ARM tools are plenty.
Making them accessible is the way

Country:
Burkina Faso
Tanzania, United Republic Of
Zambia
Focus Region:
Sub-Saharan Africa
Focus Topic:
Market / Trade
Institutions / Organizations
Gender / Youth / Social Inclusion
Capacity Development

Research and capacity-building activities have helped empower local farmers’ organisations while the engagement with stakeholders has contributed to facilitating knowledge exchanges.

 

A country’s food security depends on the work of many smallholder farmers, but most of those working in lands of no more than one or two hectares are exposed to all sorts of agricultural risks – simply because they have limited or no access to agricultural risk management (ARM) tools. Climate shocks or the attack of pests or diseases may completely undermine their efforts, and hence their products’ availability in local markets, as well as their incomes and families’ livelihoods. And if the price falls too much, the finances of these farmers come under threat, and they may not be able to reinvest and secure yields and outputs in the next season.

In high-income countries, farmers can count on several tools to manage agricultural risks, but these are significantly limited in Africa for different reasons. As a result, African smallholders tend to rely on traditional ex ante risk minimisation strategies, such as the diversification of farm activities (e.g. mixed cropping and crop rotation), and ex post coping strategies, such as maintaining reserves of inventories and financial assets. Quite often, these strategies do not optimise productivity but only provide limited protection against severe negative climate or price shocks.

How to fill this gap? The key word is accessibility. With funding from the European Commission in partnership with the consortium of agricultural research institutions AGRINATURA, the Farm Risk Management for Africa, or FARMAF, is catalysing smallholders’ access to and use of effective ARM tools (systems, institutions and infrastructure) in Burkina Faso, Tanzania and Zambia. Research and capacity-building activities carried out by AGRINATURA have helped empower local farmers’ organisations while the engagement with stakeholders has contributed to facilitating knowledge exchanges.

SUCCESSES AND LESSONS LEARNED

This initiative has helped scale up and/or develop several ARM resources: 1) market-based agricultural risk management tools, including crop insurance, interlocked with production financing schemes; 2) reliable and more informative market information systems; and 3) structured output marketing systems, including warehouse receipt systems on different scales (commercial operations in Tanzania and Zambia and small-scale inventory credit or warrantage in Burkina Faso) and exchange-based trading systems.

These activities have benefitted more than 175,000 smallholders in the three target countries, and it is expected that, as the tools promoted are being scaled up at a national level, more than 3 million farmers will see a very positive impact in the near future (by 2022).

Unfortunately, some objectives have not been reached yet. Initially, the idea was to promote viable commodity exchanges trading futures contracts in Tanzania and Zambia, but this was not possible because the necessary policy framework was not in place on time. On the contrary, initiatives like the ad hoc imposition of restrictions on exports to regional markets undermined the business case. The teams could not scale up the use of warehouse receipts systems for grain marketing and financing in Tanzania, and match the scale for export crops like coffee and cashews. The analysis of these difficulties, however, has shown many lessons and helped provide many recommendations, all of which are helping reach farmers with an even better offer.

SOURCE:
Platform for Agricultural Risk Management (PARM)
AUTHOR:
Gideon Onumah, Ph.D., Agricultural Economist/Rural Finance Specialist, Natural Resources Institute
COVER PHOTO:
©PARM/Carlos Acosta