Smallholder farmers hold the key to the future of food security and poverty reduction in much of the developing world, according to leading development experts. Today, about 500 million smallholder farms already provide more than 80 percent of the food consumed in regions like Sub-Saharan Africa and South Asia; their role will only become more critical as the global population grows.
Yet while smallholder farms are often the backbone of local economies, most operate far below their potential due to lack of financing necessary to adopt sustainable agronomic practices that boost yields, safeguard communities and ensure the health of the soil for future generations. The good news: a new study of certified and noncertified farmers in Colombia and Peru shows that Rainforest Alliance Certified™ farms have better access to credit than noncertified farms. Read on for the key findings.
Researchers conducted in-depth surveys of 110 smallholder coffee and cocoa producers in Colombia and Peru, 63 of which are Rainforest Alliance Certified. They also surveyed international social finance and metric organizations as well as local, in-country financial institutions on their experience of lending to farmers.
Global demand for loans by the 250 million smallholders that sell what they grow is estimated at nearly $500 billion—yet less than $400 million was disbursed by social lenders in 2011, according a study by Dalberg Development Advisors.
Rainforest Alliance Certified farms have better access to credit than noncertified farms. The social lenders interviewed unanimously agree that certification makes them better candidates for loans.
The average dollar value of loans to Rainforest Alliance Certified farms was $5,562, compared to $3,311 for noncertified farms, and the certified farms received more than twice as many loans on average.
Since lenders prefer to lend to small and medium-sized enterprises over individual farmers, technical assistance providers can expand smallholder access to financing by training for cooperatives to on-lend (when one organization lends money that it has borrowed from another).
Learn more about the Rainforest Alliance’s sustainable finance program.