RETHINKING FOOD AND AGRICULTURAL FINANCING

Capitalism or Socialism – which is the best approach to solving world food problems?

This is my attempt to suggest a win-win model for scalable investment in Agriculture.

Until just recently, Agricultural and food security interventions have been considered as purely humanitarian interventions with little or no emphasis on the business aspects.

A critical look at the sector, however, will justify this school of thought. I mean, what could be more humanitarian than helping people to have enough food to eat? "A hungry man", they say, "is an angry man". Hence, it is not an exaggeration to say that there cannot be any form of security without a pass mark in food security.?

However, it's becoming clearer that the most sustainable approach to fighting hunger and attaining food sufficiency is to treat the sector as a business. By allowing the law of demand and supply to take its natural course. We will encourage competition (the survival of the fittest) which will drive innovation in the sector that can help us attain Global food security. Or, at least, so we thought. Thus, we coined terms like 'agripreneurship' and 'agribusiness'.

But should we leave a critical aspect of humanity such as food to pure capitalism? Wouldn't the rich prey on the poor and the poor eventually end up being starved to death??And if we decided to go the way of socialism to curb this menace, wouldn't it discourage investors from considering the sector as a lucrative opportunity? And if that happens, can the public sector alone adequately provide the funds required to meet the demand of the sector??

So what is the best approach to tackling food insecurity and achieving SDG 2?? The answer is obvious - we need more than charity to solve the world food problem?

To make agriculture (in under-developed & developing countries)?an attractive sector for the private sector, without sacrificing the extremely poor, we need a new set of investors with a different orientation. These are investors who are not only profit-crazy but also impact-driven. And that makes impact investing a perfect investment style for the sector.?

What is Impact Investing??

International Finance Corporation(IFC) of the world bank, "defines impact investments as investments made in companies or organizations with the intent to contribute measurable positive social or environmental?impact, alongside a financial return".

Impact investing is not the same as the value-alignment investment, whereas the latter occurs when investors buy stocks in companies that sell products that improve?the environment. Impact investments are made with the specific intent to make a measurable contribution to the achievement of social and environmental goals, as well as achieving a financial return.?

Impact investing does not sacrifice social impact on the altar of return on investment, neither does it ignore profitability in the name of helping people to eat well.?It can be seen as a new form of philanthropy or a new form of investment, depending on which side of the coin you belong. It's like seeing the cup as half full or half empty.?

What Makes Food and Agriculture the Best Fit for Impact Investment?

An impact investor develops the intention to fund a cause that leads to social and environmental transformation, evaluates the impact of the cause, and finally, measures the outcome of the investment.?

Since the goal of impact Investment is to both maximize returns, drive social and environmental transformation, the food and Agricultural sector provide the perfect platform for achieving this goal.

With a world population of over 7 billion people and estimated to reach 9 billion in less than a decade, the market for a scalable business in food and agriculture is guaranteed and so is the return on investment in the sector, every other thing being equal.?

Agricultural activities directly contribute about 17% to the share of Greenhouse Gas (GHG) emissions. An impact investor seeking to contribute to environmental transformation can look into sustainable food production and climate-smart agriculture.?

Similarly, the rural community, which is the epicentre of poverty, happens to be the centre of food production. Thus, an investment in rural agricultural transformation has the potential to lift billions of people out of poverty.?

These are just a few examples of how impact investment in the food and agricultural sector have ripple effects on other developmental challenges.?

The food and agricultural sectors need not be the messiah to give handouts, to be productive. It is a fertile ground, capable of yielding high returns to the investors. Yet, we cannot afford to run the Agricultural investment like every other wall street investment. We need to have a new set of investors who have the intention to make an impact and are ready to measure the social transformation that comes with the investment.