[Interview] "Microfinance institutions are key in strengthening the resilience of smallholder farmers"
Interview with Paul Delaunois, Head of ADA's Climate-Resilient Agriculture programme.
How can microfinance institutions provide practical support to smallholder farmers in Benin in dealing with the impacts of climate change?
In Benin, small, family-held farms account for 90 to 95% of farmers and cultivate 70 to 80% of farmland. They produce most of the food and are therefore crucial to food security. However, they remain highly vulnerable to climate hazards, which degrade ecosystems, reduce yields and threaten incomes.
Microfinance institutions (MFIs) are key stakeholders in strengthening their resilience. By offering tailored financial products, they allow farmers to cover their production costs and invest in climate adaptation. This includes seasonal loans tailored to the cultivated crops and the real circumstances, insurance against climate risks and support during the adoption of sustainable practices. MFIs also play an important role in providing financial education and disseminating information on climate risks, thereby helping to make incomes more secure and support the transition of farms.
Has the project already led to interesting approaches, practices or innovations by partner microfinance institutions?
We support five MFIs whose portfolios are largely focused on farming. Faced with increasing climate hazards – droughts, irregular rainfall, floods and heatwaves – smallholders are struggling to repay their loans, which increases the risks for MFIs.
Our aim is to help our partners strengthen the economic resilience of smallholder farms by supporting them to sustainably transform their farming practices. The objective is clear: to improve the profitability of farms so that they are better able to cope with climatic, environmental and economic shocks.
To achieve this, we facilitate their access to appropriate financial products, develop risk management solutions (guarantee mechanisms, early warning systems and post-harvest loss reduction), build farmers' capacities through training and support and improve their access to more lucrative markets.
In Benin, several of our partners are already implementing these solutions with convincing results.
"Strengthening financial innovation, protection against risks and technical support is key to making the agricultural sector in Benin more resilient and inclusive."
In your opinion, what are the main challenges in adapting financial products to the specific needs of climate-resilient agriculture?
Beninese MFIs have to overcome a number of different obstacles.
Firstly, the lack of effective cover against climate risks remains a major problem. The agricultural loans offered often do not take account of hazards such as drought, flooding or price fluctuations. In addition, access to affordable and innovative agricultural insurance – covering, for example, climate-related yield losses or providing reliable weather information – is still very limited in Benin.
Secondly, the flexibility of financial products and the MFIs’ institutional frameworks represent a real challenge. Credit offerings are not sufficiently adapted to the changing needs of smallholder farms, particularly because most financing is still short-term. This hinders long-term investment in sustainable infrastructure or technologies, which are essential for adaptation.
Thirdly, the lack of resources for offering complementary advisory and support services limits the impact of the loans. Where technical support is not provided for adopting resilient farming practices (new varieties, agroecological production techniques, storage and processing), access to credit rarely leads to real changes on the farms.
Finally, it continues to be difficult for vulnerable populations such as women, young people and smallholders to access appropriate financial products as they often lack the necessary guarantees and information.
To address these challenges, strengthening financial innovation, protection against risks and technical support is key to making the agricultural sector in Benin more resilient and inclusive.
How does ADA propose to collaborate with partner MFIs and the Beninese authorities to sustain efforts in the transition towards more resilient agriculture?
ADA is working with five MFIs to develop comprehensive approaches to transform smallholder farming, promote sustainable changes in production practices and strengthen the economic viability of farms by improving their profitability.
To ensure that its work has long-term effects, ADA is also working with state institutions and national structures (e.g. the National Agricultural Development Fund). This means that activities can be aligned with national priorities, results can be shared, and an institutional framework can be established that is conducive to replication and upscaling. The authorities are particularly involved in validating the agricultural models that are promoted and consulted on support mechanisms for smallholders, thereby facilitating the dissemination of these innovations on a larger scale.
This approach should ultimately impact several thousand farmers and, with the support of local partners, create a self-sustaining dynamic of agricultural resilience in Benin.