What’s next for development finance?

Brian Thomson

This is Farms. Food. Future. – a podcast that’s Good for You, Good for the Planet, and Good for Farmers.

Brought to you by the International Fund for Agricultural Development.

Welcome to Episode 86 - I’m Brian Thomson.

Michelle Tang

And co-presenting this edition, I’m Michelle Tang.

Brian

Here’s a question: What do you think is the world’s single most reliable source of support for rural families?

Michelle

Hmm… Aid from governments? Development grants?

Brian

Close. But it’s actually remittances – the money migrants send back home.

According to the World Bank, last year, migrants worldwide sent nearly 656 billion US dollars to their low- and middle-income countries.

That’s more than twice the amount of all official development assistance combined.

Michelle

That’s huge.

Brian

Yeah… and for many rural households they’re lifelines that pay for food, education, health, and even farming investments.

Michelle

This week, as the world heads to Seville for the Fourth International Conference on Financing for Development, we’re following the money trail

Brian

From personal remittances to blended finance, and private sector investments – to understand how these financial flows are shaping the future of rural communities.

Michelle

And, of course, we want to hear from you – what you think about our stories and who you want us to be talking to – so please get in touch with us at podcasts@ifad.org.

Brian

You can also subscribe to this podcast via your favourite podcast platform and please don’t forget to rate us.

Michelle

Coming up first, the personal side of rural finance, with IFAD’s Pedro de Vasconcelos.

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Brian

You’re listening to Farms. Food. Future. with me Brian Thomson and Michelle Tang.

Behind every remittance sent is a story of sacrifice, hope and often, a long-distance love.

Michelle

Migrants are sending money home not just for daily needs, but to build futures.

And that potential is only growing.

Brian

50% of remittances now go beyond consumption – to health, housing, education and agriculture.

Michelle

Pedro de Vasconcelos heads IFAD’s Financing Facility for Remittances, which has worked across 70 countries to make remittances faster, safer, and more productive.

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Michelle

Hello Pedro and thank you for joining us on Farms. Food. Future.

The International Day of Family Remittances was marked just last week.

What message did IFAD want to highlight this year – and why is it such an important moment?

Pedro de Vasconcelos

Council, and that happened in: 2015

Day of Family Remittances in: 2015

Michelle

Yeah, so lots of convergences there, and it's easy to see why this here is particularly important. And that message really sets the stage, because in just a few days, global leaders will be gathering in Sevilla for the fourth International Conference on Financing for Development, which you had just mentioned. Now, why is this such an important opportunity for IFAD and also for rural communities globally?

Pedro

Indeed, one third of remittances, one third of the $685 billion that go on remittances every year back to low- and middle-income countries, one third of it goes through rural areas. And this is where remittances have the greatest impact. The biggest investment in agriculture is done by remittances. The aggregated parts, which each family member takes a piece of the remittances that they receive to invest in agriculture or related agriculture products or needs. And it is not about trying to divert some of these flows to development projects, but it is more about providing remittance families – as we call that as a unit of the migrant and their families – how to support them to make better choices as well. First, get better. Facilitate the access to remittances. Getting money there, it's not easy. Digitalization have changed a lot. But there's still a lot of things that can be done to ensure that digitalization reaches rural area effectively. So, providing better access to remittances through digitalization is one, but also then provide better use of remittances, provide the financial tools and financial capability for remittance families to use this form more effectively to learn how to save, to link this with financial services such as credit and insurance, and therefore have a multiplier effect of this $300 that is received each time. And then multiply it by the number of families that receive it, you really have one of the biggest transformative tools available in rural areas today.

Michelle

What is the significance of remittances and diaspora investments in the context of sustainable rural development, and what will IFAD bring to the table in Sevilla?

Pedro

We often talk about remittances, the flows that migrants, migrant workers abroad send back home. That can be domestic too, migrant workers in cities sending back to rural areas are of crucial importance – 685 billion internationally, an unknown number domestically at country level – but often omitted by that is also what diasporas invest. Beyond sending the remittances, there's an attachment to the communities of origin by many migrants, some that have been already abroad for a long time. But this connection with their country of origin, oftentimes stimulates investments. And this comes through the savings that it is estimated to half $1 trillion accumulated by the diaspora abroad. So, this is an almost similar amount to remittances, but it's very little known. Investing in rural areas of the community of origin is a connection that actually links with IFAD’s work and this is why at IFAD we're also very keen in supporting this type of activities.

Michelle

Thank you for that, too. How is IFAD working with partners to mobilize more financing for agrifood systems, especially in ways that benefit rural communities and the food workers?

Pedro

Yes, indeed, to maximize the development impact of remittances and diaspora investment, what is clear for IFAD is that we cannot do it alone. And it requires really a holistic approach involving the public sector, governments, also local communities. It involves also the private sector, service providers, particularly in financial service providers, fintech involved in this sector, it also involves the civil society, diaspora communities… And it's only together that we can really address the maximisation of these flows. We are well versed now in doing that with over 70 projects that IFAD has implemented in over 50 countries for the last 17 years of activities in this field. I think we're leading now in that regard on trying to see what works and what doesn’t, and what to promote, particularly in trying to bring this to scale.

But one aspect is crucial, it is not just the press of a button or a magic app that will transform this. It is really a combined approach. Migrants need more support than just the service, they need also capability services, financial literacy, for instance, to adopt new tools that link remittances to services such as savings, credit and insurance. The private sector, on the other hand, needs to provide those. They need to believe that there is a business opportunity in rural areas at the moment for remittances. This is why IFAD does projects that actually prove the case, build the business case, a profitable one, to engage in rural areas. We do projects in that. You need facilitation from the governments… We believe very strongly at IFAD that the greatest development opportunity of remittances is financial inclusion. Why? Simply because the majority of people that receive remittances – $300 every month – are financially excluded, which makes no sense. So, this is really the biggest opportunity that exists if you can bring the families that receive this income on a monthly basis, and you can connect them with savings, credit and insurance – it is a life changing event. In the communities where they reside, where they live, this can really have a transformative impact in those communities. And this is why we're trying to promote, but in order to do that, of course, national policies, including Remittances National Inclusion strategies should be created. They don't, only a handful of countries have those. And this is also one of the field that IFAD is actively working, in policy engagement, making sure that national strategies include remittances. So, as you can see, both public, private or civil society are all key sectors that you need to work with if you really want to maximize the impact and at this stage, I think this is where IFAD is leading the charge, if I may call it that way.

Michelle

Thank you for that as well. So, my last question would be sort of a wrap up, conclusion, takeaway. What outcomes or commitments would you like to see emerge from the Financing for Development conference? And how can IFAD help drive implementation?

Pedro

s beyond what was declared in: 2015

So, the point here that I think that IFAD would greatly appreciative is the recognition of these flows, particularly to rural areas where we are convinced that these flows have the greatest impact by far. And that recognition, I think, will serve a lot in our dedication to showcase to the public sector, private sector, that rural areas is the place to invest into this field. For the private sector, that you can be both pro-poor and pro profit at the same time by addressing remittances markets in rural areas. We provide, of course, all the arguments as well as market intelligence to showcase this, but that information is still to pass through listing for governments and for their rural development strategies to ensure that it is not just the financial aspect, these are socio-economic phenomena that exist in rural areas and all parties of government should be aware of that in order to maximise it. So, in other words, it's not just the Ministry of Foreign Affairs because it's about migrants, or Finance because of the flows that should be involved. The Ministry of Agriculture should know that the greatest investment in agriculture is done by migrant families, and that they there's a lot of opportunities to link this with other national priorities and strategies. So, this is, I think, the outcome that we would like to see plainly and clearly stated in the outcome of the document in Sevilla. And that would be, I think, a big win for IFAD and its objectives.

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Michelle

Thank you, Pedro.

If remittances are personal finance, then blended finance is the next layer – where public and private sectors meet to unlock investment in underserved communities.

Brian

But rural areas are often seen as too risky for banks.

That’s where actors like Rabo Partnerships step in.

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Michelle

You’re listening to episode 86 of Farms. Food. Future. with me Michelle Tang and Brian Thomson.

Brian

Agnes Johan leads blended finance at Rabo Partnerships.

She helps bring together public money and private investors to fund farms and food projects – especially in places where banks see too much risk.

Michelle

It’s about making sure everyone has enough to eat – everywhere, not just the Global South.

Brian

Agnes started out dreaming of being a farmer herself and now she’s making deals that help small farmers get the money they need to thrive.

Michelle

Following our previous Global Donor Platform for Rural Development (GDPRD) mini-series, this time we’re pleased to welcome Agnes.

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Michelle

What are the issues that keep you up at night?

Agnes

A lot! But work wise, it's about food systems, right? How do we make that a very high priority for everybody. Because if you cannot eat, you really have a problem, but people seem to have forgotten not just in the southern area of the world, but also in Europe. I think how we can make this a higher priority on everybody's daily engagement.

Michelle

What do you think are the main building blocks for success in reforming the financial architecture for food systems?

Agnes

I'll stick to the part where I'm most comfortable with and that's the private sector.

And I think what we're missing there is the cross collaboration between the different parties, right?

We want public private partnerships. We see that that is necessary, but we still don't really know how to go about it in a very scalable manner.

Michelle

That leads me to ask you, could you share a new development or initiative that is a good example of how we should approach food systems financing?

Agnes

I am heading the blended finance team at Rabo Partnership, so I'm going to stay rather close to the things that we've done. And I'm not saying it's the one-size-fits-all. Not at all.

I think what we see nowadays that there are islands of excellence, so there are a great number of blended vehicles set up especially for agriculture. Aceli is one. And FASA, the first loss facility set up by USAID Agency, which is a blended vehicle. They all try to tap into unlocking finance for farmers and really getting into the last mile delivery.

But they also all acknowledge that they can't do it themselves, so they will work through commercial banks because they have the network and the mandate basically to service these financial loans.

They're still small, but I think there's room to grow.

But I think that inclusion of those partners in the whole financing system is going to be key.

So you have the DFIs. They can do big tickets, but if we talk agriculture, then small tickets.

So how do you bridge it and you need to find the in-between organization or company or bank or aggregator, no matter what. But somebody needs to bridge that gap to get the funding all the way down to the primary producers.

Michell

What is one message you would like the donor community to walk away with?

Agnes

I think if we are all feeling the sense of urgency, for one, because we do need to come up with solutions for the youth, I think. That is a key message.

But the other thing is that we need to start to understand each other. We all speak a different language. So we need to start to develop a vocabulary that everybody understands, because then you can finally come to solutions. Because if you continuously have a mismatch in communication, then you don't reach the goal that you are actually working towards.

So I hope that this one of the takeaways.

It will facilitate the coordination, it will facilitate thinking about solutions, it will bring energy to the table as well, so I really hope that that part is also being achieved by the people who have participated today.

Michelle

We've talked a lot about the challenges facing world development and financing. Could you also share one most promising development that you see happening in the near future?

Agnes

We see that on X, because we work with a lot of banks in emerging markets, that the topic of sustainability is very quickly embraced. And I think that is a very positive note. I had always feared that that in terms of priority, sustainability wouldn't be ranking too high. But they are really embracing it and also seeing that it is a crucial element for them to move forward into the financing of certain sectors, so.

So what we saw, for example with banks in Africa, they jumped, or leapfrogged, as you call it. Because they moved immediately into mobile banking and I really hope they're leapfrogging as well in terms of embedding sustainability whether via KPIs or how do you look at credit proposals and balancing their portfolio much better. I hope they leapfrog ahead of all the other banks in the world.

Michelle

So that leads me to my last question. What inspired you to become involved in international development?

Agnes

I'm an agriculture economist by training, so I went to Wageningen University and I combined macroeconomics with development economics.

Actually, I wanted to become a farmer, but since my dad was in the military, there's no way unless I marry a farmer.

But food, somehow, food and agri always captured my interest.

I said, everybody needs to eat, I think, it is so important, so essential to life.

And now my career led me through very commercial banking. I used to finance traders, commodity traders, but then I moved into blended finance which is really where my heart lies, right?

It allows me to structure deals so I can use all the finance knowledge that I have but still create very positive impact.

Yeah, I really enjoy it. It is complicated, it moves slowly but I hope I make tiny changes for the better with my career.

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Brian

Thank you, Agnes.

You can check out www.rabobank.com to find out more.

Michelle

And don't forget to check out too our latest episodes!

Brian

In episode 83 we talked about reverse migration – people returning home... for opportunity, not necessity.

Michelle

Episode 84 brings you slow fashion and innovation from indigenous communities that could just revolutionize your wardrobe!

Brian

And in episode 85 we take you across continents, exploring extreme climates from Mongolia to South Africa.

Michelle

Coming up now, we speak to Ines Rocha from the International Finance Corporation IFC.

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Brian

You’re listening to Farms. Food. Future. with me Brian Thomson, and Michelle Tang.

According to the OECD, only 7% of private climate finance reaches low-income countries.

Michelle

The challenge – and the opportunity – is to build structures that channel more capital to where it’s most needed.

Brian

Our last guest today is on the frontline of global investment.

Ines Rocha is Director of Agribusiness at the International Finance Corporation, the private sector arm of the World Bank Group.

Michelle

Also as part of the GDPRD mini-series, now we’re joined by Ines. Thank you for being with us.

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GDPRD/Michelle

What are the issues that keep you up at night?

Ines Rocha

I cannot not mention Ukraine and the war situation that we have currently unfortunately in Europe, which is the region that I cover under my current role as Regional Director for IFC. The impact of climate change as well, and the very volatile incidents that we see, and this affects not just developing countries but also more developed countries. This also keeps me awake at night in terms of how we have, as an international community, an obligation to do something that mitigates the impact.

Michelle

What are the main building blocks for success in reforming the financial architecture for food systems?

Ines Rocha

, the: 1900

But there are also hidden social, economic and environmental costs behind the food systems, estimated as about actually $12 trillion.

Food systems produce about one third of the greenhouse gas emissions.

Agriculture uses about 70% of water usage and is one of the largest users of land and water in terms of sector. And it is estimated that about one third of the food is actually wasted or lost.

And not to mention the issue around nutrition, which is not just about providing food, but healthy food.

What are the building blocks that we see?

First is reshaping some of the public support.

A second would be a factoring in the health, environmental and social risks when making decisions on investments.

Third would be scale up financial products and models.

Michelle

How can we better leverage the private sector to catalyse food systems transformation?

Ines

To attract the private sector, you need to foster innovation. This is innovation not just in the instruments but also technologies so financing some of these innovative technologies and help respond to climate change.

Second point is the integration of supply chains. So in a more inclusive way, working with arbitrators or financial banks and financial institutions, to then also look into integrating the small farmers, the low end of the spectrum in terms of end users on the supply chains in a more inclusive and sustainable manner.

Michelle

You have a background in fragile contexts. In this increasingly volatile world, how can development investments continue to be available and to make the most impact for those in fragile contexts?

Ines

The World Bank operates in fragile and conflict countries. I myself am just coming out of a mission on Ukraine. IFC has invested just under 2 billion since the start of the war also supporting agriculture, which is a key sector for Ukraine.

And we do this also with leveraging donor funds with the work of our key partners and shareholders but also mobilizing private sector funds working with companies, among the different sectors.

And this is infrastructure, looking into greening of the energy sector, agriculture, trade, financial institutions and other real economy sectors, such as tech and IT which is important for innovation.

Michelle

You spoke a lot about the challenges that we're facing. Maybe you can just mention one most promising development that you see coming up.

Ines

I feel there's momentum within the MDBs.

At COP, all of the MDBs committed to US$120 billion of climate financing.

I speak to quite a few number of companies in Europe that are looking into more sustainable solutions and that fills me with hope because it can also be a business opportunity.

Michelle

What inspired you to get into international development?

Ines

So it's always been a passion of mine. I remember still, when I was studying economics that I wanted to do something and I had a short stint in an investment bank that I felt was not quite enough in terms of impact, so I wanted to feel that I was doing something that together and collectively could move the needle for a better world even for my children and my children's children.

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Michelle

Thank you Ines.

For more information you can visit www.ifc.org.

And for more information about the Donor Platform, please visit www.donorplatform.org.

Brian

And that brings us to the end of this episode.

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Brian

Thanks as always to our producers and editor here in Rome, Rosa González, Francesco Manetti and Francesca Primavilla.

Michelle

But most of all thanks to you for listening to this episode of Farms. Food. Future. brought to you by the International Fund for Agricultural Development.

Brian

We’ll be back in two weeks with our second edition of Life Stories, this time from Bangladesh and Colombia.

Michelle

And on the second Monday in July, we’ll be joined by Chef Ana Villota and Sabrina Elba.

Brian and Michelle

Stay tuned!

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Brian

 

This is Farms. Food. Future. – a podcast that’s Good for you, Good for the Planet, and Good for Farmers.  Brought to you by the International Fund for Agricultural Development.     

 

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Thanks for listening.