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Because of negative issues such as low rainfall, poor households often opt for low-risk livelihood strategies that lead to low returns.
University of Namibia lecturer Elina Amadhila said at a public lecture on Tuesday evening that Namibia’s agriculture sector needs to become more profitable.
The lecture, titled ‘Agricultural Finance Interventions as Instruments for Social Protection: A Comparative Assessment of Developing Economies’, was organised by the Friedrich Ebert Stiftung (FES) and funded by the Forum for Experts on Social Protection (FESP).
Amadhila, a development finance PhD holder, said that despite Agribank and the agriculture ministry helping the sector financially, issues such as drought, low output price and lack of tractors continue to hamper the sector.
According to Amadhila, the transformative function of social protection is missing in Namibian agriculture, as there is poor investment in human development.
“Our interventions have focused more on the role of agriculture than the role of social protection,” she said.
Because of that, there is a need to adopt innovative lending techniques that would benefit financial institutions and farmers, she said.
She said Namibia could learn a lot from Brazil and Indonesia. Both are developing countries that have been registering similar trends in the general economy as well as agricultural employment between 2005 and 2013.
Brazilian lesson
According to Amadhila, market failures and chronic rural poverty in Brazil have prompted government intervention in domestic food markets to connect smaller markets to bigger productions.
The Brazilian government also provided unsubsidised loans at market interest rates against a note issued by the farmers. This, according to her, is something that Namibia too can embrace.
This product offering commits farmers to delivering a specified amount of product, or an equivalent payment, on a future date to a buyer.
“With this method of payment, farmers are more likely to invest, improve their technology, or seek out new buyers to deliver their products to,” she said.
In 2004, Brazil started a federal crop-insurance programme.
“The government has always intended that the environmental risks to crops should not lead to large-scale credit default by farmers,” she said, adding that the Brazilian government supports farmers through economic subsidies for the purchase of agricultural insurance policies. This, she said, is all aimed at promoting social protection.
Since Namibia’s lending expertise is weak, Namibia can learn from Brazil in that sector, she said.
Asian lecture
Amadhila added that unlike Namibia, Indonesia invested heavily in irrigation and actions were taken such as improving agriculture infrastructure and expanding planting areas.
“A guaranteed price for rice producers in Indonesia stimulates farmers’ output as it leads to a protected farming sector and securing of farmers’ incomes,” she said.
Something else that Namibia can learn from Indonesia is agricultural insurance, for which the Indonesian government allocates billions of US dollars.
Indonesia also passed a Farmers Protection and Empowerment Act, which supports its developing agriculture sector.
“Indonesia’s Bank Rakyat Indonesia, which focuses on small-scale and microfinance-style borrowing, provides a good example to show that rural finance can be profitable when it does not rely on subsidies, as long as the government intervention is directed towards improving the legal and regulatory framework, adopting appropriate governance arrangements and having management principles and operating procedure for interventions that reflect a new and more promising approach to rural finance,” Amadhila said.
FES Namibia head Heiner Naumann said at the same event that social protection interventions could reduce risks and might encourage and enable farmers to enter into new production patterns.
“Maybe there are chances to enlarge production patterns in the agricultural areas by innovative approaches. Why should Namibian farmers not begin to harvest energy? The success story of renewable energies should not stop at the farm gates,” he said.