There is broad consensus that realizing the Sustainable Development Goals (SDGs) and the Paris Agreement on climate change require a transformative agenda for agriculture and food systems. In this context, the importance of mobilizing more investments and aligning them to sustainable development and inclusive rural transformation objectives, is widely acknowledged.

The gaps in investment
Estimates of investment required for achieving these goals show that the financing needs are considerable although the appraisals of incremental financing requirements differ significantly.

Raghav Gaiha

In 2019, the United Nations Conference on Trade and Development (UNCTAD) estimated total investment needs for food and agriculture at US$ 480 billion to achieve related SDGs in developing countries, with actual investment at US$220 billion, thus leaving a gap of US$260 billion.

These estimates suggest that transforming food systems to deliver healthy people, a healthy planet, and a healthy economy will require US$300 – US$350 billion extra per year over the next decade.

The swift and massive shock of the coronavirus pandemic has plunged the global economy into a severe contraction. The prospects of economic revival are highly uncertain and downside risks are predominant. Development finance gap is thus likely to worsen.

Towards meeting the financing gaps
To meet these needs, finance will be required from all sources to work in alignment with the 2030 Agenda and the Paris Agreement. The extension of the Debt Service Suspension Initiative (DSSI) through to the end of 2021 led by the World Bank – will help most developing countries to focus on domestic priorities including getting SDG delivery back on track.

A Common Framework for Debt Treatments beyond the DSSI is in the making, while some International Financial Institutions (IFI) are expecting historical highs in their replenishments (IFAD, IDA, AfDB). In addition, there is a call for a new general allocation of USD 650 billion (IMF Special Drawing Rights) to be channelled to benefit vulnerable countries.

Shantanu Mathur

Yet other PDBs have a primary focus on agriculture but their portfolio includes other sectors. This is based on the notion that supporting sustainable small-scale farming through inclusive agri-food value chain development is between two to three times more effective as a means to eradicate poverty than other sectors.

Some PDBs target small-scale enterprises including producers, while others focus their portfolios on larger agribusinesses or larger investments, for instance, in agricultural infrastructure and markets. This diversity is key to understanding the role of different types of PDBs in advancing the 2030 Agenda.

The overarching goal, however, is to address market failures, with counter-cyclical roles, and greater risk tolerance than what other financial institutions have. Given their public mandate and close proximity to public policy and governance institutions, PDBs can play a catalytic role supporting accessible, affordable and usable financial services for rural poor people socially, environmentally and economically sustainable outcomes across food systems.

PDBs (which are already responsible for over two-thirds of formal financing for agriculture), can facilitate a change of course across the financial ecosystem. This includes mobilizing sustainable and green finance, issuing investment products, structuring blended solutions and public-private financing schemes.

At the same time, adopting digital solutions across their business operations, and delivering a suite of financial services and products to different types of clients in food systems – including women, youth, SMEs and smallholders. It is known that private investment in agriculture and/or in other activities within food systems is often constrained by many risks associated with poor infrastructure and economic returns. PDBs are capable of increasing their capacity to crowd in, de-risk, and help align commercial finance to the SDGs and to climate-related goals such as those set in the Paris agreement.

Mobilizing catalytic investments
Stimulating responsible private investment and financial innovations – such as through blended finance – are required to improve food security and nutrition and inclusive rural transformation, and to address the post pandemic gap in ODA. UNCTAD has estimated that around 75 per cent of the gap could be financed, in principle, by the private sector – with the potential to mobilize US$195 billion annually. PDBs are actively engaged in platforms where private investors, businesses, philanthropists and other entities are investing to fund SDG aligned projects.

In their Communiqué (Matera, June 2021) the G20 Development Ministers have welcomed the establishment of a “Finance in Commons” Working Group on Financing Sustainable Food Systems, led by IFAD, that is meant to bring together PDBs, recognizing the critical role of the private sector to build upon public efforts to improve agri-food systems.

As a concrete action – emerging out of the United Nations Food Systems Summit (UNFSS) is the advent of a Coalition for Action to launch a PDB global Platform, with focus on increasing investments in inclusive and sustainable food systems chains, for accelerated learning, innovation, mobilization and deployment of capital and services.

Going forward, closing the financing gap will require strong international cooperation and political will to enhance the fiscal space to ensure sustainable domestic financing. Multilateral Development Banks can work with PDBs and test/validate sustainability-related financial instruments, encompassing (sustainability/green) bonds, funds and other investment vehicles aimed at advancing sustainable development objectives. This will play an important role in mobilizing much-needed finance to reduce the SDG financing gaps in developing countries and become possible long-term financing instruments of international and national public financial institutions.

Raghav Gaiha is Research Affiliate, Population Aging Research Centre, University of Pennsylvania, USA, & (Hon.) Professorial Research Fellow, Global Development Institute, University of Manchester, UK; Shantanu Mathur is Lead Adviser & Senior Partnership Officer, Global & Multilateral Engagement International Fund for Agricultural Development (IFAD).
(The views are personal)

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By Raghav Gaiha and Shantanu Mathur
NEW DELHI, Dec 19 2017 (IPS)

Lack of diet diversity is viewed as the major cause of micronutrient malnutrition in Sub-Saharan Africa. Imbalanced diets resulting from consumption of mainly high carbohydrate based-diets also contribute to productivity losses and reduced educational attainment and income. Consequently, micronutrient malnutrition is currently the most critical for food and nutritional security problem as most diets are often deficient in essential vitamins and minerals. In Tanzania, for example, most rural and urban households consume mainly staples as their main food, which are high in carbohydrates, but low in micronutrients and vitamins. Staple food items increase energy availability but do not improve nutritional outcomes if not consumed together with micro-nutrient rich foods.

Raghav Gaiha

A recent study analyzed the relationship between production and consumption diversity in smallholder farm households in four developing countries: Indonesia, Kenya, Ethiopia, and Malawi (Sibhatu et al. 2014). These four countries were selected mainly because of availability of recent household data. The results are classified under (i) association between production and diet diversity, (ii) role of market access, and (iii) role of selling and buying food. Farm production diversity is positively associated with diet diversity, but the effect is relatively small. In the pooled sample (of all four countries), producing one additional crop or livestock species leads to a 0.9% increase in the number of food groups consumed This effect, however, varies across the countries in question. In Kenya and Ethiopia, the estimates are very small and not (statistically) significant. In these two countries, average production diversity is quite high; further increasing farm diversity would hardly contribute to higher diet diversity. One indicator of market access is the geographic distance from the farm household to the closest market where food can be sold or bought. The estimated effects are negative, implying that households in remoter regions have lower dietary diversity. Better market access through reduced distances could therefore contribute to higher diet diversity. Reducing market distance by 10 km has the same effect on diet diversity as increasing farm production diversity by one additional crop or livestock species.

Shantanu Mathur

Another approach is to take into account what households sell and buy. This information is only available for Ethiopia and Malawi. If a household sells at least parts of its farm produce, it has a positive and significant effect on diet diversity. It is also much larger than the effect of production diversity. This comparison suggests that facilitating the commercialization of smallholder farms may be a better strategy to improve nutrition than promoting more diversified subsistence production. Furthermore, the negative and significant interaction effect confirms that market participation reduces the role of production diversity in dietary quality.

Better market access in terms of shorter distance and more off-farm income opportunities increase the level of purchased food diversity. If off-farm income opportunities are greater in rural areas with short distances to market, the market access effect can’t be disentangled from the income effect. The interaction between level of farm income and participation in off-farm activities is often complex as small farmers tend to work as labourers in the latter while relatively affluent dominate as owners in more remunerative enterprises. The two important inferences are: (i) increasing on-farm diversity among smallholders is not always the most effective way to improve diet diversity and should not be considered a goal in itself; and (ii) in many situations, facilitating market access through improved infrastructure and other policies to reduce transaction costs and price distortions seems to be more promising than promoting further production diversification. One major caveat, however, remains. Even the alternative measure of diet diversity/quality is merely a crude approximation to nutrition (Gaiha et al. 2014).

In brief, market access through buying/selling food is more closely associated with diet diversity than production diversity. Diet diversity, however, is a weak proxy for nutrition. Indeed, there is no shortcut to empirical validation of the link between diet diversity and nutritional outcomes-especially consumption of micronutrients.

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By Raghav Gaiha and Shantanu Mathur
NEW DELHI, Dec 11 2017 (IPS)

Although difficult to ascertain whether it is a trend reversal, two recent FAO reports (2017a, b) show a rise in hunger globally as well as in Africa. The number of undernourished (NoU) in the world suffering from chronic food deprivation began to rise in 2014 –from 775 million people to 777 million in 2015 – and is now estimated to have increased further, to 815 million in 2016. The stagnation of the global average of the proportion of undernourished (PoU) from 2013 to 2015 is the result of two offsetting changes at the regional level: in Sub-Saharan Africa, the share of undernourished people increased, while there was a continued decline in Asia in the same period. However, in 2016, the PoU increased in most regions except Northern Africa, Southern Asia, Eastern Asia, Central America and the Caribbean. The deterioration was most severe in Sub-Saharan Africa and South-Eastern Asia (FAO 2017a,b).

Raghav Gaiha

Food systems are changing rapidly. Globalization, trade liberalization, and rapid urbanization have led to major shifts in the availability, affordability, and acceptability of different types of food, which has driven a nutrition transition in many countries in the developing world. Food production has become more capital-intensive and supply chains have grown longer as basic ingredients undergo multiple transformations. Expansion of fast food outlets and supermarkets has resulted in dietary shifts. The consumption of low nutritional quality, energy-dense, ultra-processed food and drinks, and fried snacks and sweets has risen dramatically in the past decade.

The concomitant shift to the more market-oriented nature of agricultural policies means that agricultural technology and markets play a more important role in determining food prices and rural incomes, and more food is consumed from the marketplace rather than from own production. The greater market orientation of food production and consumption has increased the bidirectional links between agriculture and nutrition: agriculture still affects nutrition, but food and nutritional demands increasingly affect agriculture. Increasing demands for energy-intensive products exacerbate environmental impacts of food value chains: for example, excessive use of agricultural chemicals to extract more dietary energy from every hectare while contaminating the very food it produces, along with groundwater and the soil; and the greenhouse gas emissions from livestock industries to feed the ever-increasing demand for meat and dairy products (Carletto, 2015).

Shantanu Mathur

A food value chain involves a series of processes and actors that take a food from its production to consumption and disposal as waste. In a value chain, the emphasis is on the value (usually economic) accrued (and lost) for chain actors at different steps in the chain, and the value produced through the functioning of the whole chain as an interactive unit. A value chain is commodity specific, and thus involves only one particular food that is relevant within a diet.

As value chains are crucial in determining food availability, affordability, quality, and acceptability, they have potential to improve nutrition. What is required is to identify opportunities where value chain actors benefit from supplying the market with agricultural products of higher nutritional value. Value chain development, however, has rarely focused attention on consumers—consumers are simply considered as purchasers driving the ultimate source of demand. In this light, the value chain strategy is likely to be enriched by a stronger consumer focus, and, in particular, a focus on consumer nutrition and health. The empirical evidence on the role of value chains in improving nutrition is, however, scanty and mixed.

Basically, nutrition results from the quality of the overall diet, not just from the nutrient content of an individual food. In value chains, the focus is generally commodity specific, rather than on how to integrate multiple chains to contribute to an enhanced quality of diet. There may be offsetting impacts such that, if one value chain works better and consumption of the associated food increases, consumption of other foods may decline.

On the demand side, the central issue is how to promote consumption of nutritious foods by target populations that may not be able to afford a healthy diet. Similarly, on the supply side, an important concern is the feasibility of targeting the poorest smallholders and informal enterprises along the value chain, particularly, involving women.

An example from Nigeria elucidates the potential of value chains for enhancement of nutritional value and the constraints that must be addressed. Chronic undernutrition is pervasive in Nigeria, with rates of stunting and underweight alarmingly high and little progress over the last decade. There are major disparities in nutrition outcomes between the wealthy and poor, between the north and south, and between urban and rural areas. Micronutrient deficiencies are widespread across social groups. Vitamin A deficiency, for example, is associated with 25% of child and maternal deaths. Together with direct nutrition interventions, it is necessary to improve the functioning of food value chains and provide access to nutrient-dense foods to the urban and rural poor.

Cowpeas make a substantial contribution to the nutrition of poor populations in Nigeria. Cowpea grains contain an average of 24% protein and 62% soluble carbohydrates. They are rich in thiamine, folates and iron, and also contain zinc, potassium, magnesium, riboflavin, vitamin B6 and calcium, as well as the amino acids lysine and tryptophan. Markets for cowpea products are mainly informal, and the majority of products are produced by small-scale businesses and sold locally. Few formal sector businesses have invested in cowpea products, and there is limited innovation in value-added products. A merit of cowpea foods is that they are readily acceptable to diverse populations, widely available across the country and can be distinguished from less nutritious alternatives. However, affordability and availability of cowpeas is constrained by major supply-side problems. Cowpea prices fluctuate between seasons, due to the susceptibility of grains to degradation and low use of improved storage technologies. Although simple, safe and low-cost technologies are available in the form of improved storage bags, these are not prominent in wholesale and transport stages of the value chain. Besides, existing preservation techniques make use of pesticides that create risks of toxic contamination. Improving use of storage technologies along the value chain, including on-farm facilities, transportation and storage facilities in markets would help alleviate this constraint-especially for smallholders.

So the challenges are creating incentives for businesses to focus better on nutritional foods and conditions enabling smallholders to integrate better into these chains.

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