Sustainable agricultural innovation is happening worldwide, but investors often overlook small-scale producers when providing funding. In a recent literature review, experts from EcoAgriculture Partners, Tropenbos International and the Center for International Forestry Research (CIFOR) argue that financial inclusivity is critical for small-scale producers’ success in achieving more sustainable landscapes.
Small-scale producers are farmers, foresters, fishers or others who work with a small area of land and have limited resources and labor. These producers grow a third of our world’s food, yet they often fail to get support from large financial institutions that require high, fixed returns. Micro-loans help individuals stabilize their housing or education but often they do not offer enough financial support for producers to adopt sustainable land-use practices through landscape finance, a new approach for finance where funds are invested in various assets to account for the multiple sectors within a landscape.
Agriculture Researcher. Image: Adobe Stock
The literature review outlined the following solutions to help producers access landscape finance:
- Create inclusive landscape governance. Build trust and identify common objectives between funders and recipients.
- Strengthen financial literacy. Initiate resources like village savings and loans.
- Offer access to financial services. Provide information on financial markets and technical innovations.
- Make inclusive facilities and mechanisms for integrated landscape finance (ILF). Create portfolios of tools to support landscape objectives.
This graphic shows how landscape finance can include small-scale producers, also called micro-, small- and medium-sized enterprises (MSMEs). Source: “Access to Landscape Finance for Small-Scale Producers and Local Communities: A Literature Review,” Aug. 31, 2022, MDPI.
Inclusive finance in action
The review focused on landscapes in tropical regions where a lack of internet is common, which makes it difficult for many producers to connect with external resources. Multi-stakeholder initiatives and third-party programs can help address these worldwide challenges, the authors found. For example, the Tropical Landscape Finance Facility works with small-scale producers to access development money from various investors.
The Trees for Global Benefits program, implemented by ECOTRUST in Uganda, is another example of ILF in action. The program monetizes carbon emissions, an approach known as carbon finance, to help fund landscape initiatives by paying people for efforts such as planting trees.
“Finance is often unavailable to people who need it within landscapes,” said EcoAgriculture Partners’ Seth Shames, who also leads a 1000 Landscapes for 1 Billion People (1000L) initiative dedicated to creating innovative finance solutions. “This paper used the Landscape Finance Framework our team is building as a point of departure for exploring how we can improve financial access in an integrated landscape context.”
The proposed framework for inclusive ILF. Source: “Access to Landscape Finance for Small-Scale Producers and Local Communities: A Literature Review,” Aug. 31, 2022, MDPI.
Connecting people across sectors of a landscape
Expanding financial inclusivity can take many forms. It can mean connecting people with educational resources to open a bank account or manage spreadsheets. It can also involve negotiating partnerships between landscape leaders and financial institutions, such as finding alternative payment methods for small-scale producers whose harvest cycles do not align with set loan payment periods.
Better techniques can bridge the financial-access gap through a mixture of top-down investment and bottom-up approaches that center on the needs of local landscape actors. Combining methods and resources can reduce landscape actors’ dependence on single funding sources and increase their resilience to adverse climate, market and political impacts.
A thriving series of cabbage fields in Thailand. Image: Adobe Stock.
Expanding access to financing is just one piece of the puzzle for farmers. To fully support sustainable landscapes, finance actors must account for the economic, social and local knowledge surrounding that particular land and people. Accounting for all sectors within a landscape from finance, sustainable practices, community, culture and more allows for holistic policy decisions and more inclusive finance.
Shames said this research targets people who prioritize financial support for small-scale producers, specifically landscape partnerships and investors. By helping small-scale producers through access to finance, he said, we are creating a more sustainable and equitable world for communities and the landscapes they rely on to thrive.
Read the publication here.
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