Meeting the demand for sustainable agri-business
Around 75% of people living on less the US$ 2 a day reside in rural areas, depending on agriculture as their main source of income. A growing world population and the effects of climate change are putting pressure on land and natural resources. To help tackle these, Oikocredit established a dedicated agricultural unit in January 2014, to increase sustainable investments in the sector.
The unit is based in Lima, Peru, and headed by Frank Rubio, who is also regional director of Oikocredit South America Northern Region. Together with two agricultural advisors based in Peru and Cote d’Ivoire, he works closely with regional staff to grow and improve the quality of the agricultural portfolio. We recently spoke with Frank about his role and the importance of investing in sustainable agriculture.
The agriculture unit has been operating for almost two years now. What has been the unit’s main achievement to date?
“One of the biggest achievements is that we've been able to place agriculture front and centre at Oikocredit, as it’s one of the most important sectors for future generations as well as sustainability. Before the establishment of the unit, we had a lot of agriculture partners, however there was no focused strategy, best practices or forms of information sharing. So these are the areas that we’ve worked on in improving, to further our investments in the sector.”
How does the agriculture unit help Oikocredit offices build up agriculture portfolios?
“If an office has established that agriculture is a priority sector and growth area, then we can assist them in growing and developing the portfolio. For example, my colleague, Carina Torres, spent several weeks in Rwanda last year where we had no agricultural partners. Carina worked side by side with the Rwandan staff in financing two new coffee partners. We also held some training on financing the agriculture value chain in Rwanda as it was a big focus country for us last year.”
Does Oikocredit prioritise investing in fair trade and/or organic producers?
“Yes. When we have the opportunity to support Fair trade and organic production we do. In some countries like Peru over 90% of our agricultural portfolio is comprised of organic agriculture. There is a growing market for these commodities so we expect that our financing will only increase for these, especially in Latin America.”
How does investing in agricultural enterprises empower low-income earners?
“Small producers generally don’t have access to financing. Oikocredit’s lending provides smallholders with the opportunities to implement strategies to garner better prices for their crops. For example, our trade finance loans allow producer cooperatives to purchase products in bulk and store them until prices rise to higher levels. These price increases are then transferred to small producer members, particularly when they sell to fair trade markets. Our longer term investment loans finance the purchase of machinery and equipment that help small producers add value to their crops and also sell them for a higher price.”
Has climate change had an effect on agricultural producers? If so, what can we do to tackle this?
“Climate change is one of the biggest risks we face in agriculture in the future. Risks associated with climate change include drought, floods, rising temperatures and the results of these on overall production. We have already seen its effects in the coffee sector with the advent of the coffee leaf rust which resulted in over 30% of the Central American coffee crop being lost in 2012/2013. Oikocredit in this case responded by developing a specific lending product to assist smallholder farmers in the replanting of coffee farms with more rust resistant coffee trees.”