The Microfinance Crisis and Food Security
On October 2, 2013, the ‘Study Circle for Development Issues’ of the Royal Agricultural Society (KLV) in the Netherlands organised a meeting entitled ‘The Microfinance Crisis and Food Security’. The meeting, which was held in Wageningen, was chaired by Dr Klaas Molenaar, lecturer Financial Inclusion and New Entrepreneurship of the Hague University of Applied Sciences. Mr Molenaar introduced the issue by drawing lessons from microfinance with respect to access, empowerment and product development. He also postulated that structural changes are taking place in terms of self-managed and self-controlled financing, equity finance and SME credit unions.
Professor Robert Lensink, of Wageningen University, sketched the enormous changes in the appreciation of microcredit. Up to about 2005 microcredit was extremely popular but it has been challenged by recent developments. These include its commercialisation which, to many, has caused a ‘microcredit crisis’. He also embarked on the diversification of microfinance instruments, including savings and insurance which, in his opinion can be even more important than providing loans.
Dr Ferko Bodnar of the Dutch Ministry of Foreign Affairs provided insight in a recent systematic review of impact of interventions in agricultural production, value chains, market regulation and land security. In his presentation Mr Bodnar tried to link the impact of these interventions to options for credit services.
Mr Gert van Maanen, former Board Member of ING Bank (the Netherlands) and founding member of Oikocredit International took the position that microcredit has emerged to be both, a blessing and a curse.
The blessing is in the fact that, under strict conditions, ‘unbankables’ have been enabled to survive with microcredit. The curse was that this success attracted opportunists into the microfinance business who went for their own profit and that of their principals.
Mrs Hedwig Siewertsen, managing director of d.o.b. Equity for Africa investigated impact investment and private equity as instruments to realize (agricultural) growth and societal return in Africa.
In her view, long term risk capital is needed to make the agricultural sector in Africa grow. This is because negative effects of short-term volatility in markets, prices and weather can only be compensated by ‘good’ years. D.o.b., contrary to banks, invest in risk-bearing equity instruments by taking ownership stakes in companies for periods up to 10 years. D.o.b. Equity for Africa is one of the sponsors of the Africa Agribusiness Academy.
Lastly, Mr Albert Boogaard of the Netherlands’ Rabobank Foundation shared some of the Foundation’s experiences in microfinance for agricultural lending, and the limitations thereof. He emphasised the role of rural cooperatives and the Foundation’s support in managing loan funds and organizing technical assistance.
The meeting was concluded with a lively plenary discussion between the presenters and the 50 participants.