POLICY OPTIONS TO STRENGTHEN SMALLHOLDER FARMERS WITH AGRICULTURAL POTENTIAL 15
higher-value maize varieties, holding other farm-level characteristics constant (Ricker-Gilbert and Jones 2012). In response, public and private investments in agriculture- based and transforming economies should focus on reducing food loss along entire supply chains, from the development of crop varieties with beter postharvest traits to beter storage equipment and facilities that have low initial and recurring costs. Extension services should help smallholders build their postharvest crop manage- ment skills and maximize the benefits of postharvest tech- nologies (Bokusheva et al. 2012). Policies in transformed countries should also place more emphasis on promoting consumer awareness of food waste.
ENSURE SMALLHOLDER-FRIENDLY FINANCING AND INVESTMENT
Moving from subsistence to more commercially ori- ented activities requires increased capital and investment flows that focus on smallholder farmers and their specific constraints and needs during times of both price stabil- ity and volatility. Increasing capital flows toward rural areas requires innovation in the channels and instruments through which financial services are offered to smallholders, including young people. Te potential for novel approaches is wide and includes value-chain finance, rural leasing, loan- guarantee funds, and ethical and Islamic banking. When it comes to smallholders, however, more research is needed to explore the viability and benefits of these innovative services before they can be scaled up. For example, loan- guarantee funds under the Innovative Financing Program of the Alliance for a Green Revolution in Africa (AGR) have been used to leverage much larger loans from commercial banks and have lowered interest rates for smallholders, but questions remain about whether this program has actu- ally reached new customers who previously were unable to access such loans (Poulton and Macartney 2012). Increased efforts are needed to examine and promote ICTs, such as mobile phones and Internet kiosks, that can boost access to affordable payment, savings, and credit services for small- holders. Such financial products can be bundled with other development services, such as capacity-building and exten- sion services. Te focus of financing efforts should also be shiſted
toward more medium- and long-term financing mecha- nisms to support commercially oriented capital investments
by smallholders, such as machinery and storage facilities, which are critical for increasing productivity and moderniz- ing smallholder agriculture. Areas that are worth exploring and test-piloting include the provision of long-term loans through producer organizations, development of financial leasing schemes, and the expansion of accepted collateral through the introduction of movable asset registries. ICTs can also be used to establish an electronic credit history for smallholders, thereby giving them a foundation for access to longer-term financing mechanisms (IFC 2011b). Above all, a vibrant rural financial system is needed that includes a diverse mix of financial institutions and networks that work together to support innovation and rural access among smallholders. Te public spending portfolio should also be strategi-
cally positioned to offer a short-term cushion for coping with livelihood shocks as well as long-term productivity- enhancing or exit opportunities for smallholders to escape poverty and food insecurity. Public investments should be directed toward providing essential public goods that have the highest economic and social returns, including rural infrastructure (especially rural roads) and agricul- tural research and development. National research systems need to prioritize the development of location-specific and smallholder-friendly technological innovations across the whole agricultural value chain. A sound legal and regula- tory environment is needed to maximize the private sector’s contribution to smallholder productivity and to protect the property rights of smallholders and their surrounding natu- ral resources. In conjunction, more research is needed to define appropriate instruments and strategies for integrat- ing public-private partnerships and FDI into local econo- mies. For example, regional and local governments could work with private businesses (foreign and domestic) to design and provide supportive services, including techno- logical and organizational support, to smallholder farmers who serve as their suppliers (Jordaan 2011). Te promo- tion of FDI from other developing and emerging countries also has the potential to generate greater spillover of more contextually appropriate technologies and skills to small- holders (UNCTAD 2012). Sound evidence-based research, information systems, and regulations at the national and global levels are needed to enhance the transparency of transactions and to understand the opportunities and threats for smallholders.
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