Potential Impact of New Agricultural and Rural Finance and Role of Major Stakeholders

In addition to realizing that modern agriculture could be good business for small farmers and, therefore, also a profitable investment for agribusinesses and for financial intermediaries, public donors, governments of developing countries, and large philanthropic foundations may also want to know if supporting this New Agricultural and Rural Finance will have meso and macro level impact and contribute to reaching aspects of the Millenium Development Goals. Agribusinesses and Financial Intermediaries will need to realize that modern agriculture is good businesses for farmers and also profitable investments for themselves. Public donors, governments of developing countries and large philanthropic foundations may want to know the impact of supports that they provide to this New Agricultural and Rural Finance, at meso and macro levels. All stakeholders are keen to understand how a successful endeavour in agricultural financing will contribute significantly to reaching aspects of the Millennium Development Goals.

Potential Impact at Micro, Meso and Macro Levels

At the micro level of rural finance, access to appropriate and adapted financial and non-financial services for small farmers will increase their incomes and enable savings habits, which in turn will smoothen households' and enterprises' cash flow and facilitate investment in productive means and living conditions. This will lead to a virtuous circle, out of subsistence into a modernized rural economy. Both livelihood and value-chain promotion have in common that it involves change management, transforming traditional and dependant individuals into rural entrepreneurs, making strategic decisions of diversification, of entering in contractual relations, of investment in agriculture as a business rather than a way of life and of managing the risks related to agriculture in a modern way. Empowerment could also be assumed as a major impact.

At the meso level, seasonal and permanent job creations for the youth in secondary towns and in value chains, are certainly a credible impact assumption. Better investment of remittances in MSMEs in the agribusiness sector should be considered if migrants see it as a good opportunity to set up a profitable business for themselves and a useful activity for the community. In turn, these jobs created and the investment from private sector leads to local economic development, sustaining local governments in countries where devolution is an important development policy.

At the macro level, successful agricultural and rural development built upon a private-sector-led approach would certainly have an impact on growth. And as this sector involves a majority of the population and most often the lower end segment, a spill over effect is likely. With appropriate policy, there should also be a significant impact on food security and food sovereignty for countries and regions that have been dependant.

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