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New Working Paper: Fertilizing Growth

An International Credit Facility for African Smallholder Staple Farmers

Early last year I wrote a 3-page concept note proposing “An International Credit Facility to Support Commercialization of African Smallholder Staple Crop Farmers”  This would be a mechanism to tackle the “missing rural middle” of African farmer finance.

It would target staple crop farmers, rather than cash crop farmers, who typically have much greater access to capital, for many reasons.  (It is also the same mechanism cited in a recent blog post for Rio+20.)

The basic idea is as follows:

A systematic financing mechanism is needed to address the “missing middle” of rural Africa, whereby smallholder farmers can coordinate to access “patient capital” loans of perhaps $25,000-$100,000 at a time. This mechanism should be focused on making capital available in the context of a broader ecosystem of business support and agricultural extension services that help farmers identify market opportunities based on agronomic comparative advantage, then develop business plans, introduce new farming techniques, and implement successful marketing programs. Importantly, the complementary services are not a substitute for the patient capital itself. The financing facility would focus on neither pure public subsidy nor pure private capital. Instead it would focus on covering the risk-adjustment component of private loans.

The cost would be roughly $5 billion per year of public finance to leverage roughly $25 billion per year of private capital.

I wrote this as an input to a working group that was chaired by Mthuli Ncube, chief economist of the African Development Bank, and which included people like Nancy Birdsall of CGD.  Everyone in the group seemed to support the idea, but in the busy-ness of life we didn’t have a chance to spend more time on it.  As a minimum step I thought it worth posting the note online here.

The Millennium’s Promise: International Security and Poverty Reduction

[This post originally appeared at CENSA.net on September 15, 2010]

President Obama’s recent national security strategy places a significant emphasis on development in the poorest countries. This is partly anchored in an ambition to promote American values, and partly in an ambition to address pragmatic concerns that human suffering in any corner of the world can ultimately threaten the wellbeing of Americans viagra a vendre suisse. The risks of violent conflict are much higher at the lowest levels of economic development, and there is significantly higher risk in African countries exposed to major climate stress.

The focus on development is consistent with the President’s stated objective of backing the Millennium Development Goals (MDGs) and a vision to eradicate extreme poverty in a generation. The MDGs are the internationally agreed targets that were established in 2000 to tackle key challenges in hunger, education, health, access to safe drinking water, and income poverty, with a general aim of cutting each problem by half by 2015, compared to a baseline of 1990. The Goals draw attention to 1.4 billion people still living on less than a dollar a day, and to the simple and low-cost interventions that can make a dramatic difference in their lives. A $10 modern anti-malaria bednet can protect two children for five years. A $50 bag of fertilizer can help a poor farmer double her crop and start to earn an income. A locally produced school meal can entice a child to attend classes and have the energy to focus and learn while there.

Five years remain until the Goals’ 2015 deadline, and this September the UN will convene its last major checkpoint summit to map out a course for the home stretch. More than 150 world leaders are said already to have confirmed their attendance, so the breadth and caliber of participation should be high. Expectations were set last September, when President Obama used his first speech to the General Assembly to assert that he would approach the 2010 MDG Summit with a “global plan to make [the Goals] a reality.”

The US Government’s commitment to a successful MDG summit outcome unlocked a cascade of ambitions throughout the international community, driven by a desire for the US to take a proactive global leadership role for sustainable development, rather than what had previously been perceived as a reluctant if key role on specific issues of interest, in particular global health. Nonetheless, the recent MDG movement in Washington has been sympathetic but gradual as foreign policy players have navigated a thicket of policy urgencies plus an internal review of strategies and institutional arrangements. As a result, a little over two months away from the summit, the world is still waiting to learn the US’s suggestions for an action plan.

The previous official international hurrah around the MDGs took place five years ago, at the 2005 Gleneagles G8 Summit in the United Kingdom and then the UN World Summit in New York. At Gleneagles, leaders of the wealthiest countries made extremely high profile and solemn commitments to double their collective investments in African development by 2010 and to increase their global development support by $50 billion over the same time period.

Since Gleneagles, the UK has been the one country that made major promises and also held steady to its word. Canada and the U.S. made modest commitments and generally met them too. But in the end the G8 has fallen roughly $20 billion short of its collective pledge, due mainly to shortfalls from France, Germany, Italy, and Japan, thereby defaulting on its joint commitment. Even worse, at last month’s G8 Summit in Canada, leaders declined even to mention their Gleneagles commitments in their public communiqué, as if erasing a reference at the deadline would somehow erase the commitment itself.

It is remarkable that even the richest and most powerful countries cannot coordinate to hold their word for dollar values that amount to near rounding error when compared to national security budgets and economic stimulus packages. Twenty billion dollars would easily fill the global budget gaps for bednets or fertilizer, while the Wall Street bonuses in New York state alone were more than $20 billion in 2008, the same year the financial sector melted. Such explicit shortcomings of G8 collective responsibility undermine the legitimacy of any of their future promises, and indeed undermine anyone’s desire even to hear more promises. This, in turn, forms an indirect threat to global security and stability, since intergovernmental agreements are anchored in trust, compliance, and an understanding of shared responsibility.

A loss of faith in global commitments creates diplomatic costs well outside of the development community. For the well-governed but poverty-stricken countries, development priorities like farm productivity and disease control are first order political priorities wherein donor shortfalls cause direct local repercussions, fueling resentment to be aired on other international issues. For the less well-governed developing countries, a lack of accountability among the rich countries creates opportunities for “spoilers” to foster sympathy coalitions other issues, fueling a cycle of mistrust in international negotiations.

All of this points to the imperative for US leadership on the Millennium Development Goals, and for a strong action-focused outcome at the UN this September. There is a global leadership gap at the intergovernmental level, and the world is hungry for the U.S. to be out in front on the Goals. Developed and developing countries alike will respond very positively to suggested global policy and planning recommendations for agriculture, education, child survival, maternal health, infrastructure, and basic environmental management.

This summit is therefore not just an opportunity for the MDGs. It is a moment to build system trust – and thus a significant opportunity for advancing national security, even if not typically appreciated as such. Where development budgets might not be immediately available amidst fiscal pressures, great gains can still be made if the appropriate mechanisms are launched, like a global education fund that can sow the seeds of development for a generation. The world will need to continue well beyond 2010, and ongoing success will hinge on contributions from all parts of foreign policy community, including government, business and non-profit organizations. This blog looks forward to exploring these themes in more detail over the weeks ahead.

Clarifying Two Central Questions in Foreign Aid

[This post originally appeared on May 19, 2009 at globalbrief.ca]

Spurred by a fragile global economic psyche and some controversial recent writings, foreign aid has entered a new cycle of scrutiny in recent from months. This is not altogether surprising in light of widespread market malaise and the tendency of many to turn inward during times of crisis. But it is nonetheless risk-ridden at a time when intensified international collaboration is required. It is also ironic cheap jerseys since rich countries were already falling dramatically behind, well before the onset of the crisis, on their commitments to support basic services in the poorest countries.

In practical terms, the debate around foreign aid tends to confuse two basic questions. The first is whether aid-financed programs achieve what they are meant to achieve. The second is whether the same aid-financed programs boost economic growth. The latter topic is important for understanding when countries can graduate from the need for aid to finance public programs exclusively from their own resources.

On the first question, the past decade has shown cheap nba jerseys many unambiguous aid-financed successes. Programs for AIDS treatment, for example, have brought life-saving medicines to more than 2 million people in Africa. Likewise aid-financed programs helped to cut measles deaths in Africa by 90 percent in just 6 years, saving more than 1,000 lives per day. They have also helped Malawi double its food production and supported the distribution of more than 140 million long-lasting insecticide treated anti-malaria bednets within just 3 years.

Have all aid-financed programs achieved such success? Of course not. Does the lack of success in some quarters mean we should cut back on other areas of success? Of course not. Cutting back life-saving health programs would not only have horrific consequences for the millions of current beneficiaries, but it would also leave hanging the millions of others who By have yet to be reached by programs that are still being scaled up. The key task is to understand why some aid programs have been so successful while others have not, and to scale up those that work. Common elements of success include clear delivery targets, ground-level ownership of success, transparent allocations of responsibility, and adequate finance to get the job done.

The second question of aid’s effect cheap nba jerseys on economic growth is more complicated. Macroeconomists tend to focus on this topic as a short hand measure of aid’s overarching value. Many think that if aid cannot be statistically linked to growth then it must have been a failure. This framing is short-sighted when it overlooks the first priority of discerning direct programmatic results. We know, for example, that emergency humanitarian aid is inversely correlated with growth, since that aid is (by definition) delivered to avert catastrophe rather than to make long-term investments. But at another end of the spectrum, if aid helps eradicate smallpox but doesn’t create any jobs, is that a failure? Likewise should a program that helps save 2 million people from dying of AIDS be considered a success or failure if it does not create new jobs? And when aid to Africa amounts to approximately $35 per African per year, how many successes should one realistically expect in any case?

At core, economists still have difficulty measuring all the mechanisms through which successful aid programs might contribute to growth. For example, economic theory and evidence teach us that better health and education contribute to better economic outcomes. But macroeconomists have so far had trouble confirming all the statistics to map every link in the chain from aid to health and education to country-level growth. That notwithstanding, it is an interesting if preliminary fact that Africa’s economic cheap jerseys growth ? rates have picked to up over the past decade at the same time as aid started to rebound from historic lows, with a particular emphasis on health and education.

Another possible explanation why aid is not more closely cheap nba jerseys linked statistically to growth is that aid programs have not yet directed adequate practical emphasis on Hamul productive sectors like agriculture, which dominates the rural economies of sub-Saharan Africa. Total worldwide aid to agriculture from all rich countries to all poor countries amounted to roughly $5 billion in 2007, equivalent to approximately $2 per person for all people living on less than $2 per day (or $4 per person if we assume that roughly half of that population is rural). It is possible that subsistence economies’ biggest and most discernible economic growth returns to foreign aid will lie in productivity boosts among smallholder farmers. Malawi, for example, has enjoyed robust economic growth amidst its boost in food production over the past three years.

The bottom line is that any assessment of aid needs to be unpacked and measured against its purpose. It is unquestionable that aid is helping to finance vast human Financial success stories throughout the world, especially in Africa. These are of merit unto themselves, even when the evidence linking to GDP growth is still pending. They should provide lessons for a other programs that can provide key complements for economic development, and might indeed have direct Noon growth consequences.streaming movie Fifty Shades Darker

A humane and strategic approach to aid should boost poor countries’ ability to tackle the challenges of today while helping to build the economic autonomy that will allow them to address the challenges of tomorrow. In the meantime, the global community has an obligation to keep supporting and expanding programs that work, especially during a period of fragility and strain.