Stimulating entrepreneurship: The case for investing in farmers

In Liberia, US program Feed the Future teaches a community of farmers how to improve production and decrease environmental impacts. Photo credit: Morgana Wingard/ ONE

There is quite possibly no other symbol representing economic growth and prosperity more than the modern entrepreneur. Names like Steve Jobs, Martha Stewart and Mark Zuckerberg ring in the public consciousness as entrepreneurial success stories. These rare individuals drive growth and create jobs, while taking on tremendous risk. All across the developing world there are entrepreneurs who not only absorb risk for themselves, but often for their families.

Smallholder farmers are the ultimate entrepreneurs. In order to feed their family and send their children to school, they must grow enough food to eat and have a surplus left over to sell on the market. If they don’t succeed, many are forced to go hungry or sell off precious assets such as livestock or land.

While credit is usually attributed to individual efforts, the spotlight rarely focuses on the favorable business environment – led by government – that allows entrepreneurs to mitigate risk. The World Bank’s Doing Business index (measures the overall ease of doing business) ranks the United States fourth in the world. While each country is unique, farmers in sub-Saharan Africa would all benefit from a more favorable agriculture investment climate. This idea is stressed in the new FAO report, The State of Food and Agriculture 2012. Here are the key takeaways:

1. Investing in agriculture is one of the best strategies for reducing poverty and hunger. The regions where public agriculture spending have stagnated or fallen are the same areas with high rates of hunger and poverty.

2. Farmers are by far the largest source of investment in agriculture. Despite the recent flurry of high-profile commitments in agriculture by donor governments, multinational organizations (e.g. The World Bank) and large domestic and international companies, farmers are the dominant investors on their farms. Their on-farm investment is more than three times than all of the other sources combined.

3. A favorable investment climate is indispensable. Farmers need access to finance and insurance against crop failure. They need secure property rights and good roads to transport their crops to markets. Unfortunately, this hasn’t always been achieved. Governments and large private companies need to be transparent in their dealings so that farmers (and the environment) can truly benefit from their investments. Open investment and interventions aimed at big problems (e.g. corruption, no rule of law, etc.) in the business environment will catalyze further investment from farmers.

4. Governments and donors need to make ‘smart’ investments. Not all investments are created equal. In fact, research has shown high returns for investments in public infrastructure (i.e. rural roads and education) and R & D; and poor returns on subsidies for inputs like fertilizer.

Clearly, entrepreneurs cannot do it alone – they need tools to help them succeed. Smallholder farmers are no different. As the world looks forward to 2013, governments, citizens and domestic and foreign investors must commit to creating an “enabling environment” for smallholder farmers to grow their way from poverty to prosperity.

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