Well-functioning agrifood systems play an important role in increasing food and nutrition security, reducing poverty, especially in low-income countries (LICs), and meeting climate and environment goals for sustainable development. They are especially important now in the face of rising prices and food insecurity. The World Bank Group uses a variety of instruments to help develop effective agrifood systems, so they are more productive, inclusive, and sustainable. A new evaluation from the Independent Evaluation Group (IEG) looks at a decade’s worth of Bank Group support for agrifood system development and identifies lessons for the future.
Agrifood systems comprise three components: the actors involved in the agriculture sector, the activities that these actors engage in, and the larger enabling environment. The actors cover the full range from farmers, agribusiness firms, processors, distributors to consumers. The enabling environment includes the policies, standards, and investments that affect sustainable production and market access.
IEG’s report finds that the Bank Group’s interventions in developing agrifood systems in the period between 2010 and 2020 were broadly relevant. But, gaps remain in scaling up and better targeting support to countries that need it the most. The report also found that the interventions were effective overall in improving the productivity, inclusion, and sustainability of agrifood systems. However, this was less so in LICs, particularly in West and Central Africa. This was partly because of the limited capacity, climate shocks, and other challenges that these countries face, especially those in fragile, conflict, and post-conflict situations. In addition, World Bank support for improving productivity was insufficiently diversified toward higher-value products that offer multiple benefits. The agribusiness investments of the Bank Group’s private sector arm, the International Finance Corporation (IFC), faced challenges in meeting environmental and social (E&S) standards, especially in LICs.
The report offers the following recommendations:
- Combining production and market approaches: Production activities are poorly integrated with markets in many countries, especially LICs and countries at early stage of agrifood system development. Many LICs experience low agricultural productivity, which undercuts their efforts to reduce poverty and improve food security. Given their low productivity and limited access to markets and value chains, smallholders, and small producers in LICs remain poor and vulnerable to various shocks. Many of them struggle to shift from semi-subsistence agriculture to more market‐oriented agrifood enterprises.
The Bank Group can help reduce this weak market integration and fragmentation of smallholder production by exploring synergies between interventions that aim to support production activities with those that aim to support improved market access of producers. Interventions aimed at supporting production, i.e., on the supply-side, include improvements to technology, innovations including of digital technologies, delivery of inputs, and irrigation systems. Support for increasing market access, i.e., on the demand-side, includes identifying buyers, developing the needed market infrastructure (for example, storage and aggregation, logistics and cold chains) and facilitating value-chain linkages between smallholder farmers and small and medium enterprises (SMEs) with potential buyers in local, regional, and global markets. Access to finance is also key for supporting both production and marketing activities of farms and SME firms.
Such a mix of supply and demand-side interventions is particularly important for LICs and countries at early-stage of agrifood system development. The Bank Group can pursue such a combined approach through multiple avenues, including leveraging synergies across the Bank Group using parallel or sequenced interventions, through partnerships with other agencies, or through coordinated client actions.
- Diversifying production and cultivating behavioral changes towards sustainable practices and standards: Where conditions allow, the Bank Group should support farmers and agribusiness firms in diversifying their production to also include high-value and more nutritious food products, such as fruit trees, vegetables, food legumes, fish, poultry, and livestock in addition to the traditional staples. Sustainable diversification should benefit smallholder farmers and SMEs, who often find it challenging to diversify their production or agribusiness to include high-value products. This will not only increase their agricultural productivity, but also provide nutritious foods that currently remain undersupplied or largely unaffordable to low-income consumers.
Supporting the successful production and marketing of such products will require the Bank Group to provide adequate financing and help producers pay attention to food safety and quality standards so that they can access competitive, regional and global markets.
At the same time, it will be important to ensure that the Bank Group also supports farmers and agribusiness firms in adopting sustainability practices. The Bank Group should encourage producers and value-chain actors to adopt climate-smart practices that use less resources, such as land and water, maintain biodiversity, and reduce environmental footprints.
- Supporting Environmental and Social (E&S) Performance Standards in private sector investments: For private sector investments in agrifood systems supported by the IFC, the report found that when clients possessed the capacity and commitment to address E&S issues, or received support from IFC to do so, there was greater progress in improving their performance on E&S. Clients in LICs, especially, need assistance on recurring challenges (such as in wastewater management and occupational health and safety) and to support the implementation of E&S action plans and the Bank Group Environmental, Health, and Safety Guidelines.
IFC could support these clients through loan covenants, tailored advisory services, or blended finance.
The above lessons will help the World Bank Group better support its clients in developing agrifood systems that are more productive, inclusive, and sustainable and that can contribute to addressing the current global food crisis.