Breakthroughs for Financing Sustainable Agriculture

(From left) Kristen Dailey, Global Washington; Paul Moseley, Gates Foundation; Steve Hollingworth, Grameen Foundation; Matthew Arnold, JPMorgan Chase Photo Credit: Grameen Foundation

November 07, 2017 by Bee Wuethrich

“It’s not culturally common for us to work with foundations and NGOS--we’re a bank,” said Matthew Arnold, the Global Head of Sustainable Finance for JPMorgan Chase, which handles US$2 trillion in assets.

He was speaking in Seattle on Nov. 2, during a breakfast panel with Paul Moseley, Program Officer, the Bill & Melinda Gates Foundation, and Steve Hollingworth, President and CEO of Grameen Foundation. So, perhaps it was a trio of unlikely bedfellows--but perhaps not.

The panel, hosted by Global Washington and the Seattle World Affairs Council, was focused on the topic of financing sustainable agriculture. It drew a full house, and the conversation had even more kick than the early morning coffee as panelists and audience considered what it will take to make a difference for food security and the world’s 500 million smallholder farmer households.

Smallholder farmers are responsible for feeding more than two billion people across Asia, Africa and Latin America, yet also make up 70 percent of the world’s extreme poor and many for the 800 million people who are chronically hungry. They receive only about US$20-to-US$30 billion of the US$450 billion demand for financing to grow their way out of poverty.

Moseley explained that about 7 percent of smallholder farmers are part of “tight” value chains that are linked to purchasers of global commodities like coffee, coconut and cacao.  Another 33 percent are members of “loose” value chains, producing staple food crops like maize (corn), rice, wheat, and sorghum.  The vast majority -- 60 percent -- are subsistence farmers who eat what they grow and sell whatever small surplus is left. They often live in environmentally fragile areas, semi-arid zones or other areas wholly dependent on rain-fed agriculture in a changing climate.

The three panelists shared experiences, the framework for their work, and thoughts about the breakthroughs that will help smallholder farmers turn the tables on poverty.

Arnold explained that the majority of JPMorgan Chase’s philanthropic investments are dedicated to driving inclusive growth, but that through the US$200 billion commitment to facilitating clean energy investments, the firm is helping to advance several of the United Nations Sustainable Development Goals. And as bank, aligning these investments with their long-term business interests is what makes their commitments truly sustainable.

The company has made some forays in this direction, including efforts to structure a loan fund for oil palm farmers in Indonesia, and investments in sustainable agriculture funds in Central America and East Africa.  A common obstacle to these efforts, especially for a large bank, is to identify partners on the ground, “intermediaries” who have the skills and resources to deliver the services.

That problem also points directly to the kind of breakthrough needed. As Arnold said: “If we’re going to be part of solving this, we have to form partnerships with groups that are culturally unlike us.  We need to understand the ecosystem of players but remember who we are, what we bring to the table.”

Hollingworth highlighted Grameen Foundation’s use of digital technology and data for providing unprecedented insights into farmers’ needs and capabilities—a use of digital technology that is relatively new and untapped when it comes to agricultural development.

Grameen uses these data-derived insights to develop essential services, from loans tailored to smallholders’ cash flows, to agricultural training delivered via mobile devices.  For example, Grameen’s AgroTech work in Ghana uses data to connect small-scale maize farmers to secure buyers of their crops, train them in best agricultural practices and connect them to finance.  Now, mid-size commercial farmers in Ghana are beginning to invest in training their field agents in the digital AgroTech system, and using it to support smallholder farmers at the base of their supply chain. Hollingworth pointed out that such use of digital tools and data holds immense promise for future breakthroughs.

Moseley emphasized that the Gates Foundation is “betting on the middle...the 33 percent of smallholder farmers who are in loose value chains” for breakthroughs against poverty. These farmers get less than 15 percent of the financing they need for short term inputs, and less still for longer-term needs like mechanization.

To create more opportunity for these farmers, the foundation is working with governments to build an enabling environment and to pool public and private money to finance new solutions. “How can we help these farmers be creditworthy with their lenders?” he asked.  “If we get financing and combine that with digital reach and agricultural advice, we can solve malnutrition and double productivity.”

Read more about the Financing Sustainable Agriculture panel in this summary from Global Washington.