Welcoming remarks by IFAD President Kanayo F. Nwanze at IFAD international conference "Investing in inclusive rural transformation: innovative approaches to finance", Rome, Italy
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Ladies and gentlemen,
I warmly welcome you to this inaugural session of the conference on Investing in inclusive rural transformation.
I would like to extend particular thanks to Professor Maskin, who has flown in from Boston to be with us today, and to all of you who have taken the time and made the effort to participate in this conference.
On behalf of IFAD I would also like to express our gratitude to Italy, our host today and long-term partner in development, and to Minister Pier Carlo Padoan.
It was Italy that put food security and agricultural development back at the top of the development agenda during the L'Aquila G8 summit in 2009.
It was Italy that co-hosted the Multilateral Development Bank meeting on Finance for Food at Expo Milan in 2015. And, of course, it is Italy that will continue to push the agenda forward during its presidency of the G7 this year.
IFAD is co-hosting this event because we believe those of you gathered here today and those who will join us tomorrow share our deep commitment to eliminating poverty and hunger; and ensuring that the Sustainable Development Goals – the SDGs -- are met.
The need is urgent. Despite decades of commitments and considerable effort to end poverty and hunger, nearly 800 million children, women and men still go hungry every day, and an almost equal number live in extreme poverty.
Most of the world's poorest and hungriest people live in the rural areas of developing countries. Most depend on agriculture for their lives and livelihoods.
Migration to city slums will not put food on their table or a solid roof over their heads. But economic opportunities, access to financial services, markets, and assets in the regions where they live will.
We must therefore invest in the 2 billion people who depend on the world's 500 million small farms. They need to be included in food security initiatives and fully integrated into modern food systems. And we also need to make sure that rural small and medium enterprises have the resources they need to grow and thrive.
But let me be clear. The current speed of change and the current scale of change is not enough.
It will cost an additional US$265 billion a year until 2030 to achieve the first two SDGs, ending poverty and hunger.
Where will that come from? ODA in 2015 was around $192 billion a year, and only $9 billion of that was earmarked for agriculture. And when it comes to financing for smallholders there is a $150 billion gap between the financing that is currently available and the financing that smallholders need.
If we adopt a "business as usual" approach, their needs will not be met and there will be an estimated 650 million chronically malnourished people in the world in 2030.
Clearly, we must be more creative in how we leverage public resources and how we mobilize additional financing, particularly by making it possible for the private sector – with its huge resources – to invest in smallholder development. We will also need to make it possible for new players – such as philanthropic organizations – to engage more fully.
Ladies and gentlemen,
For IFAD, innovative financing for development is not a concept. It is a reality. Through the projects we support, IFAD has promoted inclusive finance, starting with microfinance, and more recently through our work with remittances, and through partnerships with the private sector.
We have also pioneered what we call 4P relationships – these are public, private, producer partnerships. Because traditional public-private partnerships ignored producers and their organizations.
We know that expanding a business into a remote rural area can seem risky to our private sector partners, so we look for ways to help mitigate that risk. In Kenya, IFAD together with AGRA offered Equity Bank a 10 per cent risk-sharing fund in the form of a $5 million deposit when we partnered with the Bank to bring loans to smallholders. The Managing Director and Chief Executive of Equity Bank, Mr James Mwangi, is here with us today. The fund enabled Equity Bank to provide $20 million in loans to small producers through their organizations.
As a result of the project, small producers were able to grow their businesses and enter the mainstream banking system. And Equity Bank benefitted from very low default rates.
And we are always exploring new ways to mobilize financing. Just yesterday, IFAD announced an exciting new initiative that will provide much-needed capital to small and medium agri-businesses in Uganda.
The Agro Equity Impact Fund for Uganda is starting off with a commitment of 12 million euros from the European Union, in part managed by IFAD, and expects to raise another 13 million euros from like-minded private sector partners.
It is important because agricultural SMEs today largely fall within a "missing middle" -- too big to get funding from microfinance institutions and too small to be attractive to commercial banks.
Ladies and gentlemen,
As I mentioned earlier, the financing needs for development are enormous, but so are the opportunities. Agri-food is already a $5 trillion sector, and it is growing. It holds tremendous promise for the private sector and for producers in developing countries.
By developing the potential of smallholder farming, by helping them to get organized into producer organizations, and by getting the private sector to be more involved through inclusive partnerships, agriculture could generate untold prosperity, lifting millions out of poverty, and creating jobs and new industries along the length of the agricultural value chain.
At IFAD, we have a very large portfolio of programmes and projects that enable small-scale producers to increase their production and have better links to markets. But we are aware that we need to do more to attract the private sector at every step along the value chain. We see the potential of our portfolio serving as a powerful "de-risking mechanism", enabling the private sector to engage in profitable relations with smallholder organizations.
Towards this end, IFAD is ready to partner with the private sector, governments, and philanthropic organizations to develop innovative mechanisms to scale up and deepen private sector engagement with smallholder producers.
Just this afternoon, IFAD convened close to 25 organizations that are committed to exploring how a new network can better drive smart finance for smallholders and rural SMEs.
With their support and that of the Government of Italy, we plan to announce the formation of a Smallholder Agriculture Finance and Investment Network. SAFIN will serve as a multi-stakeholder forum, deepening knowledge and strengthening the position of smallholder finance and investment on the global development agenda.
Ladies and gentlemen,
IFAD is convening this conference because we know that when we work in partnership -- when our efforts are united, not fragmented -- we get the best results. I hope that today's discussions will result in collaboration across many sectors.
Together, in partnership, we can share knowledge and build on promising innovations in finance and bring them to smallholders and small rural enterprises.
I am excited about the next few days and hope that you share this excitement. And I very much look forward to seeing concrete outcomes from our deliberations and interactions.