The World Bank and agriculture

5 April 2012 | Inside the institutions

Agriculture re-emerged in the last decade as a focus of World Bank Group lending, with the Bank claiming that “improving agricultural performance is the most powerful tool we have available to reduce global poverty and hunger.”

The share of lending to agriculture by the International Development Association (IDA) and the International Bank for Reconstruction and Development (IBRD) – the Bank’s low-income and middle-income country arms, respectively – declined from 30 per cent to just 7 per cent between 1980 and 2001. In 2009, the World Bank Group declared that it would increase its lending to agriculture and related sectors, including fishing and forestry, from an average level of $4.1 billion between 2006 and 2008 to $6-8 billion by 2012. This would represent an increase in percentage of agriculture lending from 12 per cent between 2006 and 2008 to up to 17 per cent by 2012 (see Update 69). In 2011, agriculture funds committed by the Bank amounted to $5.7 billion, over a third of which was support to private investment in agribusiness by the International Finance Corporation (IFC) – the Bank’s private sector arm. IFC spending on agribusiness rose to $2.1 billion in 2011 from a yearly average of $1.2 billion between 2006 and 2008.

South Asia and Sub-Saharan Africa are the highest recipients of IBRD and IDA funding for agriculture and related sectors: between 2007 and 2011 they received on average around 29 per cent and 26 per cent respectively of IBRD and IDA agriculture funding. In contrast, the IFC directs the majority of its agriculture investment towards Latin America and the Caribbean, and the Middle East and North Africa. These regions received 35 per cent and 26 per cent of IFC agriculture funding (disaggregated from fishing and forestry) respectively in 2011, whilst South and South East Asia, and Sub-Saharan Africa received only 5 per cent and 9 per cent each.

The Bank’s publications Reaching the Rural Poor (2003) and Agricultural Growth for the Poor (2005) outline its “smallholder first” approach, and a belief that transaction costs and information asymmetries are key inhibitors to agricultural development. The 2008 World Development Report (WDR) on agriculture scaled up the emphasis on integrating small farmers into global markets. Some critics have questioned the Bank’s support for corporate agribusiness, suggesting that corporate food giants pass costs and risks on to small farmers whilst taking the lion’s share of the profit.

The Bank’s approach to food security primarily focuses on extending opportunities for hedging risks to small farmers. In 2008 it set up the Global Food Crisis Response Program “to provide immediate relief to countries hard hit by food high prices” (see Update 77, 62). In addition, the Bank sits on the United Nations Committee on Food Security, although it has faced criticism for its failure to acknowledge the impact of financial speculation on food security. The Bank also hosts trust funds for spending on agriculture, including the Global Agriculture and Food Security Programme (GAFSP), set up in 2010 by the G8, to which it pledged $1.5 billion of its own resources while struggling to secure donor funding (see Update 79, 69).

The WDR demonstrated the Bank’s continued advocacy for land reform, claiming that “well-functioning land markets are needed to transfer land to the most productive users”. Critics have linked the Bank’s advice to countries on reform of land markets to increases in land acquisitions by large agribusiness companies, dubbed ‘land grabs’. The Bank’s Agriculture Action Plan 2010-12 (AAP), intended to operationalise the WDR, suggests that agriculture policy will be realised through: “(i) expansion of demand driven extension services, (ii) expanded use of information and communication technologies to provide farmers with better information, (iii) increased use of matching grants for technology adoption, and (iv) strengthening of seed and fertilizer markets.”

The Bank is currently preparing its AAP for 2013-15 and looks set to emphasise “climate smart agriculture”, which includes supporting “more drought tolerant crops and livestock breeds to improve resilience to climate change” and “soil carbon sequestration” (see Update 79, 78, 77).