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![Page 1: Changing the Food on the Plate: Implications for Rural Lenders 3 rd African Microfinance Conference Richard Roberts GTZ Uganda.](https://reader037.fdocuments.in/reader037/viewer/2022110322/56649d0c5503460f949dfb45/html5/thumbnails/1.jpg)
Changing the Food on the Plate: Implications for Rural Lenders
3rd African Microfinance Conference
Richard RobertsGTZ Uganda
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Relative importance of global livestock and aquacultural production - 2000
0
100
200
300
400
500
600
700
800
900
1000
Crop Livestock Capt.Fish Aquaculture
$b
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• Already the estimates just presented show the size of these areas of primary production.
• But……• There are trends which underpin further
growth in the livestock and fish farming sectors – of interest also to FIs
• Let’s look at some economic history, to examine demand
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SearchMaps
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Demand elasticities
• Europe: Late 19th Century
• North America: Early 20th Century
Now……
• Asia:
Up to an annual per capita income of $3000 the elasticity of demand for food is 0.7
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Table 1: Trends in annual per capita consumption of selected livestock food products (kg)
Commodity Developed Countries Developing Countries
% change 1973 to 1993____________________________________________________________
Milk + 3.7 + 38
Eggs 0 + 150
Beef/PorkSheep/Goat + 16.4 + 91Chicken
Source: FAO
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Table 2: Trends in annual per capita consumption of fish – captured and farmed
Origin of fish % change 1970 to 2002____________________________________________________________
Captured fish - 6
Aquaculture (farmed) + 814
Total + 46
Source: FAO
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FI
• Having established the growing importance of these two areas of higher value food production, let us now look at some of the major risks, to a borrower and therefore to FIs ……
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Mortality vs performance
• Major risk in livestock farming and aquaculture is mortality of the stock
• Performance may also be affected by lack attention to feeding management, disease control and protection against typical perils – e.g. those familiar to an insurer
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Perils
• include :– Diseases/epidemics – Adverse weather – Pollution, poisoning, land subsidence– Machinery/electrical breakdown– Fire, lightning, explosion– Malicious damage, riot, strike
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Weather
• Weather perils– Drought/lack of water from irrigation source– Excessive rain/flood– Frost/snow– Windstorm– Hail
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Drought
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Microfinance issues
• Risk analysis of livestock investments not well developed inn most FIs – scope for sharing of information
• However, microfinance already active in financing both livestock and aquacultural investments, but neither is a “measured risk, mature product”
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Some steps…
• Sensitize FI management and staff to the growing demand for higher value foods and the implications for investment flows
• Open up communication lines with sources of necessary expertise – this is usually available, but is often isolated from the financial sector
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Insurance – an option?
• In some cases, yes, but these are limited
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Livestock Risks – Option 1
• Mortality on an individual farm basis
– This may be recorded on a per-animal basis (typical for larger animals), or…….
– On a percentage of herd/flock basis (typical for poultry/small livestock)
(Both too expensive for most small operators)
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Livestock Risks – Option 2
• Mysterious disappearance
– Unexplained absence of livestock, through escape, rustling
(Requires firm rule of law)
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Livestock Risks – Option 3
• Outbreak of a contagious disease with the potential for serious regional/national consequences
(Scope for scale economies in determining loss)
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Traditional livestock cover - Mortality
• Common exclusions in the traditional policy were:– Consequential loss & legal liability– Government slaughter order– Cannibalism/ malnutrition– Overcrowding
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New Directions for Livestock Cover
• Insurable perils now commonly include:
– Epidemic disease– Fire– Poisoning, pollution– Accident
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New Directions for Livestock Cover
Insured events include:
Ban on selling animals or animal products
Drop of production as a result of an insured peril
Loss of animals
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India: Harvesting Carp
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Aquacultural Risks - 1
• These mirror to some extent the categories of risk for livestock
• Like poultry enterprises, and like the trend with insurance for larger livestock losses at the farm level are measured as percentages and/or as lost revenue.
• Thus………………….
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Aquacultural Risks - 2
1. Diseases
2. Predation by birds, seals, sharks
3. Water quality- oxygen depletion- algal toxins
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Sea cages
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Aquacultural Risks - 3
Risks to structures (tanks, cages, sluices)
- Floods- Electrical power outages- Windstorm / storms & surges- Collisions
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Risk Management
• Risk management procedures begin with physical measures to reduce exposure to perils. Livestock and aquaculture
• Thus: • constant monitoring of health• suitable location• veterinary procedures• structural strength adequacy
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Aquaculture Insurance is or has been Transacted in these Countries
(List may be incomplete)
Australia Netherlands New ZealandCanada Honduras NorwayChile Iceland PortugalChina Ireland SpainDenmark Italy SwedenFinland Japan Turkey France Korea,S U.K. Germany Mexico U.S.A. Greece Vietnam
Ref. Secretan (2003) & others
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West Sumatra: Lake MananjauTilapia & Common Carp
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Thank you……..