Spotlight: Azeta Cungu, Rural Finance Officer at FAO on green finance for agri-SMEs

Azeta Cungu, PhD – Rural Finance Officer at the Food and Agriculture Organization (FAO)

1. Can you please tell us about how FAO addresses agri-SME finance?

Agri-SME finance is critical for bridging the investment gap in agriculture and food. FAO sees SME finance as key to increasing financing for agricultural value chain actors, for instilling dynamism in the sector in terms of food production, job creation, greening of the agri-food chain and for improving livelihoods in rural areas and beyond.

At FAO, agri-SME financing is often addressed as part of broader development interventions that target priority value chains in countries. It is viewed as a pre-condition for strengthening the investment capacity of agribusinesses and a means for improving access to finance for upstream agents, such as farmers, and for typically underserved client segments such as women and youths. FAO supports thes different actors through technical assistance, capacity building, de-risking and small-scale investments.

2. Please tell us about your role at FAO and how it has evolved with the growing need for green finance solutions in the agriculture sector.

I am part of a team in FAO Headquarters that works to promote inclusive finance for agricultural and rural actors. Overtime, in line with changes in the development context, our focus on inclusiveness has strengthened and there has been a decisive evolution towards promoting inclusive and green rural finance. It is clear that greening agriculture is central to greening the economy and the planet. There is also growing recognition among stakeholders that building resilience and transforming farming and food systems will not be possible without transformative finance that ensures significantly more resources go to climate-smart, environment-enhancing investments.

In this context, we work on the generation of knowledge and evidence to inform practice that is fundamental in making a stronger case for and boosting momentum for inclusive green finance in agri-food. A specific aspect to single out here relates to the enabling conditions, such as policies, regulations and incentives, and the catalytic role of the public sector. We know these are of key importance whether in building the necessary stakeholder capacities, generating and sharing information, supporting the development of bankable and inclusive green projects, and working with all stakeholders to make green investments in agriculture and food commercially viable. We are also working on the development of technical and operational guidance materials and learning products aimed at supporting stakeholders for an informed and evidence-based engagement in the sector. This addresses another important limiting factor to the expansion of green and sustainable finance.

3. Where do you see the main knowledge and operational gaps in the area of green finance for agri-SME finance?

The gaps are still many. I would like to single out the question of definitions and taxonomies, and policy and regulations. On taxonomies, despite recent progress in this direction by some countries and institutions, we are still not at a stage of convergence and this remains a bottleneck. The plurality of standards on what constitutes green investments in the sector and the issue of green-washing remain largely unresolved. Policy, incentive frameworks and regulatory reforms that green the investment market are crucial in the agri-food sector. They are important for de-risking, repurposing of subsidies, putting in place fiscal instruments to overcome market barriers often faced by investors and to redirect capital flows to healthy, sustainable and inclusive sectors/ activities. Today, it is pressing that countries develop and channel incentives for agriculture and food away from activities that work against sustainability.

Today, it is pressing that countries develop and channel incentives for agriculture and food away from activities that come at the expense of the environment, such as subsidising what works against sustainability, and into healthy, sustainable and inclusive practices instead. Yet, the capacity of many countries to design and implement such frameworks for agri-food remains weak. Coordination and policy coherence are also an issue. We see this with the continued subsidies for fossil fuels. Finally, enforcement of regulations is just as important as their design.

“Today, it is pressing that countries develop and channel incentives for agriculture and food away from activities that work against sustainability.”

4. What role do you think SAFIN can play in addressing these gaps?

SAFIN has a diverse membership of ecosystem players in agri-SME financing. It also has valuable experience and capacities in bringing together these stakeholders and fostering dialogue among them. In my opinion, SAFIN could be a valuable facilitator of exchange and dialogue on policy and regulation-related issues by discussing experiences, drawing lessons and drafting recommendations.