301
© The Author(s) 2019
T. S. Rosenstock et al. (eds.), The Climate-Smart Agriculture Papers,
https://doi.org/10.1007/978-3-319-92798-5_26
Chapter 26
Rural Finance to Support Climate Change
Adaptation: Experiences, Lessons and Policy
Perspectives
Ruerd Ruben, Cor Wattel, and Marcel van Asseldonk
26.1 Introduction
Agricultural development is strongly influenced by the availability of rural finance.
Given the time lag between sowing and harvesting, upfront funding is generally
required to enable input purchase before returns are realized. This time lag is even
larger for perennial (tree) crops and for production practices that have a longer gestation period, such as irrigation, land consolidation and cover crops.
Access to credit is even more important in the adoption and subsequent upscaling of climate-smart agriculture (CSA) practices. CSA investments tend to be
resource-intensive and can be recovered only over a long period of time. Farmers
who make these investments often are motivated not only by direct costs and returns
but also by the prospect of reduced volatility, increased resilience and a higher
degree of certainty regarding future revenue streams.
Different types of financial services fulfil different functions in the production
cycle. Whereas credit provision is most helpful for short-term input intensification
and medium-term investments, market contracts and insurance (e.g., crop, health
and life) provide coping strategies for risk-averse decision-makers. Furthermore,
savings provide a way for farmers to both pay for inputs and ride out adversity. The
effectiveness of these financial services depends on the availability of other nonfinancial services (such as training, extension and certification) and the incentives
provided by the market (e.g., price premiums, input costs and payments for environmental services). The latter types of incentives may enhance the profitability of
CSA investments and encourage farmers to adopt CSA practices (Long et al. 2016;
Nyasimi et al. 2014).
R. Ruben (*) · C. Wattel · M. van Asseldonk
Wageningen Economic Research (WEcR), Wageningen University & Research,
Den Haag, The Netherlands
e-mail: ruerd.ruben@wur.nl
© The Author(s) 2019
T. S. Rosenstock et al. (eds.), The Climate-Smart Agriculture Papers,
https://doi.org/10.1007/978-3-319-92798-5_26
Chapter 26
Rural Finance to Support Climate Change
Adaptation: Experiences, Lessons and Policy
Perspectives
Ruerd Ruben, Cor Wattel, and Marcel van Asseldonk
26.1 Introduction
Agricultural development is strongly influenced by the availability of rural finance.
Given the time lag between sowing and harvesting, upfront funding is generally
required to enable input purchase before returns are realized. This time lag is even
larger for perennial (tree) crops and for production practices that have a longer gestation period, such as irrigation, land consolidation and cover crops.
Access to credit is even more important in the adoption and subsequent upscaling of climate-smart agriculture (CSA) practices. CSA investments tend to be
resource-intensive and can be recovered only over a long period of time. Farmers
who make these investments often are motivated not only by direct costs and returns
but also by the prospect of reduced volatility, increased resilience and a higher
degree of certainty regarding future revenue streams.
Different types of financial services fulfil different functions in the production
cycle. Whereas credit provision is most helpful for short-term input intensification
and medium-term investments, market contracts and insurance (e.g., crop, health
and life) provide coping strategies for risk-averse decision-makers. Furthermore,
savings provide a way for farmers to both pay for inputs and ride out adversity. The
effectiveness of these financial services depends on the availability of other nonfinancial services (such as training, extension and certification) and the incentives
provided by the market (e.g., price premiums, input costs and payments for environmental services). The latter types of incentives may enhance the profitability of
CSA investments and encourage farmers to adopt CSA practices (Long et al. 2016;
Nyasimi et al. 2014).
R. Ruben (*) · C. Wattel · M. van Asseldonk
Wageningen Economic Research (WEcR), Wageningen University & Research,
Den Haag, The Netherlands
e-mail: ruerd.ruben@wur.nl