Scaling Up Agricultural Investment to Combat Poverty and Hunger

The 2007-2008 and 2010-2011 food crises saw not only an increase in food prices, but also an increase in poverty in many developing countries. A staggering 1.2 billion people live in extreme poverty worldwide, and 70 percent of those poor live in rural areas and depend in some capacity on agriculture to survive. For these poor populations, there is an urgent need for strong investment in agricultural growth to increase production, reduce hunger, and help lift them out of crushing poverty.

A new brief , released as part of a set of 20 briefs commissioned by IFPRI's Vision 2020 Initiative, cites evidence that agricultural growth can have a strong impact on poverty reduction. According to the report's analysis, a 1 percent average annual increase in agricultural growth leads to a 2.7 percent increase in the income of people in the lowest three income deciles in developing countries. Investment in agriculture is also 2.5 to 3.0 times more effective than nonagricultural investment in increasing incomes in poor populations. Clearly, agricultural growth is a critical step in reducing poverty and hunger and reaching the Millennium Development Goals.

How can agricultural growth be sustainably and effectively increased in the developing world? What investments are needed, and from whom? The brief's author, Kevin Cleaver of IFAD, provides four key steps to increasing agricultural growth.

1. Increase rural populations' access to agricultural markets, infrastructure, and government services, particularly for smallholder farmers. This includes creating an environment that encourages both private investment in agriculture, processing, and farm inputs and public investment in rural infrastructure, education, and regulation.
2. Increase attention to the needs of smallholder farmers. Focusing efforts on smallholders, who make up a large share of the world's rural poor, would help increase food production, sustainably manage important natural resources, and stop or even reverse environmental degradation.
3. Increase both donor aid and government investment in agriculture. In recent decades, agricultural investment has steadily declined, with the share of agriculture in total bilateral and multilateral aid reaching a low of 5.4 percent in 2003–2005. Similarly, most African governments spend less than 10 percent of their budgets on agriculture. In countries that have reached or surpassed the 10 percent target (Ethiopia, Madagascar, Malawi, Mali, Niger, and Senegal), research now shows that larger public expenditures, coupled with a good governance environment and larger aid allocations from international donors, can lead to impressive agricultural growth and subsequent poverty reduction.
4. Target appropriate programs and policies for scaling up. Many developing countries are the site of a multitude of small development programs; these programs are typically only supported by similarly small donor and government budgets. As such, there is not much potential for scaling them up. Scaling up larger government programs or aid-financed programs that have been successful in the past can help stop such fragmented spending and make real inroads into rural poverty.

Watch the launch of the 20 brief set on June 28, 2012.