Africa | Climate Smart Agriculture

Conference with Cordaid for the climate financiers of the future

27 June 2022 16:00

Can financing arm farmers against climate change? Yes, especially with the help of microfinancing institutions (MFIs). As driving forces behind climate-smart solutions, they reinforce their own positions while improving the lives of farmers. During a two-day conference together with Cordaid, we planted the first seed among MFIs in Rwanda. Program Manager Kevin Kabatsi will explains us how MFIs can make a difference.

I’ve seen for myself how climate change can have devastating effects on people’s lives where I come from in Southwest Uganda. People in the mountains are starting to die of malaria, where the disease had never been a problem before. Why? The malaria mosquito can now survive at higher altitudes, thanks to global warming. Rwanda faces different challenges, but they’re no less far-reaching. Life-threatening floods and extreme drought are both destroying harvests there. As a result, smallholder farmers can’t earn a living, and food production is under threat.

A unique opportunity to help

It’s often impossible for farmers to innovate in the face of natural disasters. So they need to invest money, but financiers think they pose too great a risk for standard loans. That’s where MFIs come in. They have close ties to the farmers, and therefore a unique opportunity to help them with climate-smart agriculture. For example by charging a lower interest rate to farmers who use climate-smart farming techniques. Or by issuing special climate loans. With access to financing, farmers can implement climate-smart agricultural techniques like irrigation systems, terrace farming, crop rotation and the use of intermediate crops and organic fertilizer. That will give them more successful harvests, higher incomes, and enable them to repay their loans.

Inspiring MFIs to take on their role

But unfortunately, many MFIs don’t recognize those opportunities. In fact, they often have a bad reputation as loan sharks charging high interest rates. They also acknowledge that they don’t have the knowledge needed to play a climate-smart role for farmers. And they claim to need international funding to introduce new financial products and services. To inspire Rwandan MFIs to take on the role of climate financier, in May 2022 we organized a conference in Kigali, Rwanda, together with Cordaid. They already work with a lot of Rwandan MFIs and know the Rwandan financial sector and donors very well.

Uncommon, but powerful tool

During the conference, representatives of farmers’ organizations emphasised the urgency of the problem. They are literally watching their harvests burn up or wash away. The other participants also shared their insights and knowledge with the Rwandan MFIs: government representatives, the Rwandan Central Bank, other financiers and donors, the Dutch embassy, and Rabobank’s Acorn. Special guest was a delegation from the Senegalese MFI Caurie MicroFinance, a pioneer in climate-related solutions and a wonderful example of climate-smart financing.

For us as a Foundation, conferences are an uncommon tool, but in this case it was ideal. We were able to quickly bring together our network and inspire as many Rwandan MFIs as possible in just two days. In the process, we accelerated two of our strategic priorities: promoting climate-smart agriculture and reducing post-harvest losses. Both with the same overall goal: to give smallholder farmers a stronger position and a better life.

Now it’s the MFIs’ turn

We’re definitely proud of what’s been achieved so far: few MFIs in Rwanda can claim not to be aware of the role they play in climate-smart agriculture. The next step is to decide how to fulfil that role. The MFIs present will develop an environmental plan before the end of the year, and hopefully they will introduce products and services to promote climate-smart agriculture sometime in the coming year. The seed has been planted, and now it’s up to the MFIs to let it come to fruition, with positive consequences for Rwandan farmers, the MFIs themselves and the global food supply.

Rabo Foundation strives to provide access to not only finance but also knowledge and network for as much smallholder farmers as possible. These kind of conferences contribute to this goal.