By Tarek Kotb, Country Director, Sri Lanka and Nepal, IFAD
Across the world, the COVID-19 pandemic has led to food shortage and the loss of market opportunities and jobs. Rural communities have struggled to get timely access to inputs, and in many cases have seen their links to markets vanish. As UN Secretary-General Antonio Guterres has noted, the pandemic has threatened to undo decades of progress on eliminating hunger and transforming rural lives and livelihoods. Sri Lanka is no different – over 80 percent of the population lives in rural areas. Inclusive and sustainable agribusiness development -- a powerful tool in raising rural incomes, contributing to national food production and leading to rural job creation -- was seriously affected, with a disproportionate impact on smallholder farmers, women and youth producers.
At the onset of the pandemic, the Government of Sri Lanka took quick steps to mitigate the spread of the virus by going into lockdown, while simultaneously trying to make sure agricultural food chains were not hindered. But the crisis has underlined the need for robust and resilient agriculture value chains that allow food to reach every person in Sri Lanka. This is in line with the government’s draft Overarching Agricultural Policy, which identifies the promotion and development of food value chains as a key priority area.
To facilitate knowledge sharing among the various entities who work on agriculture value chains in Sri Lanka, the UN’s three Rome-based agencies – the International Fund for Agricultural Development (IFAD), the Food and Agriculture Organization (FAO) and the World Food Programme (WFP)– and Sri Lanka’s premier policy think-tank, the Institute of Policy Studies, organized a virtual dialogue earlier this month. The idea was to better understand the impact of the pandemic on Sri Lanka’s food systems, and to share experiences and innovative solutions that could help build stronger food systems in the country. As the UN Resident Coordinator for Sri Lanka said in her opening remarks, the UN entities working to end hunger, ensure food security and reduce poverty are committed to learning from each other and complementing their efforts. The dialogue also saw keen participation from the Directors General of the Department of National Planning and Agriculture, respectively; as well as senior officials from the ministries of plantation, foreign employment promotion, livestock development and the Central Bank of Sri Lanka.
Throughout the dialogue, it was clear that value chain development is not only about increasing production to sell to market, but that it is making agriculture pay better, especially when it targets smallholder farmers to increase their food purchasing power. An added source of income has knock-on effects, like diversifying household diets and reducing the risk of smallholders depending exclusively on their own production for food security.
Here are five ways to strengthen agricultural value chains:
First, build capacity of producers and promoters to identify profitable technological solutions to improve production, storage, packaging and marketing. The government, financial institutions and insurers are crucial partners in providing well-informed agricultural extension and business development services, easy access to feasible financial products for both producers and promoters and, most importantly, crop insurance -- essential for some crops in particular agro-environments.
Second, focus strategically on food security. The public sector is not always able to identify and encourage cash crop production in scenarios where smallholder producers prefer to grow food to consume at home. For example, 40 percent of legume farmers were expected to diversify into turmeric. But this did not happen, because the focus of the state extension services was more on legume production.
Third, establish the know- how needed to successfully grow and market value chain commodities, especially those essential to food security. For example, during the pandemic period, the government banned imports of food products such as quality seeds of potato, maize, onion and chili. The IFAD-supported Smallholders Agribusiness Partnership Programme had to move quickly to bring in agents with field presence and the ability to move around during the lockdown, to facilitate partnerships for the production and marketing of seed potatoes and seed chili. Around 1,200 farmers were involved in these partnerships. We also learned the lesson about the need for seed banks for strategic food crops, but we learned it the hardest way.
Fourth, make available financial instruments for value chain partnerships. Public financial institutions are typically reluctant to lend to agriculture because of the inherent risk in the sector and the low creditworthiness of most rural producers. This is the case even where IFAD offers a 100 percent refinancing facility. To address this, IFAD has put in place two value-chain financing products: one that allows financing institutions to issue bulk loans to companies involved in value chain partnerships so they can extend in-kind working capital loans to producers; the other, a large loan to cooperative rural banks for on-lending to value-chain partners. Both instruments are designed to minimize the risk involved in lending.
Finally, develop a crop and climate insurance service. The absence of such a product has created a sort of reluctance all along the value chain. Farmers have to face crop losses because of climate shocks and extreme weather events, like in the case of onion seeds and maize, and banks are also unable to recoup their losses. All of this builds reservations against financing value chains. A policy dialogue is very necessary to elevate this issue to the highest decision-making authorities.
IFAD strongly believes that the development of value chains can significantly contribute to securing more food for the nation, especially smallholder farmers. As part of robust and resilient value chains, smallholder farmers will have better access to agricultural inputs, finance and market information, as well as non-farm facilities such as last mile rural roads. IFAD, and its partner UN organizations, remain committed to achieving the Sustainable Development Goals, ensuring that we eliminate hunger and poverty, and achieve food security for all.