Banks also have a key role to play in promoting sustainable agriculture. Donal Whelton, Head of Agri, Food & Fisheries at Allied Irish Banks (AIB), highlights his institution’s commitment to environmental stewardship: “Given the importance of the sector to AIB and indeed the wider economy, our focus over the next 2-3 years will be on supporting the sector’s transition to a low-carbon economy and supporting our individual farming customers as they take actions on their own farms to make them more sustainable."
Across the Atlantic in Canada, Desjardins is taking a similar approach. “Our priorities include developing ESG products and services for agricultural businesses; educating and equipping our front-line teams in sustainable farming practices and helping them identify ESG risks; and educating and equipping our members in the various practices that help reduce GHGs and any other practices that help build resilience to climate change,” explains Sylvain Morel.
In parallel with all these efforts, a wide range of initiatives is emerging, aimed at enhancing the lives of smallholder farmers and promoting sustainability in agriculture. From mobile apps that facilitate direct purchases from disadvantaged regions, to pay-as-you-go tractor sharing and climate insurance solutions, these innovations aim to improve the livelihoods of farmers and promote sustainability in agriculture. Through these transformative initiatives, smallholder farmers have the opportunity to overcome challenges, increase their productivity, and contribute to a more sustainable and prosperous future in agriculture.