Integrating Farms, Finance, And Markets – OpEd

Rural economies in emerging markets are often fragile, and this International Growth Centre brief explores the challenges and opportunities that they face. The vast majority of emerging market commodity production is carried out by smallholder farmers who have limited plots of land and are therefore often highly vulnerable to increases in input costs, uncertainty and shocks to global commodity markets. There is a growing demand for more disclosure and sustainability in global commodity supply chains, which is also having an impact on rural areas. Improving rural futures will require action on smallholder agriculture, supply chains and finance. This brief argues that there is a role for an integrated approach to improving rural economies through the overlap of smallholder agriculture, supply chains and finance. Such an approach could deliver more sustainable, inclusive and long-term gains for rural development than current approaches.

Food and nutrition security is a global challenge that can only be met through the development of smallholder agriculture. Smallholder farmers working in food systems dominated by old fields, low yields and inadequate agricultural services face major challenges. Climate change is also introducing new factors that affect their production and exacerbating others that are already well known, such as interannual rainfall variability, increased incidence of pests and diseases, and land degradation. In addition, smallholder farmers are excluded from formal markets and financial services, primarily because of the lack of formal proof of land ownership. Limited extension services are a major factor in not having the appropriate agricultural skills to practice the recommended agricultural practices to obtain higher yields and therefore increase productivity and income. This is one of the main factors of rural youth exodus to urban areas in search of employment opportunities. Our mission is to transform the smallholder agriculture from a model of development characterised by insufficient livelihoods for the rural population, to an innovative and climate change resilient sector.

Agriculture faces many challenges, and for each of these, on the field as well as on the policy level, potential solutions have been identified. For example, clearing old crop from the field should be solved by re-planting, and this should be supported by investments in Climate Smart Agriculture (CSA) technologies like seeds, soil and irrigation management. Farmer Institutions (FIs) can be strengthened by training farmers and enabling them to be powerful, for example, cooperatives and local farmer associations, in order to address fragmentation. Many agritech innovations like digital advisory tools and remote sensing have the potential to empower farmers and increase their capacity to make informed decisions, but further research is required in order to confirm their applicability in the agriculture sector.

The global supply chains for commodities that are demanded on the world market need to be transformed so that traceable and sustainable commodities can be delivered. The declarations from many of the large buyers on the principles of No-Deforestation, No-Peat, No-Exploitation (NDPE) must be translated into real action on the land. However, land-use maps are not available or reliable in many parts of rural areas and are often lacking in the land of smallholders. This lack of availability of maps makes verification of compliance with the required land use arrangements very difficult. Most smallholders do not have direct access to markets served by buyers that require adherence to forest stewardship principles. Instead, they are selling their products to traders or middlemen who may not have any formal forestry principles to adhere to. This leads to two-track forestry where there is a formal sector alongside an informal sector.

The first step on the way to meeting the sustainable living challenges we are all faced with is to guarantee that our production and supply systems are both sustainable and inclusive. Small farmers must be included in traceability systems so they are not excluded from the global market, because large buyers require sustainable products. It is also important that land use classification and verification processes are harmonised and simplified for small farmers, so that they are not overwhelmed by administrative tasks. In order to apply global standards to local realities, it will be necessary for companies, NGOs, governments and local communities to engage in multi-stakeholder dialogue. If standards are imposed without the participation of the local population, they will simply become a formal procedure and will not have an impact on rural development.

Small holder farmers are structurally excluded from access to finance due to several factors that include the length of the agricultural production cycle, lack of adequate collateral and low and unstable income. There are no compelling returns for banks to provide finance to smallholder farming due to high perceived risk. In farming, an individual deciding to plant crops can forfeit income over several years. It is therefore impossible to provide finance to meet this risk. Affordable long-term finance will be required to facilitate access to high-value agricultural products and services. Without access to affordable long term finance, the productivity of the small holder farmer is unlikely to improve significantly, and the resultant small holder farmer income and consequent vulnerability to poverty is unlikely to improve.

Agricultural Finance is a pressing issue that needs to be addressed. We need to develop and implement new and innovative forms of agricultural finance using commercial capital, impact investment and public funds. Blended finance approaches can incentivise and mitigate risks for commercial banks, and therefore increase access to banking services for farmers at affordable interest rates. Cooperatives can play a key role in this context. They provide a stable market for produce and are more efficient in the collection of produce from members. In addition, they can offer competitive interest rates on loans to their members. This can be done by providing credit on an after-sales basis and thus offering time to farmers to replant and allowing them to manage their cash flow. Long-term loans can also be provided for specific crops that require time to mature. A grace period and flexible repayment terms can also be provided to enable farmers to replant. Agritech and sustainability systems can also be linked to the financial products and services to increase the comfort level of the commercial banks and to better support the financial and sustainability needs of the farmers.

The solutions found in the 4 domains are interlinked. When farmers adopt new practices, their yields and incomes are higher, and they are less exposed to risk and therefore more bankable. Sustainable supply chains provide the right incentives to farmers to practice more sustainable agriculture. Alternative models of financing enable the transition. Each solution on its own is limited. But together, they open a sustainable pathway for the development of high-performing, inclusive and sustainable rural economies.

Small farmers must be recognised as an important part of the world commodity system because their work contributes to the maintenance of the environment and also to the economy. The main purpose of this article is to reflect on the potential of an integrated strategy to develop agriculture and rural economy, linking agricultural and climate change issues with corporate social responsibility and access to innovative financial services. This strategy aims to reinforce the rural economies so that they are able to face the challenges arising from climate change, to be competitive at an international level and to ensure that the farmers have decent living and work conditions today and tomorrow.

The opinions expressed in this article are the author's own.

References

• Kehinde, A. D., Akinola, A., & Tijani, A. (2026). Unlocking yield potential through credit access: Insights from smallholder tomato farmers in Nigeria. Springer Nature (BMC Agriculture). 
• Yang, Z., & Li, X. (2026). From credit access to farmers’ income resilience: Evaluating the impact of financial reform on urban–rural inequality and rural income stability. Frontiers Media (Frontiers in Sustainable Food Systems).