Rome, 11 November 2020 – For the first time in history, today 13 Public Development Banks (PDBs) made a joint commitment to strengthen investments in food and agriculture in the context of a global pandemic and a changing climate, with more signatories expected in the coming days.
This unprecedented move comes as an urgent response to the world’s most pressing development and climate challenges in some of the most vulnerable countries.
COVID-19 and climate change are putting enormous stress on our food systems
Said Gilbert F. Houngbo, President of the UN’s International Fund for Agricultural Development (IFAD) which convened the PDB discussions and the subsequent joint statement that was released today.
We need to act now and step up financing if we want to free the world from hunger and poverty by 2030, and offer a sustainable future to the two billion rural people who grow much of our world’s food. Public Development Banks can be leaders in in unlocking opportunities, building a more resilient world and ensuring more equitable societies.
The statement contributes to the Finance in Common Summit (9-12 November) where 450 PDBs from all sectors will meet for the first time to commit to actions that shift investments to a greener and more sustainable path, while responding to the COVID-19 crisis.
The statement has been signed so far by 13 agriculture and rural banks from Sub-Saharan Africa, Asia and Latin America, and regional rural and agricultural credit associations. While these banks may be diverse in terms of capital base, mandate and instruments, the statement emphasizes the critical role they all play in financing future sustainable and inclusive food systems, and in addressing market failures - particularly in times of crisis such as the current COVID-19 pandemic.
To that end, the statement stresses the need to improve regulations, policies, governance and institutional capacity to allow PDBs to take on the necessary investment risks while remaining financially viable and institutionally sustainable in a rapidly changing financial market.
The signatories also acknowledge the importance of focusing on smallholder farmers and small and medium-sized agribusinesses, and developing financial products and services tailored to their needs. Their ability to access finance for investment is often constrained by their size, asset base, fragmentation and lack of information and coordination in both agricultural and financial markets. Houngbo says:
It is critical that Public Development Banks focus on small-scale producers and agripreneurs who are the backbone of food systems and economies of many low and middle income countries. With access to finance, they can be far more productive and contribute to broader food security and prosperity.
The statement further emphasizes the important role of PDBs as catalyzers of private sector investments which are often hindered by a variety of risks, costs, and poor economic returns. PDBs can develop innovative financial solutions to attract investors to the sector and help align commercial finance to global development, environmental and climate-related goals.
According to the Food and Land Use Coalition, transitioning to more sustainable practices in food systems may require US$300-350 billion per year until 2030, but deliver an “economic prize” of $5.7 trillion saved in “hidden costs” associated with current practices, and unlock $4.5 trillion annual opportunities for businesses.
In this context, IFAD is stepping up its engagement with the private sector to attract investments in small-scale agriculture and rural small and medium-sized enterprises (SMEs). In October, IFAD was the first UN fund to receive a public credit rating making it easier to raise funds from public and private lenders. Last March, IFAD invested in a private impact fund, the ABC Fund, to boost investments in rural SMEs.