IFAD and Kingdom of Cambodia sign agreement to promote inclusive and sustainable agricultural growth

Rome, 16 February 2023: The International Fund for Agricultural Development (IFAD), the UN’s rural development agency, and the Kingdom of Cambodia signed a US $194 million financing agreement to promote inclusive and sustainable agricultural growth in rural Cambodia through the Agriculture Services Programme for an Inclusive Rural Economy and Agricultural Trade (ASPIRE-AT) project this week. ASPIRE-AT will create an enabling environment to address the barriers faced by small-scale farmers in increasing their productivity and incomes, particularly through priority export and domestic value chains.

While Cambodia has seen a significant reduction in poverty over the last two decades, the poverty rate has climbed to 18 per cent (up from 10 per cent in 2019) as a result of the COVID-19 pandemic. Agriculture based on small-scale farm production is the basis of Cambodia’s rural economy and remains essential for employment and rural livelihoods. The sector is also crucial to diversify Cambodia’s exports. Yet, small-scale farmers – who make up three-fourths of the country’s 1.7 million farming households – struggle to achieve the scale and consistent quality of produce needed by export and domestic markets. Most supplement their incomes with non-farm wage labour.

“Small-scale farmers in Cambodia are highly vulnerable to climate risks,” said Frew Behabtu, IFAD Country Director, Cambodia. “To increase their productivity, small-scale farms need resources so they can adopt modern techniques and access adequate supportive infrastructure. ASPIRE-AT aims to ensure that these farmers also benefit from Cambodia’s increasing national prosperity,” he added.

Barriers to increasing productivity of small-scale farming include access to credit, technology, market information and key inputs. Access to water is another key constraint. ASPIRE-AT will focus on aggregating 125,000 small-scale rural households into strong producer organizations (POs), enabling them to produce at scale, access services, create value addition, and become attractive partners for agri-businesses. This will be done through investments at both farm level and in PO-owned enterprises and facilities.

The weak competitiveness of Cambodian produce in export markets and key domestic markets and the low number of profitable agribusiness have led to under-investment in value chains for small-scale farmers, particularly women farmers, who often lack a voice in decision-making and have little control over or access to resources. ASPIRE-AT will address market failures and gaps in service provision at all levels of the value chain, assisting small-scale farmers to organise, aggregate and invest through highly effective POs and increase their climate resilience.

IFAD will contribute $47.9 million over seven years. The Government of Cambodia will provide $19.2 million, while the European Investment Bank will contribute $60.6 million. Other domestic financial institutions will provide $42.9 million, and project participants will themselves contribute $1.1 million. The local private sector is expected to contribute $2.2 million.

IFAD has accompanied Cambodia’s development journey since the late 1990s, moving from recovery and ensuring food security to building institutions to now focusing on the market economy. Over the next decade, IFAD aims to contribute to a sustainable rural economy and to ensure that benefits reach the most marginalized communities.

Since 1996, IFAD has helped finance 12 rural development programmes and projects in the country for a total investment of US$950.48 million, of which US$309.08 million came from IFAD's own resources. These investments have benefited over 1.56 million households in Cambodia.

Read more about our work in Cambodia here | Follow us on Twitter: @IFADSouthAsia

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Press Release No.: IFAD/09/2023

IFAD is an international financial institution and a United Nations specialized agency. Based in Rome – the United Nations food and agriculture hub – IFAD invests in rural people, empowering them to reduce poverty, increase food security, improve nutrition and strengthen resilience. Since 1978, we have provided more than US$24 billion in grants and low-interest loans to fund projects in developing countries. A wide range of photographs and broadcast-quality video content of IFAD’s work in rural communities are available for download from our Image Bank.