Bolstering Small-Scale Agriculture: IFAD's Innovative Approach in an Uncertain Era

The International Fund for Agricultural Development (IFAD) is taking bold steps to support small-scale agriculture in an increasingly uncertain global environment. At a recent event hosted by the Center for Strategic and International Studies (CSIS), IFAD President Alvaro Lario outlined the organization's innovative approaches and evolving financial model aimed at bolstering rural development and food security.

The Global Context: Rising Challenges for Food Security

President Lario began by highlighting the complex global context IFAD is operating in:

• Conflicts have risen to the highest levels in decades
• A cost of living crisis and inflation are impacting economies worldwide
• 740 million people are currently experiencing food insecurity and poverty
• 300 million face acute food insecurity
• Global trade and value chains have been disrupted

These challenges have brought renewed focus on food security as a national security priority for many countries. African nations in particular are recognizing the need to invest across the entire agricultural value chain to boost self-sufficiency.

IFAD's Unique Role and Approach

Within this landscape, IFAD plays a critical role in targeting investments to rural areas where 80% of extreme poverty is concentrated. The fund focuses on making farming a viable business for smallholder farmers by providing:

• Access to capital
• Access to water
• Access to markets at fair prices
• Support for infrastructure and value chain development

IFAD's niche is working in remote, challenging environments that larger institutions often overlook. As President Lario noted:

"Our purpose is to do the right investments to really make sure that farming is a business. That means that farming has access to capital, access to water, access to the markets which is very important at a fair price, access to being able to export or just to even trade."

Evolving Financial Model Expands Impact

A key development in recent years has been IFAD's entrance into capital markets. The fund has:

• Obtained two AA+ credit ratings
• Issued its first bond in 2022
• Issued its 10th bond in January 2025

This new financial model provides IFAD with greater flexibility to leverage resources and develop new tools like partial credit guarantees. It allows IFAD to:

• Mobilize more credit for smallholder farmers
• Work with local financial institutions and banks
• Co-finance projects with multilateral development banks
• Explore local currency investments

As President Lario explained: "That flexibility we really need to take as much advantage as possible. We're also thinking on how to promote local currency in some of our private sector investments."

Partnering with the Private Sector

A major focus for IFAD is expanding partnerships with the private sector to amplify impact. Key elements of this strategy include:

• Co-investing IFAD's own capital alongside private sector partners for the first time
• Targeting investments in small and microenterprises, intermediary funds, and public development banks
• Creating vehicles and platforms to facilitate private sector engagement
• Adapting project design to create entry and exit points for private sector involvement

While private sector partnerships are still a relatively small portion of IFAD's portfolio (around 5%), the fund expects significantly higher co-financing ratios from these investments compared to public sector projects.

Investing in Human Capital and Technology

IFAD recognizes that boosting smallholder productivity requires investing in human capital alongside financial resources. Key focus areas include:

• Farmer field schools to teach agricultural skills and best practices
• Business training to help farmers run sustainable enterprises
• Partnerships with research institutions to translate innovations to on-farm impact
• Digital connectivity and financial services for rural youth

President Lario emphasized the importance of making farming an appealing business opportunity for young people:

"For young people to also go into it, there needs to be also digital connectivity. I was yesterday also signing some agreements with Microsoft, with the World Bank, with African Development Bank, with Mastercard in terms of connectivity in certain countries in Africa, how to provide also to financial services to many of the young people."

Water Access as a Foundation for Success

As chair of UN-Water, President Lario highlighted the critical importance of water access for agricultural development:

"I've seen in our projects that when you get access to water, many times it's when farming starts to become a business. Without water access, there is no business. There is no possibility of generating income."

IFAD is working to complement large-scale water infrastructure investments by ensuring last-mile connectivity to smallholder farms. This involves partnering with other development banks to extend irrigation systems to remote rural areas.

Adapting to an Era of Uncertainty

While acknowledging the current uncertain geopolitical and economic environment, President Lario emphasized that certain trends remain clear:

• Growing need for climate resilience among vulnerable farmers
• Importance of investing in rural areas to reduce poverty and food insecurity
• Potential for agriculture to drive economic growth and job creation in developing countries

IFAD is adapting its approach to this context by:

• Evolving its financial model to leverage more resources
• Expanding work in fragile and conflict-affected states
• Focusing on catalytic investments that can attract further funding
• Putting systems in place to work more effectively with the private sector

Looking Ahead: IFAD's Vision for the Future

As he reflected on his first two and a half years leading IFAD, President Lario outlined his vision for the organization's future:

• Continue evolving IFAD's culture and operations to better engage the private sector
• Ensure the institution is "fit for purpose" for the coming decade
• Maintain focus on IFAD's core mission while adapting to new challenges
• Leverage IFAD's niche expertise in rural development for maximum impact

By combining financial innovation, strategic partnerships, and a laser focus on supporting smallholder farmers, IFAD aims to play a critical role in bolstering global food security and rural livelihoods in an uncertain era.

As the world grapples with interconnected challenges around climate, conflict, and economic instability, IFAD's evolving model offers an example of how development institutions can adapt to drive sustainable impact. By bridging public and private sector resources, IFAD is working to create resilient food systems and economic opportunities in the world's most vulnerable rural communities.

Article created from: https://www.youtube.com/watch?v=a2y_XWTKK_Y