FINANCING SUSTAINABLE RICE

FOR A SECURE FUTURE

INNOVATIVE FINANCE PARTNERSHIPS
FOR CLIMATE MITIGATION
AND ADAPTATION

Supporters Action Partners

FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE

Content Authors Supporters

Executive Summary 1 Earth Security Group We are grateful for the support of our
funding partners:
1 Introduction 3
Seven Facts That Make
Sustainable Rice A Critical Swiss Agency for
Impact Commodity Development and Cooperation

2 Regional Hotspots 14
— Southeast Asia Earth Security Group (ESG) is a Phoenix Group
— West Africa strategic intelligence agency that
enables the public and private sectors
to engage, align and work together
3 The Business Case for 27 for climate resilience and sustainable Action Partners
Sustainable Rice development.

info@earthsecuritygroup.com
http://earthsecuritygroup.com Our strategic partners are collaborating
4 Blueprints to Scale Finance 35 on the design and implementation of
for Sustainable Rice the innovative finance partnerships
presented in this report:

Acknowledgments 49 Sustainable Rice Platform

Endnotes 50

United Nations
Disclaimer Capital Development Fund
The views and opinions expressed
in this report are solely those of the
authors. Every attempt has been made World Business Council for
to ensure the accuracy, completeness Sustainable Development
and reliability of the information provided
in this report; however, the information
is provided “as is” without warranty of
any kind. The information provided in
the report does not constitute legal,
financial, or other professional advice.
Earth Security Group and Earth Security
Partnerships shall not be liable for any
damages arising from the use of, reliance
on, or action resulting from any of the
information contained within the report.

Copyright
© Earth Security Partnerships 2019
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 1

EXECUTIVE SUMMARY
RICE: AN UNDER-APPRECIATED GLOBAL IMPACT
FINANCE OPPORTUNITY
Key Point 1 Key Point 2
Rice is the main staple food for 3.5 billion While China and India are the world’s
people, more than half of the world’s largest rice producers, the report focuses
population, and it is critically exposed to the on Southeast Asia and West Africa — two
effects of climate change and water scarcity. regions with significant potential to increase
production sustainably.

Rice is grown by 150 million smallholder farmers who are China and India are geographically large enough that they
mostly poor, in small plots of land of less than 1 hectare. It could relocate production in response to climate change.
uses 40% of all irrigation water globally and is responsible for However, smaller countries in the tropical belt will have less
10% of the world’s methane emissions. Most of the world’s room to adapt. Southeast Asia and West Africa are uniquely
rice is consumed close to where it is produced. Less than 10% vulnerable to the combined impacts of climate change,
is traded internationally, increasing the risks of dangerous water scarcity and food insecurity, making the need to scale
price volatility brought about by climate shocks or export sustainable rice production a pressing priority.
restrictions. A number of innovative production practices
already exist that, if implemented at scale, could mitigate the
sector’s sustainability and resilience challenges while raising
productivity. However, the high fragmentation of smallholder
production needs creative approaches to deploy sustainable
finance along the value chain. This report explains how
global impact investors can help the transition to sustainable
production.

Key Point 3 Key Point 4

The UN-facilitated Sustainable Rice Platform Innovative financing instruments can be
(SRP) Standard and Performance Indicators used to mobilise private sector investments
provide a robust basis for creating new towards climate-smart rice production.
mechanisms to finance sustainable rice
value chains.

The report’s innovative finance blueprints build on SRP’s This will require public-private cooperation and new financial
rice production standard and performance indicators as a delivery mechanisms that leverage global climate finance.
framework to design new finance mechanisms. For example, Companies in the rice value chain that are making sustainable
SRP’s indicators inform the design of instruments such production and farmer livelihoods a key part of their
as ‘rice bonds’, digital finance platforms to scale financing business models are well-positioned to attract new forms
to smallholder farmers, and blended finance funds that of sustainable finance. However, rice is not a well-known or
deploy climate finance to achieve a transformation towards well-understood impact finance opportunity for investors, and
sustainable rice value chains. much remains to be done to ensure that international climate
finance can be used to attract private sector investments into
climate-smart agriculture.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 2

EXECUTIVE SUMMARY
BLUEPRINTS TO BUILD INNOVATIVE FINANCE
MECHANISMS FOR SUSTAINABLE RICE
The report’s recommendations identify In developing these proposals, Earth Security
opportunities to adapt sustainable finance has engaged over 60 stakeholders including
innovation to the rice sector’s sustainable banks, asset managers, impact investors,
transition. These provide practical pathways major rice traders and agribusiness companies,
for private sector investments to help achieve international organisations and civil society
countries’ commitments to climate mitigation groups, in collaboration with its action partners,
and adaptation. through workshops and interviews.

Blueprint 1 Blueprint 2 Blueprint 3

Create a digital finance Issue a ‘rice bond’ to finance Leverage international climate
platform for financing to reach sustainable rice value chains finance to attract private sector
smallholder farmers investment for climate-smart
rice production

This initiative addresses the absence of This concept addresses the need for This proposal addresses the opportunity for
an integrated financial infrastructure to upfront capital for companies, suppliers more climate finance to be directed towards
serve millions of rice smallholders who and farmers to switch to climate-smart resilient agriculture systems. Countries in
lack access to financial services. We production. A ‘rice bond’ would enable a Asia and Africa that are already receiving
recommend developing a digital finance global rice processor, trader, or retailer donor funds to develop climate-smart rice
platform that gives smallholders that to provide farmers in their value chain production, such as more efficient irrigation
are working towards compliance with with capital to transition to sustainable systems, can use these funds as a catalyst to
the SRP Standard access to bundled production: improve farming practices, attract private investment. Innovative models
financial services and market linkages increase yields and revenue, and range from issuing a ‘sovereign green
to sustainable value chains. Such a become more resilient to climate risks. bond’ for agriculture investment, to blended
platform would facilitate interoperability We recommend integrating the SRP finance vehicles that enable agri-businesses
with existing data platforms led Performance Indicators into the Climate and local banks to increase the access to
by agribusinesses, research and Bonds Initiative (CBI)’s taxonomy for green finance of smallholders. Landscape-based
development agencies, and creating bonds in agriculture, as a common basis and carbon market-based solutions will
agreements with banks and other financial on which a ‘rice bond’ can be designed, play increasingly important roles. Using
institutions. Such a platform could issued and reported on. Additionally, we public finance strategically would enable
effectively help to create the financing explore other types of ‘rice bonds’ as an the private sector to play a more prominent
architecture that is missing to support the innovative form of finance that incentivises role in helping governments to achieve
more than 140 million smallholder rice sustainable procurement. These include their climate-smart agriculture pledges,
farmers around the world. issuing a ‘rice bond’ to enable the World as reflected in their Nationally Determined
Page 37 Food Programme (WFP) to drive the Contributions (NDCs) and National Adaptation
procurement of sustainable rice at scale. Plans (NAPs).
Page 40 Page 43
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 3

1 INTRODUCTION
SEVEN FACTS THAT MAKE
SUSTAINABLE RICE A CRITICAL
IMPACT COMMODITY
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 4
INTRODUCTION

SEVEN FACTS MAKING SUSTAINABLE RICE

A CRITICAL IMPACT COMMODITY

Rice is the third-biggest crop globally in terms However, the global rice sector is extraordinarily
of area harvested, after wheat and maize. It fragmented, and most rice is grown on farms
is the main food staple for 3.5 billion people, of less than 1 hectare by farmers with little or
and a linchpin of global food security. But it no access to credit, training, or agricultural
uses 40% of the world’s irrigation water and it extension services, creating barriers to wide-
is responsible for 10% of global emissions of scale adoption of climate-smart, sustainable best
methane, a powerful greenhouse gas (GHG). practice in rice production.

Innovative production systems such as the A sustainable production path is vital to the
System of Rice Intensification (SRI), and more security of major rice producing and consuming
recently the Sustainable Rice Platform (SRP) countries, and to meeting a global need to
Standard and Performance Indicators, offer mitigate and adapt to climate change while
proven tools to help farmers lift production contributing to achieving the Sustainable
while using fewer inputs and reducing methane Development Goals by 2030.
emissions.

FACT 1 FACT 2 FACT 3

3.5 BILLION PEOPLE GLOBAL PRODUCTION IS RICE CONSUMES 40% OF THE
DEPEND ON RICE AS THEIR EXPECTED TO FALL 15% BY 2050 WORLD’S IRRIGATION WATER
MAIN STAPLE FOOD DUE TO CLIMATE CHANGE

FACT 4 FACT 5 FACT 6

RICE PRODUCES 10% OF 48 COUNTRIES SEEK TO INVEST 1 BILLION LIVELIHOODS
GLOBAL METHANE EMISSIONS IN CLIMATE-SMART RICE IN DEPEND ON RICE FARMING
THEIR NDCS

FACT 7
RICE PRICES ARE HIGHLY
SENSITIVE TO CLIMATE SHOCKS
AS LESS THAN 10% OF GLOBAL
RICE PRODUCTION IS TRADED
INTERNATIONALLY
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 5
INTRODUCTION

FACT 1
3.5 BILLION PEOPLE DEPEND ON RICE
AS THEIR MAIN STAPLE FOOD

Figure 1 Source: FAOSTAT, IRRI Ricepedia Rice consumption per capita (kg/year)
Rice consumption per capita versus Calorie supply from rice (%)
% of calories supplied by rice

200 100

180 90

160 80

140 70

120 60

100 50

80 40

60 30

40 20

20 10

0 0
Bangladesh

Vietnam

Myanmar

Thailand

Indonesia

Philippines

China

India

Japan

Brazil

Higher rice prices due to climate These consumers are not in a position Meanwhile, in producing countries such
change and resource scarcity will force either to spend more on rice or to change as India and Bangladesh, falling rice
households in Asia and Africa into to other staples. As a result, any major yields represent an existential threat
poverty. incidents affecting availability or price to many rural livelihoods, with millions
of rice — such as harvest failures, a fall of smallholders at risk of falling into
Rice is vital to the food security of over half in export volumes or sudden price rise poverty.5 6
the world’s population.1 Asia continues — would jeopardise the food security of
to account for 90% of rice consumption, millions of people and increase hunger Falling household incomes and increasing
with China alone accounting for around a and poverty across the developing world. poverty would also have longer-term
quarter. In lower-income countries such In Cambodia, for example, it is estimated consequences for community and national
as Bangladesh, Cambodia and Vietnam, up that a 10% rise in the rice price could lead development. During periods of high rice
to 70% of people’s dietary energy comes to a 0.5% increase in the poverty rate, prices, poor households are forced to
from rice. Demand for rice is also growing dealing a severe blow to poverty reduction prioritise spending on basic sustenance
rapidly in Sub-Saharan Africa, which is efforts.3 over other needs such as health and
mostly dependent on imports. education.7 Higher food prices thus act
A study conducted after skyrocketing as a brake on development by preventing
In both Asia and Africa, most rice rice prices led to a food crisis in 2007-08 households from investing in their longer-
consumers are poor and rice accounts showed that a 50% increase in the rice term future.
for a substantial proportion of household price would on average increase the
expenditure — in Myanmar, the average poverty headcount across central and
household spends 13% of its income on west Africa by 2.2 percentage points.4
rice.2
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 6
INTRODUCTION

FACT 2
GLOBAL RICE PRODUCTION IS EXPECTED TO FALL 15%
BY 2050 DUE TO CLIMATE CHANGE

Figure 2 Source: GRiSP (Global Rice Science Rest of World (million tons)
Global rice production increases Partnership) 2013 Rice Almanac, North and South America (million tons)
needed to meet demand by 2035 4th Edition, International Rice Africa (million tons)
Research Institute Asia (million tons)

600

116 million additional tons 555 million tons

550 of rice will need to be produced of rice will be needed
between 2010 and 2035 in 2035

500

450
439 million tons
of rice were produced
in 2010
400
2000

2005

2010

2015

2020

2025

2030

2035

Climate change could cut rice cultivation Excessive salinity in soil and water In Africa, rising temperatures will make
by up to 80% in the Sahel. negatively impacts rice growth and yields, highland areas of East Africa more
and rising sea levels are exacerbating the suitable for rice cultivation, but could cut
Even as global demand for rice continues problem. Saline conditions are expected to cultivation in the Sahel region of West
to rise, climate change is imposing become increasingly widespread in deltaic Africa by as much as 80%.11 In the major
additional pressure on critically scarce production areas, potentially reducing rice-growing regions of Asia, computer
water resources and reducing the yields by 15% in some of the world’s simulations have shown yields falling
availability of land suitable for rice premier rice-growing areas.9 Other by up to 10% with every 1°C increase.
cultivation. The International Food Policy impacts of climate change — including Drought, crop loss due to prolonged
Research Institute (IFPRI) says that by higher temperatures, changes to rainfall flooding of rice fields, and an increased
2050, stresses due to climate change patterns and extreme weather events — incidence of pests and disease epidemics
could reduce productivity by 10-15% in key are also likely to compound this negative are also likely to reduce rice yields. In
growing areas.8 Given the importance of impact on rice productivity. Vietnam’s Mekong Delta and Bangladesh,
rice production in deltaic regions — such studies show that higher temperatures
as Vietnam’s Mekong Delta, Thailand’s Rice is vulnerable to high temperatures, and the resulting fall in rice production are
Chao Phraya Delta and Myanmar’s particularly during the reproductive a leading driver of migration to cities.12 13
Irrawaddy Delta — seawater intrusion into phase and at night. In recent years, high
rice-growing areas resulting from rising temperatures have led to crop losses in
sea levels is increasingly impacting on Asian countries including Japan, Vietnam,
production. Pakistan and Bangladesh.10
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 7
INTRODUCTION

FACT 3
RICE CONSUMES 40% OF THE
WORLD’S IRRIGATION WATER
Almost 30% of the world’s rice is The use of groundwater to irrigate rice In some cases, conflicts among users
produced in regions that are already paddies has led to a fall in groundwater have arisen, which can spill over into
experiencing water stress. levels in northern China and large parts transboundary water conflicts.20 For
of India, casting doubt on the future of rice example, competition for water from the
It takes 3,000–5,000 litres of water to cultivation in those areas.16 By 2025 it is Cauvery river in southern India is the main
produce a single kilogram of rice, more expected that some 15–20 million hectares cause of a long-running conflict between
than any other staple crop.14 In all, rice (ha) of irrigated rice will suffer from some rice farmers in the neighbouring states of
receives 34–43% of the world’s irrigation degree of water scarcity.17 Tamil Nadu and Karnataka.21
water and 24–30% of its developed
freshwater resources.15 The water In India, the Philippines and Indonesia,
intensity of rice cultivation, coupled water scarcity is preventing the expansion
with dwindling water resources in many of rice cultivation into new areas to satisfy
rice-growing areas, represent a serious growing demand.18 The situation is further
obstacle to expanding rice cultivation and complicated by the fact that in many key
indeed even to maintaining current levels rice-growing countries, competition for
of production. water is increasing due to growing demand
from industrialization and for domestic
consumption in cities.19
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 8
INTRODUCTION

FACT 4
RICE PRODUCES 10% OF
GLOBAL METHANE EMISSIONS

Figure 3 Source: FAOSTAT, UNFCC, and NDC Rice production volume (million tons)
Rice production versus Registry (accessed Sep 2019) GHG emissions per ton of rice (tons)
GHG emissions Mentioned in NDC NDC

250 2.0

1.8

200 1.6

1.4

150 1.2

1.0

100 0.8

0.6

50 0.4

NDC NDC NDC NDC NDC 0.2

0 0.0
China

India

Indonesia

Bangladesh

Vietnam

Thailand

Myanmar

Philippines

Brazil

Pakistan

In the ‘rice bowl’ region of Southeast Proven techniques such as Alternate

Asia, rice accounts for 25–33% of Wetting and Drying (AWD) can reduce
methane emissions. emissions by up to 50%. These methods
can also conserve water and boost yields.
Of the three major GHGs (carbon Improper management of residues such
dioxide, nitrous oxide and methane), as rice straw and husks is an additional
rice sequesters carbon but emits factor. Across the world, farmers typically
nitrous oxide and methane. Rice is the either leave these to be submerged in the
source of 10% of global anthropogenic paddy (where they decompose and release
methane emissions.22 In Southeast Asia methane) or else burn them (releasing
— the world’s premier rice bowl — rice carbon dioxide along with soot). Adopting
cultivation accounts for up to 25-33% sustainable practices such as removal
of the region’s methane emissions, and of rice straw from the field can reduce
between 10-20% of its overall greenhouse methane emissions by 70%. However,
gas emissions. capacity building and market incentives
are needed to encourage widespread
While methane emissions are caused by adoption of these practices, for example
a number of factors, water management, by creating new applications and revenue
tillage practices and fertiliser use are streams for rice straw products.23
key. In flooded rice soils, the water blocks
oxygen from penetrating the soil, creating
ideal conditions for bacteria that emit
methane.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 9
INTRODUCTION

FACT 5
48 COUNTRIES SEEK TO INVEST IN
CLIMATE-SMART RICE IN THEIR NDCS
162 countries have submitted their A first policy action for these countries Although the NDCs of 67 countries
Nationally Determined Contributions would be to incorporate opportunities acknowledge the private sector’s role
(NDCs) to the United Nations for emissions reductions from rice in financing climate adaptation and
Framework Convention on Climate cultivation as part of their respective mitigation, very few refer to specific
Change (UNFCCC). NDCs. For example, in Thailand, the actions the private sector can take,
world’s sixth-largest rice producer and none specifies actions private
NDCs lie at the core of national and the second biggest exporter, rice companies should take in relation to
strategies for reducing greenhouse accounts for 8% of total greenhouse gas rice.27 Only 18 countries refer to specific
gas emissions in line with the Paris emissions. Despite this, while Thailand’s financial mechanisms (such as credit and
Agreement.24 Of these 162 countries, 127 NDC does refer to the need to reduce insurance) that will need to be extended to
list agriculture as a priority for climate agricultural emissions, rice is not farmers to incentivize adoption of climate-
mitigation efforts, with 104 including specifically mentioned. smart best practice, including a small
specific agriculture sector pledges.25 Of number of rice-producing countries such
these, 48 countries include commitments By contrast, Bangladesh — the world’s as Nigeria and Pakistan.
to reduce GHG emissions from rice fourth-largest rice producer where the
in their NDCs. Four of the world’s 10 rice sector accounts for 13% of total GHG This gap highlights the need and the
largest rice producers refer specifically emissions — has gone further than other urgency to develop mechanisms to
to rice in their NDCs (Bangladesh, China, major rice producers in setting specific facilitate coordinated large-scale private
Myanmar and Vietnam), while the other targets to reduce emissions from rice. Its sector initiatives specific to rice, in
six do not (Brazil, India, Indonesia, NDC includes a commitment to scaling support of governmental efforts under
Pakistan, Philippines and Thailand). up Alternate Wetting and Drying (AWD), their respective NDC commitments to
a practice that can reduce methane emissions reduction.
emissions by 50%, to cover at least 20%
of rice production by 2030.26
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 10
INTRODUCTION

FACT 5
48 COUNTRIES SEEK TO INVEST IN
CLIMATE-SMART RICE IN THEIR NDCS

Figure 4 Source: UNFCCC, NDC Registry,

Top 10 Rice Producers and their Accessed Sept 2019
Nationally Determined Contributions (NDCs)

Ranking NDC Inclusion NDC Commitment on Rice

1 China
NDC Commits to control methane emissions from rice fields and nitrous oxide emissions from
farmland; and to build a recyclable agriculture system, promoting the comprehensive use
of straw.

2 India No explicit commitment on rice. The agriculture sector is included in the country’s
adaptation plans with commitment to enhance investment in climate vulnerable sectors.

3 Indonesia No explicit commitment on rice. Commits to reducing GHG emissions from agriculture by
up to 0.32% but no further detail is given.

4 Bangladesh
NDC Commits to scale up rice cultivation using Alternate Wetting and Drying for 20% of all rice
cultivation, raising productivity of agricultural land and lowering emissions of methane.

5 Vietnam
NDC Commits to reduce GHG emissions from rice. Rice is also seen as key in climate
adaptation: ‘Up to 39% of the Mekong Delta could be submerged, affecting 35% of the
population and causing the risk of losing 40.5% of the total rice production in this region.’

6 Thailand No explicit commitment on rice. However, it commits to mitigate economy-wide GHG

emissions by at least 20% by 2030, including from agriculture. The government is
investing in measuring GHG emissions from rice and supporting sustainable rice projects
that adopt the SRP standard with the goal of reducing GHG emissions from rice by 26%.28

7 Myanmar
NDC Commits to mitigate GHG emissions from the agriculture sector and growing rice in paddy
fields. Methods include alternate wetting and drying, organic fertiliser use, and improved
rice straw management.

8 Philippines No explicit commitment on rice. However, commits to reduce greenhouse gas emissions
by 70% by 2030 and includes climate-smart agriculture in adaptation commitments.

9 Brazil No explicit commitment on rice. However, commits to reduce greenhouse gas emissions
by 37% below 2005 levels by 2025, including through strengthening the existing Low
Carbon Emission Agriculture Program (ABC).

10 Pakistan
NDC Commits to manage water in rice cultivation to control release of methane from
agricultural soils and introduce low water dependent rice varieties.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 11
INTRODUCTION

FACT 6
1 BILLION LIVELIHOODS
DEPEND ON RICE FARMING

Women farmers play a vital, and often Most of these are in remote rural areas, Women farmers play a vital and often
unrecognised role. In South Asia, they so farmers have little option but to sell unrecognised role in rice farming. Women
contribute as much as 80% of labour. their rice to middlemen for a fraction of its in Southeast Asia contribute up to 60% of
eventual market value. the required labour and in South Asia the
Rice differs from other major global proportion can be as high as 80%. Women
staples (such as maize and wheat) in The number of smallholder farms in are also disadvantaged in terms of land
that it is disproportionately grown and rice (~144 million) is far higher than ownership. For example, although most
consumed by the world’s poor. Rice is for any other crop.31 Smallholders are rice workers in Tanzania are female, they
a key product and staple food in Least price-takers with low bargaining power, own only 19% of titled land.35
Developed Countries (LDCs) in Asia such limited access to finance, services, and
as Bangladesh, Cambodia, Lao PDR and infrastructure, and lack incentives for Increasing productivity is key to reducing
Myanmar. Moreover, rice is the main quality and product differentiation.32 There poverty and improving livelihoods. In
staple food in several African LDCs, is limited coordination between actors China, Japan and South Korea, the gap
including Madagascar, Guinea, Guinea- and, even in more developed markets such between actual and potential yields has
Bissau, Sierra Leone, and Senegal. as India, middlemen can still proliferate, been reduced effectively, with further yield
distancing farmers further from their increases mostly possible through genetic
Not only is rice disproportionately markets.33 Historically, farmers have innovation. However, in countries such
consumed by the poor — it is produced been relatively powerless in the value as Bangladesh, Cambodia and Myanmar
by them too. Overall, more than a billion chain, with larger players exerting greater as well as rice-growing areas of Sub-
people worldwide depend on rice for their influence. Many farmers across different Saharan Africa, a substantial yield gap
livelihoods, either as farmers or other rice producing countries have therefore remains and better crop management
actors within the value chain, or as their organised themselves in cooperatives techniques and expanded irrigation can
family members and other dependents.29 to improve negotiating leverage and lift production. However, the very fact
The overwhelming majority live in low or economies of scale in procuring inputs that most rice farmers are resource poor
middle-income countries — which account and services, and in marketing produce. In limits this potential. With incomes barely
for 94% of global rice production — and Africa, farmers have reported price gains enough to cover basic needs, and little
operate small farms of 1 hectare or less of around 300% by selling through co- or no access to credit or other sources
(in Asia and Africa, though not in Latin operatives rather than to local agents.34 of finance, farmers cannot invest in farm
America).30 operations to make them more productive
and sustainable.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 12
INTRODUCTION

FACT 7
RICE PRICES ARE HIGHLY SENSITIVE TO CLIMATE SHOCKS AS LESS
THAN 10% OF GLOBAL RICE PRODUCTION IS TRADED INTERNATIONALLY
A poor harvest, extreme weather events In such a thinly traded market, production Rice-producing countries tend to respond
or export restrictions in a leading shocks or changes to trade policy in one to production falls by restricting exports in
producer country can quickly trigger or more of the big exporting countries order to shore up domestic food security.
global price volatility. can have a major impact on availability Consumers in poor countries who depend
and price of rice in international markets, heavily on imported rice are particularly
Rice differs from other staples with potentially serious consequences for vulnerable to the economic impact of
such as wheat and maize in that it consumers in importing countries. Price sudden price volatility.
is overwhelmingly consumed in the volatility offers a compelling rationale
countries where it is grown, most of for a global transformation towards Price increases may also trigger larger-
them low- and middle-income countries. sustainable rice production as a means of scale social upheaval in rice-producing
Although rice is grown in more than ensuring market resilience.36 37 and consuming nations. The 2007-08 food
100 countries worldwide, 90% of global price crisis led to demonstrations and
production is in the hands of nine Asian Prices could increase by 70% in the next riots in West African countries including
countries: China, India, Indonesia, 10 years driving poverty and instability Burkina Faso, Guinea, Cameroon, Cote
Bangladesh, Vietnam, Thailand, Myanmar, around the world. d’Ivoire and Senegal.41 In extreme cases,
the Philippines and Japan. Brazil is the unrest could lead to political unrest — a
only non-Asian country among the top 10 According to Oxfam, processed rice prices particular concern given the already weak
global producers. could rise by up to 31% by 2020 and 73% political stability and ongoing armed
by 2030, compared with 2010 prices.38 In conflicts in many West African countries.
While only a small proportion of rice is 2007-08, export restriction by countries Although West Africa’s governments
exported, a large and growing number such as India and Vietnam pushed prices emerged largely intact from the unrest
of rice-consuming countries in the up by as much as 224%.39 In West African of 2007-08, that same year, riots in Haiti,
world, notably in West Africa, depend on countries such as Senegal that depend sparked in part by increased hunger due to
imports from a small number of exporting heavily on rice imports, prices skyrocketed a spike in the price of imported rice, led to
countries in Asia, primarily India, Thailand and many households were plunged into the fall of the government.42 43
and Vietnam. food insecurity. Indeed, according to the
same Oxfam study, Senegal’s high per
capita rice consumption and dependence
on imports make it the most vulnerable
country globally to a rice price surge.40

Figure 5
Global Rice Trade

Top exporters of rice $ billion Top importers of rice $ billion Rice as top import $ billion

India 7.050 China 1.720 Haiti 0.250

Thailand 3.000 Saudi Arabia 0.933 Sierra Leone 0.190

Vietnam 1.750 Iran 0.891 Guinea-Bissau 0.048

United States 1.650 United Arab Emirates 0.706

Pakistan 1.630 United States 0.686

IN 2007–8 THE RESTRICTION ON RICE EXPORTS BY

COUNTRIES SUCH AS INDIA AND VIETNAM HELPED TO
PUSH INTERNATIONAL RICE PRICES OVER 200%
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 13
INTRODUCTION

FACT 7
RICE PRICES ARE HIGHLY SENSITIVE TO CLIMATE
SHOCKS AS LESS THAN 10% OF GLOBAL RICE
PRODUCTION IS TRADED INTERNATIONALLY

Figure 6
The $20.2 billion Global Rice Trade
Exporters Importers

North America USA 3.4%

South America USA 8.2% Mexico 2.0%
Europe Haiti 1.2%
Africa Rest of North America Rest of North America
Asia Uruguay 2.3%
Brazil 1.6%
Australia Brazil 1.6% Rest of South America
Rest of South America

Source: MIT Observatory United Kingdom 2.5%

Italy 2.9%
for Economic Complexity France 2.2%
https://oec.world /en/profile/hs92/1006 Rest of Europe Germany 1.8%
(accessed 15 October 2019) Belgium-Luxembourg 1.5%
Africa
Rest of Europe

India 35% South Africa 2.6%

Senegal 2.2%

Benin 1.8%
Ghana 1.8%
Cote D’Ivoire 1.7%
Cameroon 1.5%
Rest of Africa

China 8.5%

Thailand 15% Saudi Arabia 4.6%

Iran 4.4%

United Arab Emirates 3.5%

Iraq 2.9%
Vietnam 8.7%
Bangladesh 2.4%

Philippines 1.8%

Japan 1.7%
Malaysia 1.6%
Pakistan 8.0% Sri Lanka 1.6%
South Korea 1.4%
Rest of Asia

Burma 3.0%
China 2.9%

Cambodia 1.6%
Rest of Asia Australia
Australia
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 14

2
REGIONAL
HOTSPOTS
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 15
REGIONAL HOTSPOTS

2.0
ADAPTATION HOTSPOTS IN
SMALL TROPICAL COUNTRIES
While China and India are the world’s largest
producers, the report focuses on Southeast
Asia and West Africa — two regions that have
a significant potential to increase production
sustainably, but due to their small national
territories and tropical climates they are
critically vulnerable to the combined impacts
of climate change, water scarcity and food
insecurity.

Under a business-as-usual scenario, These regions are already facing the Senegal was identified as the country most
the Intergovernmental Panel on Climate direct impacts of climate change and at risk, as rice accounts for nearly half
Change (IPCC) anticipates that rice water scarcity, together with adverse of total crop demand. The country’s high
production will fall across the world, consequences for livelihoods and food dependence on rice imports renders it
but will affect countries differently. Asia security.45 The impacts will be most extremely vulnerable to supply shortages
will be particularly hard hit due to a severely felt by small countries with and price hikes. Other heavily-exposed
convergence of land degradation, climate tropical climates, which will see lower countries and regions included Nigeria,
change, and water scarcity.44 rice yields and production shortfalls, and Mozambique, Mauritius, Botswana, South
could gradually become less suitable for Africa, Malaysia, and the Caribbean.47
Larger rice-producing countries such rice cultivation.
as India and China, with large territories
that cover a range of climatic zones, will As prices increase, poverty rates in some
have more space to shift rice cultivation to non-agricultural household groups in
cooler areas that will become suitable for Asia and Africa could rise by 20-50%.46
growing rice. However, smaller producers Oxfam has assessed the vulnerability of
and importers in the tropical belt, such different countries to rice price surges,
as countries in Southeast Asia and West based on the importance of rice to the
Africa, lack such flexibility to adapt. local diet and the share of imports in
domestic rice cultivation.

POVERTY RATES IN SOME NON-AGRICULTURAL

HOUSEHOLD GROUPS IN ASIA AND AFRICA
COULD INCREASE BY 20–50%
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 16
REGIONAL HOTSPOTS

2.1
SOUTHEAST ASIA

The countries of mainland Southeast Asia With global demand for rice continuing to
boast large river deltas with ample amounts rise and limited potential to expand yields
of fresh water and flat land ideal for rice in traditional producers such as China, the
cultivation. As a result, rice is a major countries of mainland Southeast Asia are poised
agricultural commodity in these countries — to take centre stage as the world’s rice bowl if
accounting for up to 80% of total crop area.48 they can increase their resilience to social and
environmental pressures. However, climate
The two main rice producers in the region are change and labour shortages threaten rice
Thailand and Vietnam, currently the world’s production in a region that feeds an ever-larger
second- and third-largest rice exporters. share of the world’s rice consumers. Major
Myanmar and Cambodia are the fifth- and rice producers such as Thailand and Vietnam
eighth-largest exporters, and both have produce rice for their own populations, as well as
significant potential to scale up production. exporting to other regions, even other traditional
producers in the region such as Indonesia and
the Philippines, which are increasingly turning to
imported rice to keep their populations fed.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 17
REGIONAL HOTSPOTS

2.1
SOUTHEAST ASIA

Figure 7
Featured Countries

Myanmar Thailand Cambodia Vietnam

Myanmar is the seventh- The world’s second-largest Rapid yield gains since the Vietnam is currently the fifth-
biggest producer and fifth- rice exporter, Thailand exports 1990s mean that Cambodia largest rice producer in the
biggest exporter of rice. more than 11 million tons per is today the world’s seventh- world and the third-largest
Average yields are low at just year, much of it low-quality largest exporter of rice. exporter, with a relatively
2.7 tonnes/hectare (t/ha), so white and parboiled rice However, yields are still the high average yield of nearly 6
there is substantial scope for consumers in Asia and lowest in the region due to tonnes/hectare. However, both
to increase production and Africa. Although the sector lack of access to basic inputs rice yields and the amount of
exports. However, challenges is more developed than in such as fertilisers, high- land suitable for rice cultivation
include farmers’ limited some neighbouring countries, quality seeds, energy, credit, are threatened by saltwater
access to inputs and lack of production is constrained and training — deficiencies intrusion in the Mekong Delta
agricultural know-how, weak by low yields and an ageing that will need to be remedied as well as reduced freshwater
road and port infrastructure, agricultural workforce; the if the country is to scale up flows due to the construction of
and an inefficient milling average age of rice farmers is production and become a net upriver dams.52
sector.49 56.50 exporter of rice.51
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 18
REGIONAL HOTSPOTS

2.1
SOUTHEAST ASIA

Selected Priority Areas SDG 1 SDG 8

for Impact Land tenure security Access to finance

Sustainable rice partnerships

can have a strategic impact
aligned with attainment of the
UN Sustainable Development
Despite ongoing land reform processes, Access to finance varies widely across
Goals (SDGs) on the following
inefficiencies in titling and registration Southeast Asia: while over 80% of
social, environmental and mean that many farming households in adults in Thailand have a bank account,
development pressures that are Myanmar, Vietnam and Cambodia still in other countries fewer than 50% do,
lack secure land tenure. In Myanmar, with just 22% of Cambodians having
material to the development of
where land rights are least secure, one.57 In countries such as Myanmar and
the rice industry: the absence of legal protections for Cambodia, farmers lack access to the
farmers puts them at risk of eviction.53 most basic financial products, such as
Lack of secure tenure is an obstacle loans that would allow them to obtain
to increasing rice yields as it makes the basic inputs needed to upgrade their
farmers less willing to upgrade their operations, such as seeds and fertilisers.
operations. Studies in Cambodia have
shown that farmers with secure land title In Thailand, access to credit is more
are more likely to invest in productive widespread, but many farmers still
farm assets and on-farm irrigation, and lack crop insurance, putting them at
experience higher yields as a result.54 risk in the event of extreme weather
or outbreaks of pests or disease.
Across mainland Southeast Asia, land A sizeable and growing proportion
titling and registration processes of Southeast Asians have access to
must be improved, and more accurate mobile and Internet services, including
land registries created. Supporting smartphones. Currently, 63% of people
the rollout of digital methods such as in the region have access to the Internet
satellite-based surveying and digital and in Cambodia the number of Internet
land registries would help make land users grew by 56% in 2018 alone.58
titling more efficient and accurate, giving
smallholders the security to invest In this context, the foundations are in
more in their operations.55 Judging by place to increase rice smallholders’
the case of Cambodia, this could lift rice access to finance through digital
yields more than 30% and household financial services, including payments,
disposable income by 18%.56 credit, savings and insurance managed
through mobile and internet banking.59
To make them as valuable and useful as
possible to smallholders, digital financial
services could be bundled together with
e-agriculture services such as digital
extension services and up-to-date
information about weather and markets.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 19
REGIONAL HOTSPOTS

2.1
SOUTHEAST ASIA

SDG 9 SDG 13 SDG 13

Infrastructure gap Extreme weather costs GHG emissions

Across mainland Southeast Asia, Extreme weather — specifically drought, Across our four focus countries, the
particularly in Cambodia and Myanmar, flooding and rising sea levels — is a rice sector accounts for an average of
transport infrastructure is inadequate major stress for rice production in 28% of methane emissions and 7.3%
and poorly maintained. This drives up mainland Southeast Asia. In particular, of total GHG emissions. This is mainly
both the cost of rice imports and the cost saltwater intrusion due to sea level due to improper disposal of residues
of transporting it to market. In Cambodia, rise could cut yields by up to 15% in the such as rice straw, primarily by burning
for example, it costs $15 to transport a region’s major rice-growing deltas, straw in the field. In Vietnam’s Mekong
ton of rice 100km by road — twice the mostly due to an increase in soil and Delta, at some times of year up to 98% of
rate in Vietnam and three times as much groundwater salinity.62 Dams being built residues generated during rice farming
as in Thailand.60 upriver in Thailand, Laos, Cambodia and are burned.66 Surveys of rice farmers in
Vietnam, as well as on the upper part Thailand find that the main reason they
Poor road infrastructure also contributes of the Mekong (the Lancang) in China choose to burn rice straw is the short
to up to a tenth of rice being lost during present an additional challenge.63 64 turnaround between harvesting one
transportation due to contamination crop and planting the next, which makes
and spillage.61 In areas where most By reducing the flow of freshwater burning the most efficient option.67
rice is transported on foot or by animal and sediment to the delta, this risks
due to high transportation costs and exacerbating saltwater intrusion and Ending burning of rice straw and other
inadequate roads, supporting farmers’ further reducing yields. Given the residues is central to reducing the
access to motor vehicles can reduce importance of river deltas — such as negative environmental impact of the
spillage losses. Upgrading post-harvest the Mekong and Red in Vietnam, the sector and reducing overall emissions
practices — for example by giving Irrawaddy in Myanmar and the Chao of GHGs (particularly methane) from
farmers hermetic bags for storage — can Phraya in Thailand — to global rice Southeast Asia. This can be done by
also reduce grain losses by preventing production and food security, and the giving farmers financial incentives
contamination and spillage during extent to which sea level rise threatens and training on improved rice straw
transportation. rice cultivation in these areas, there is a management, by buying residues from
clear opportunity to ensure the industry’s farmers to be converted into other
future by supporting the development, products (such as fertiliser, animal
testing and adoption of rice strains that fodder, biofuel or building materials)
can thrive in saline conditions. Farmers or by training farmers in developing
could also be given access to accurate and marketing by-products from rice
weather forecasts and early warning residues, giving them an additional
systems, as well as training in building revenue stream.68 69
coastal infrastructure such as dikes to
protect against saltwater intrusion.65
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 20
REGIONAL HOTSPOTS

2.1
SOUTHEAST ASIA

CASE STUDY
INNOVATIVE FINANCE PARTNERSHIP: THAI RICE NAMA
CLIMATE FINANCE SUPPORTS THAI RICE FARMERS
TO MITIGATE GHG EMISSIONS

As well as being a major source of The NAMA Facility, a multi-donor fund, The project expects to generate $23.8
export revenue, Thailand’s rice sector is providing $17.3 million for the project, million in funding from the private sector
is a major source of GHG emissions. which is being implemented by the Thai for innovative financial incentives. The
government and German Corporation for Thai government has earmarked at
The sector emits a third of Thailand’s International Cooperation (GIZ). Actors in least another $27.7 million annually
methane emissions and 8% of its total the rice value chain can access funding in agriculture- and mitigation-related
GHG emissions. Nationally Appropriate from two mechanisms. areas.70 The project is currently being
Mitigation Actions (NAMAs), are climate implemented across six provinces across
change mitigation measures proposed by — The Revolving Fund is supported central Thailand (Chainat, Ang Thong,
developing country governments to cut by NAMA grant funds and supports Pathum Thani, Supanburi, Ayutthaya and
their emissions, which can be funded by farmers to invest in switching to Singburi) and is expected to lead 100,000
international climate finance. low-emissions production methods rice farming households to switch to
without going into debt. In particular, low-emissions rice farming by 2023.
The Thai Rice NAMA Project aims to farmers can access financing to pay If it meets its targets, the project will
mitigate emissions from agriculture for costly land-levelling services, result in the large-scale dissemination
by supporting rice farmers in central which they can pay back over a period of Sustainable Rice Platform (SRP)-
Thailand to adopt four climate-smart of time while service providers are compliant rice farming practices across
practices: Alternate Wetting and Drying paid upfront from the fund. central Thailand.71
(AWD), laser land levelling, improved rice
straw management, and site-specific — The other funding mechanism is
nutrient management (SSNM). It is a subsidised loans programme
anticipated that the project will reduce implemented by the Bank for
GHG emissions by 20.5% compared to Agriculture and Agricultural
a business-as-usual scenario. It will Cooperatives (BAAC), which allows
also increase smallholders’ incomes service providers (such as companies
by an average of 157% by reducing offering laser land levelling services)
expenditures on inputs such as water to invest in technology.
and fertiliser.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 21
REGIONAL HOTSPOTS

2.2
WEST AFRICA

West Africa is not a traditional centre of rice These include growing demand, low yields, and
production or consumption, but the region’s (with the exception of Mali) growing reliance
growing profile as a major consumer of rice on imports from Asia. More than half of the
and a fast-growing primary destination for region’s rice is imported.72 The region must
Asia’s rice exports means it must be included boost its food security while also reducing
in discussions about the future of the global vulnerability to supply-side disruptions
rice sector. and price shocks. To achieve this, domestic
production must be increased in a sustainable
While rice plays an increasingly important way. However, this task is complicated by
role in diets across the region (supplying challenges including low productivity and
30–40% of calorie intake in some countries), quality as well as water stress amplified by
our analysis focuses on Nigeria, Mali, Senegal climate change.
and Côte d’Ivoire. These four countries are the
main producers and consumers of rice in West
Africa. They are driving regional trends and are
emblematic of the challenges and opportunities
affecting rice in the region.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 22
REGIONAL HOTSPOTS

2.2
WEST AFRICA

Figure 8
Featured Countries

Senegal Côte d’Ivoire Mali Nigeria

Senegalese get a third of At nearly 70kg of rice per Mali produces 90% of the rice The biggest rice producer in
their daily calories from rice, capita per year, Ivorians’ it eats, making it the West Sub-Saharan Africa, Nigeria
just 27% of which is grown rice consumption is among African country that is closest nevertheless relies heavily
in the country.73 Given the the highest in West Africa. to achieving self-sufficiency on imports from Asia —
importance of rice to the Although the country’s climate and indeed becoming a net despite government efforts
Senegalese diet and the and abundant rainfall make it exporter of rice.76 However, to boost domestic production
country’s heavy reliance well suited to rice cultivation, substantial production by imposing a 70% tariff on
on imports, Senegalese smallholders are reluctant constraints — including low imported rice. There are
consumers are highly to cultivate rice, preferring levels of agronomic know- serious constraints to scaling
vulnerable to any disruption cash crops such as cocoa and how, weak access to inputs up production both at the
in supplies from Asia or cashew.74 As a result, the and inefficient irrigation farm level — fertiliser use is
fluctuation in the global country imports nearly half of — must be overcome if it is the lowest in Sub-Saharan
rice price. the rice it consumes.75 to begin exporting rice to Africa and just 1% of arable
neighbouring countries.77 land is irrigated — and in
the milling sector, which is
highly inefficient and relies on
obsolete machinery.78 79
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 23
REGIONAL HOTSPOTS

2.2
WEST AFRICA

Selected Priority Areas SDG 2 SDG 4

for Impact Food and nutrition security Basic education

Sustainable rice partnerships

can have a strategic impact
aligned with attainment of the
UN Sustainable Development
Across West Africa, and particularly Rates of basic education and literacy in
Goals (SDGs) on the following in Sahelian countries such as Mali and West Africa are among the lowest in the
social, environmental and northern Nigeria, there are high levels world. Across our four countries, only 45%
development pressures of food insecurity linked to poverty, of adults are literate; in Mali, that drops
adverse climatic conditions, and armed to just 33%.82 Literacy rates are lower
that are material to the conflict. Across our four countries, 12.5% in rural areas and amongst low-income
development of the rice of the population suffers from under- groups, including rice farmers.
industry: nourishment, and rates are much higher
in certain areas, such as northern Nigeria This significantly complicates the process
and the Casamance region of Senegal.80 of training farmers in everything from
good agricultural practice to marketing
Rice’s increasing importance as a their produce, as they cannot engage with
dietary staple makes food security in written material. It also limits the impact
these countries heavily dependent on of interventions that have succeeded
the continued availability of plentiful and in other regions with higher levels of
affordable rice. Any disruption in supply basic education, such as text-based
or significant increase in price would e-agriculture services and weather and
undermine food security, particularly market information.83 Given the extent to
amongst the poorest and most vulnerable which lack of training in good agricultural
sectors of the population. West Africa has practices prevents significant gains in
substantial unfulfilled potential to produce rice yields and quality, it is vital to develop
rice, at least in part because consumers training tools that meet the specific needs
believe imported rice to be of higher of West African rice farmers.
quality.
Given widespread illiteracy and the
However, evidence from Senegal shows region’s linguistic diversity, this could
that when locally-produced rice is tailored involve supporting the development of
to consumers’ preferences in terms radio programmes or videos in local
of quality and presentation, demand languages and their dissemination via
rises and some consumers prefer it to existing channels such as rural radio
imported rice.81 Upgrading processes stations and village cinemas.84 Literate
such as cleaning, sorting and de-husking farmers and other value-chain actors
to improve the quality and appearance (such as millers) could also be supported
of locally-produced rice and tailoring to help train and mentor their peers who
presentation to local preferences could cannot access written material.
help stimulate demand for local rice and
reduce consumer reliance on imports.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 24
REGIONAL HOTSPOTS

2.2
WEST AFRICA

SDG 6 SDG 7 SDG 8

Water stress Electricity access Access to finance

The presence of major rivers such as the Limited and unreliable access to Across the four countries, fewer than
Niger and the Senegal gives the region electricity is a key constraint in West 40% of adults have access to a bank
plentiful freshwater resources. However, Africa. Across our four countries, on account and fewer than 10% have access
these are very unevenly distributed, with average 82% of businesses say power to loans and credit from formal financial
some areas suffering from acute water outages are a problem for business.90 High institutions.95 Lack of access to credit is
scarcity. In addition, Sahelian countries energy costs and frequent blackouts are a key barrier to upgrading the rice value
such as Mali, Senegal and northern a major constraint for the rice industry, chain across West Africa. Without loans,
Nigeria suffer from increasingly erratic and in Senegal rice millers and farmers farmers cannot buy the basic inputs they
rainfall and higher drought risks due to identify electricity as the biggest challenge need to become more profitable and
climate change. There is evidence that and their largest single operating sustainable, such as improved seeds,
water scarcity is starting to affect rice expense. Long blackouts have shut down machinery and fertilisers.
yields, including in major producing areas processing operations for long periods.91
such as Mali’s Office du Niger and the In Cote d’Ivoire, liquidity constraints mean
Senegal River Valley.85 There are also Inadequate electricity supply is also a key that millers cannot pay farmers for their
reports of water stress fuelling conflicts constraint for the rice processing sector in rice without delay, leading farmers to
between rice farmers and other users, a Nigeria.92 Inadequate access to sufficient sell instead to traders and not repay the
trend likely to increase as water becomes and reliable electricity makes it vital to money advanced to them by the mills for
scarcer. facilitate value chain actors’ access to inputs.96 The precarious financial situation
off-grid technologies. Rice farmers and facing both rice farmers and millers
Given the arid climate and low rainfall, millers could be helped to obtain solar- helps to weaken the value chain. The poor
particularly in Mali, expanding rice powered irrigation pumps, rice husking penetration by banks and other formal
cultivation and yields will require an machines and small-scale rice mills.93 financial institutions in much of rural West
expansion of irrigation infrastructure. There is also an opportunity to support Africa means that scaling up access to
Currently, less than 5% of the land research into the possible use of rice credit through banks alone is unlikely to
suitable for irrigation is being irrigated.86 straw and husks to power rice mills.94 be viable.
In Mali alone, the area suitable for growing
irrigated rice has been estimated at 2.2 A range of options to develop digital
million hectares — just 20% of which finance platforms for agricultural value
is currently being used.87 However, chains are already at play across Africa
irrigation methods must be water- and can be strengthened. In addition,
efficient so as to minimise the risk of developing collateral and guarantees for
water stress and conflicts between users. farmers to access finance, as discussed
Expanding small-scale and village-level in the next section of this report, presents
irrigation schemes and developing and opportunities to broaden access to finance
disseminating innovative technologies and strengthen the value chain.97 Credit
such as drip irrigation could increase could also be bundled with other inputs
yields while reducing water use.88 In that farmers urgently need and that mills
Mali, it is estimated that drip irrigation are well placed to provide, such as seeds,
could increase yields by 40-50% whilst fertiliser and agricultural extension
also substantially reducing water support.
consumption.89
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 25
REGIONAL HOTSPOTS

2.2
WEST AFRICA

CASE STUDY
SMART IRRIGATION
TRANSBOUNDARY COLLABORATION KEY TO UNLOCKING
SUSTAINABLE RICE IN WEST AFRICA

In order to scale up rice production in Transboundary collaboration PARIIS: World Bank-funded project
West Africa and improve livelihoods on irrigation provides a framework aims to irrigate 23,000 hectares in the
and food security, better water control for action Sahel
— particularly through irrigation — is
urgently needed. Although the region Since the 1970s, regional and By far the most significant project so far
is home to several large irrigation international institutions such as the developed in line with the 2iS strategy
schemes such as the Office du Niger in International Finance Corporation and is the Sahel Initiative Support Project
Mali, substantial investment is needed the African Development Bank have (PARIIS). The project has been awarded
both in rehabilitating existing systems supported irrigation projects in West $170 million by the World Bank: $25
to ensure that they achieve their full African countries such as Senegal, million for each of the six countries, with
potential, and in bringing new areas Burkina Faso and Niger. However, a the rest reserved for regional initiatives.
under irrigation. Merely doing this could significant step forward occurred in In addition to financing irrigation
raise paddy yields in some areas by 2013, when the High-Level Forum on projects, the money will be used to
nearly 300%. This in turn would raise Irrigation in Dakar (Senegal) brought strengthen the institutional framework
household incomes, reduce poverty; together governments and international for land and water management and to
improve food security and nutrition, organisations to discuss the future of develop a regional irrigation knowledge
resilience to shocks and climate change; irrigation in the countries of the Sahel sharing system. The project aims to
and empower women.98 (Burkina Faso, Chad, Mali, Mauritania, develop schemes covering 23,000
Niger and Senegal). hectares, benefiting 58,000 farmers and
more than 400,000 people.100
Following the forum, the governments
of those six countries issued the Dakar
Declaration, in which they pledged to Investment alignment with national
expand the total irrigated area in the agriculture strategies
Sahel to one million hectares.99 The
Dakar Declaration led to the Sahel In light of the 2iS strategic framework’s
Irrigation Initiative (2iS), which aims to emphasis on tailoring irrigation
support the six countries to scale up projects to local conditions and the
irrigation. 2iS’s Strategic Framework needs of stakeholders, the agriculture
emphasises the need to prioritise and irrigation strategies developed by
small-scale irrigation systems as well as individual governments will be key to
large-scale projects; and co-ordinate the investment. All West Africa’s major
development of irrigation projects across rice producers signed the African
transboundary basins. This will require Union’s CAADP (Comprehensive Africa
plans to be co-ordinated within river Agriculture Development Programme)
basin management organisations so that Compact, which includes a commitment
investments can contribute to a peaceful to scale up irrigation to double
and efficient use of scarce transboundary agricultural productivity.101
water resources.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 26
REGIONAL HOTSPOTS

2.2
WEST AFRICA

CASE STUDY
SMART IRRIGATION
TRANSBOUNDARY COLLABORATION KEY TO UNLOCKING
SUSTAINABLE RICE IN WEST AFRICA

As part of their CAADP commitments, all Opportunities for regional investment — Adoption of climate-smart irrigation
the major West African rice producers models. In a water-scarce region
have submitted a National Agricultural As regional initiatives such as 2iS and like West Africa — and particularly in
Investment Plan (NAIP) — and most of the PARIIS project make clear, improving Sahelian countries such as Senegal,
these establish specific targets to expand irrigation in West Africa will involve Mali and northern Nigeria — any
the irrigated area or promote specific a range of interventions. Particularly irrigation projects must be as water-
types of irrigation system. For example, promising areas for investment include efficient as possible. Drip irrigation
Nigeria sets the goal of rehabilitating and the following: is well-suited to small-scale systems
completing existing irrigation projects and can help to optimise water use,
and expanding the irrigated area from — Rehabilitation of existing irrigation reducing waste and evaporation
1% of total land area to 10%.102 Mali and infrastructure. According to 2iS, while increasing yields.109 Mali is
Senegal, meanwhile, pledge to promote while the region hosts a number of pioneering a model of what private-
small-scale irrigation and drip irrigation large irrigation schemes that are public collaboration could look like:
respectively.103 104 not functioning to their full potential, SOPROTRILAD, one of the biggest
just 15% of the money currently rice processing and production
In some cases, the NAIPs are earmarked for irrigation in national companies in Mali, is working with
complemented by existing national investment portfolios is destined for Dexis Consulting and Netafim, one of
irrigation strategies. For example, Mali’s rehabilitation.106 This points to a gap in the largest smart irrigation companies
pledge to increase the area covered funding that investors could help to fill, in the world, to develop drip irrigation
by small-scale irrigation schemes for example by supporting the training in Mali. The partnership is aligned
is currently being implemented via of farmers in maintaining and repairing with the Malian Government’s National
the National Program of Small-Scale tertiary irrigation channels. Agricultural Investment Plan (NAIP). If
Irrigation (PNIP). Covering the period successful, drip irrigation could boost
2012–21, this aims to ensure reliable — Expansion of small-scale irrigation. rice yields by 40-50%, allow for year-
access to water for rural smallholders 2iS identifies five types of irrigation round agricultural production, increase
by installing small-scale irrigation projects suited to West Africa that need farmers’ income and promote food
infrastructure, mostly in the form of small to be developed to help the region to resilience.110
dams. This could lift rice yields to as much fulfil its agricultural potential. Small-
as 6 tonnes/hectare and benefit up to scale irrigation systems (both private
3 million people.105 and community-managed) can be
scaled up easily and can yield very
significant economic benefits.107 In
Mali, investment in small-scale private
irrigation schemes is needed, and the
government has identified this as a key
priority for expansion.108
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 27

3
THE BUSINESS CASE FOR
SUSTAINABLE RICE
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 28
THE BUSINESS CASE FOR SUSTAINABLE RICE

3.0
THE BUSINESS CASE FOR SUSTAINABLE RICE

A sustainable rice sector is defined as one Doing so would help to close the yield gap,
that is affordable, improves the livelihoods of improve global food security and reduce
rice producers and significantly reduces the poverty; drive climate adaptation to prevent
environmental impact of rice production. future crop losses, yield declines, pest
outbreaks and price spikes; and reduce the
A number of technical innovations have been, sector’s contribution to GHG emissions.
or are being, developed to address the sector’s
sustainability challenges. A range of platforms,
notably the Sustainable Rice Platform (SRP),
are helping to mainstream these practices
globally.

THE COMPETITIVE AFRICAN RICE INITIATIVE (CARI)

PROJECT HAS MORE THAN DOUBLED YIELDS AND
LED TO INCOME GAINS OF NEARLY 300%
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 29
THE BUSINESS CASE FOR SUSTAINABLE RICE

3.1
THE ECONOMICS OF SUSTAINABLE RICE

Sustainable rice production

translates into higher farmer
incomes in three ways:

1 2 3
Greater productivity and lower input Sustainably produced rice is more Increased quality and traceability
costs boost production and incomes. resistant to stresses, limiting crop translate into a higher market price
In Cambodia, shifting to sustainable rice losses. There is also evidence that for sustainable rice. In Vietnam, rice
cultivation has increased rice yields by practices such as integrated pest firm Loc Troi has identified a small price
20% and farmers’ incomes by 25%.111 management and precision use of inputs premium for SRP-produced rice which,
In Sub-Saharan Africa, where yields are can cut the risk of catastrophic crop together with lower inputs, translates
far below potential, good agricultural losses due to stresses such as extreme into an 18% increase in farmers’ profits
practices such as more efficient use of weather and pest and disease outbreaks. per hectare.116 Market research has
water and fertiliser has also led to such In Vietnam, switching to low carbon shown that Vietnamese consumers are
increases. For example, support from the production has made rice more resilient willing to pay between 9% and 33% more
Competitive African Rice Initiative (CARI) to storms, helping lift income by up for certified sustainable rice.117
has more than doubled yields and lifted to 60%.115
incomes by nearly 300%.112 In Vietnam,
integrated pest management has cut
input costs and increased smallholders’
profits by $190 per hectare.113 Meanwhile,
in Bangladesh and Vietnam, Alternate
Wetting and Drying (AWD) has increased
yields and reduced irrigation costs,
lifting smallholder incomes by $100–$400
per hectare.114

HIGHER FARMER INCOMES,

BETTER LIVELIHOODS

Given that most rice smallholders That said, evidence from countries as Meanwhile, in Senegal, USAID’s Naatal
are poor, extra income generated diverse as Benin and Cambodia shows Mbay (Flourishing Agriculture) project
through rice farming first and foremost that when farmers’ incomes have risen has stabilised rice prices and led
increases household spending. For due to better access to markets, higher farmers to benefit from economies
example, in Myanmar and Indonesia, yields and reduced inputs, at least some of scale due to aggregation, with rice
better agricultural practices have of them spend part of the extra money farming becoming more profitable as a
helped increase farmers’ incomes by on loans to improve their production result.
an average of just over $100, which capacities.119 120
they have spent on household expenses The percentage of farmers defaulting
such as social and religious activities, Increasing rice yields through good on loans has fallen from 20% to 5% —
education, healthcare, and food.118 agricultural practices has reduced the and this in turn has made lenders more
number of farmers defaulting on loans willing to lend money to rice farmers. As
and lifted the funding available for rice a result, the amount of credit available
farmers. In Selingue (Mali), organising for rice farmers has tripled, from $6.9
farmers into collectives and introducing million to $20 million.122
good agricultural practices raised rice
production, which in turn cut the loan
default rate to just 5%.121
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 30
THE BUSINESS CASE FOR SUSTAINABLE RICE

3.2
SPOTLIGHT ON SUSTAINABLE PRACTICES

Practices Site-Specific Nutrient Management Infrastructure, inputs & technologies

(SSNM). SSNM allows smallholders to
Alternate Wetting and Drying (AWD). increase their productivity and income by C 4 and stress-resistant rice. Through
This practice, under which rice fields applying fertiliser in a particular place genetic engineering, scientists are
are alternately flooded and kept dry, can at a specific time in precise amounts.131 trying to improve rice’s capacity for
help farmers reduce their water use In some countries, software is being photosynthesis from a ‘C 3‘ to a ‘C 4‘ crop,
by 500 litres per kilogram of rice and developed to help farmers to compute like maize. This could raise photosynthetic
cut methane emissions by up to 50% — the best nutrient management strategy efficiency by 50%, double water efficiency,
without reducing yields.123 In Bangladesh for their location. In Vietnam’s Red River increase nitrogen-use efficiency139 and
and Vietnam, AWD increased smallholder Delta, adoption of SSNM increased lift yields by 30%–50%.140 C 4 is seen by
incomes by $100-$400 per hectare due to farmers’ profits by $150 per hectare, experts as one of the most plausible
higher yields and lower irrigation costs.124 mostly as a result of higher yields.132 innovations for enhancing crop yield and
Additional benefits of AWD may include resilience in the face of reduced land area,
reduced exposure to fungal disease and Laser land levelling. By using laser- unpredictable water supplies and climate
improved soil condition.125 guided technology to level fields, change. IRRI says there is great potential
farmers can minimise water run-off and to develop rice strains that are tolerant to
Improved rice straw management. fertiliser use and raise rice yields by up abiotic stresses including drought, salinity,
Rather than burning rice straw and other to 25%.133 In the Indian state of Haryana, submergence and high temperatures.141
residues, or leaving them to decompose levelling 500,000 hectares helped to save
in the field, if farmers remove these from 1,000,000,000m3 of water.134 Expansion of irrigated area with smart
the field, the straw can be processed and irrigation. In West Africa’s Sahel region,
used for purposes such as animal fodder, irrigated rice cultivation is currently
fertiliser, and to produce bioenergy and Systems practiced on 440,000 hectares. However,
building materials, reducing emissions around 3 million hectares along the
whilst also generating an additional System of Rice Intensification (SRI). Senegal, Niger, Black Volta, Chari and
source of income for farmers.126 Farmers Originating in Madagascar in the 1980s, Logone rivers could be suitable for
can reduce methane emissions by 70% SRI sustainably increases irrigated rice irrigation.142 In areas where irrigated
through improved rice straw management, productivity through principles such rice is being grown, water management
but capacity-building and market as reduced plant density, improved skills and the use of smart irrigation
incentives are needed to encourage soil conditions through enrichment technologies are very low, undermining
widespread adoption of the practice.127 with organic matter, and reduced and rice productivity. By expanding efficient
controlled water application.135 SRI has irrigation infrastructure and improving
Integrated pest management. been deployed in more than 50 countries water management, rice production in the
On average, rice farmers lose 37% of their and has increased yields per hectare region could be significantly increased.
crop to diseases and pests.128 Integrated by 21%–105% (average 52%) as well as
pest management techniques such as significantly reducing input requirements Post-harvest technologies. In Southeast
using pheromone traps and sticky traps to and production costs.136 Asia and Africa, post-harvest losses
detect pest outbreaks early, and ensuring can be as high as 30% due to spillage,
good weed and water management, Rice-fish systems. Rice-fish farming is losses to pests, inappropriate post-
enable farmers to reduce risks from pest an ancient technique practiced in many harvest management, delays in the
outbreaks due to climate change.129 In countries, which involves farming aquatic post-harvest chain and outdated post-
Vietnam, implementing integrated pest species (including finfish, crustaceans and harvest equipment.143 Improved post-
management lowered input costs, which molluscs) in rice paddies. There is growing harvest management — including drying
increased smallholders’ profits by $190 interest in reviving and expanding these and storage — can help reduce post-
per hectare.130 systems, which lift rice yields, household harvest losses and increase grain quality,
incomes and nutrition.137 Fish reduce increasing farmers’ income.
biotic threats to rice by eating weeds and
insects that otherwise damage rice crops,
while fish manure fertilises rice plants
and reduces the need to apply fertiliser.
Properly implemented, rice-fish systems
can double rice yields.138
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 31
THE BUSINESS CASE FOR SUSTAINABLE RICE

3.3
A PERFORMANCE FRAMEWORK
TO MEASURE SUSTAINABLE RICE
The Sustainable Rice Platform (SRP) Now in its second revision, the SRP It focuses on social progress through
is a global multi-stakeholder alliance Standard sets out 41 requirements across workers’ health and safety, abolishing
established in 2011, which has produced themes, and 12 performance indicators, child labour and empowering women.
a global voluntary standard for which together provide a comprehensive Finally, it is focused on the business case,
sustainable rice production, linked and practical compliance and monitoring by measuring profitability and productivity
with a set of Performance Indicators mechanism specific to the various aspects improvements from sustainable
to measure and monitor impact. of rice cultivation. practices, which are fundamental to
SRP is co-convened by UN Environment ensure livelihoods, improve food security,
and the International Rice Research This performance framework is an and influence farmers to change their
Institute (IRRI). important building block for the design behaviour.144
of innovative finance partnerships and
With over 100 institutional members the products that can push more capital
alliance provides private, non-profit and towards a more sustainable value chain
public actors in the global rice sector with with measurable and verified impact.
sustainable production standards and
outreach mechanisms that contribute to SRP seeks to improve the sector’s
increasing the global supply of affordable environmental footprint in key areas
rice, improving rice producers’ livelihoods such as water use and nutrient-use
and reducing the environmental impact of efficiency, GHG emissions, and biodiversity
rice production. protection.

Figure 9
12 SRP Performance Indicators for
Sustainable Rice Cultivation

SRP Performance Indicator What is being measured?

Profitability: net income from rice Farmers’ net income increases from rice cultivation

Labour productivity Amount of rice produced per unit of labour

Yield productivity Increases in yields with same level of inputs

Water productivity Efficiency of irrigation and quality of runoff water

Nutrient-use efficiency — N Efficiency of nitrogen-based fertilisers

Nutrient-use efficiency — P Efficiency of phosphorous-based fertilisers

Biodiversity Enhancement of biodiversity in rice plantations

GHG emissions Reduction of methane and nitrous oxide emissions

Food safety Absence of toxic residues (heavy metals, pesticide residues)

Health and safety Worker safety and management of pesticides

Child labour & youth engagement Absence of child labour and children are in full-time education

Women’s empowerment Women’s access to finance, training and decision-making

FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 32
THE BUSINESS CASE FOR SUSTAINABLE RICE

3.4
THE VALUE CHAIN
Figure 10 Input & Service Finance
Providers Banks, investment
1 Production Seeds, input Investment, Credit & Loans funds and micro-
retailers, service finance institutions
providers and provide finance at
machinery different levels of
the value chain

Medium-sized & Investment, Credit & Loans

Larger Farms

Co-operatives & Microfinance

Farmer Groups

Smallholder Rice Microfinance

Growers
2 Processing

Collectors & Investment, Credit & Loans

Brokers

Millers & Investment, Credit & Loans

Processors

3 Commercialization

Traders Trade & Corporate Finance

Retailers & Trade & Corporate Finance

Brands
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 33
THE BUSINESS CASE FOR SUSTAINABLE RICE

Value Chain Impact Financing

Actors Opportunities Solutions

Producers Smallholder access to finance Collateral & guarantees

At the production level, the rice value Service providers can act as a point Becoming a member of a cooperative
chain is highly fragmented—especially of finance for smallholder farmers can improve a farmer’s access to group
in Asia and Sub-Saharan Africa— providing credit for goods. Facilitating loans and digital platforms and can create
comprising 144 million low-income farmers’ access to affordable, higher- conditions for the delivery of pooled
smallholder farmers who operate plots quality inputs such as seeds, supporting financial products and bundled services.
of land smaller than 1 hectare and are mechanised harvesting and drying Collaboration is needed to develop financial
involved in the cultivation, harvesting, processes, facilitating access to models that can accept a wider range of
drying and storing of paddy rice.145 technologies such as precision irrigation forms of loan collateral, such as livestock
could raise yields by nearly 400 kg/ and farm machinery rather than land
hectare, raise farmers’ profits, and ownership titles in areas where farmers
reduce methane emissions from the lack secure land tenure. Guarantees and
sector by 70%. partial subsidies can incentivise financial
providers to offer farmers longer-term
loans that allow them to invest in capital
intensive assets such as farm machinery,
or to make financial products affordable to
smallholders.152

Processors Processors as key enablers Warehouse receipts

Millers and processors are a key point Promoting investment in the milling In a warehouse receipts system,
of aggregation for farm produce. They sector and replacing obsolete producers deliver their produce to a
range from small village mills to larger processing units could significantly warehouse and are presented with a
regional bases and can act as marketing reduce postharvest losses, which are receipt that can be used as collateral for
centres, where buyers and sellers meet frequently as high as 30%.148 In the case obtaining credit from banks or micro-
and trade.146 Larger mills can be owned of Cambodia, upgrading the processing finance institutions.153 By providing
and operated by rice traders or retailing- sector led to a rapid rise in production farmers with a viable form of collateral,
manufacturers that integrate vertically. and exports of milled rice between 2011 this mitigates the risks involved in lending
Upstream, processors play a crucial and 2015.149 Meanwhile, more formal to them and allows them to access loans
aggregator role and can supply finance relationships between smallholders and at lower interest rates. In India, where
such as loans to farmers.147 processors can help create a virtuous this form of financing is quite widespread,
cycle in which value chain actors have interest rates for loans where warehouse
the reliable source of income needed receipts are used as collateral are 1.5–2%
to invest in upgrading their operations, lower than the usual rate for farmers.154
increasing yields and incomes.150

Traders Sustainable sourcing contracts Offtake agreements

Rice traders are involved across all Developing sourcing strategies Agriculture is inherently risky. A series of
levels of the rice value chain. They and contracting mechanisms to contractual arrangements along the value
are active in domestic and farm gate buy sustainable rice from farmer chain can help lower risks and increase
procurement, as well as processing, cooperatives to ensure quality and access to capital. For example, offtake
export/import, wholesale and retail traceability; and developing brand value agreements — by which a company makes
distribution.151 They range from large from sustainable rice linked to a lower a promise to buy a certain volume of a
multinationals to smaller regional environmental footprint and fairer trade, crop at a fixed price at a certain date in
companies. Retailers range from to position sustainable rice in local, the future — are a useful risk mitigation
‘open-sack’ market sellers, to local and regional and global markets. tool in smallholder farming.155 This can
regional supermarkets chains and large create three-way relationships between
international buyers from global brands. farmers, processors and banks where
banks provide credit to farmers, farmers
sell their produce on a forward contract
to processors, and processors then repay
the loan to the banks.156
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 34
THE BUSINESS CASE FOR SUSTAINABLE RICE

Case Studies Across

Agri-Value Chains

1 Production Rabobank Foundation and Rabobank The guarantee scheme provided working
Rural Fund set up a $2.25 million credit capital loans amounting to over $700,000

RABOBANK
guarantee scheme to enable banks to use to 11 cooperatives, all of which received
guarantees as an alternative to traditional loans directly from the bank for the first

ETHIOPIA
collateral for coffee growers in Ethiopia. time in their history. As this phase was
A risk-sharing agreement between the closing, the bank reported a 98% loan
Rabobank Foundation and CFC covered recovery rate.157
half of any losses incurred through lending
to farmers. Rabobank International
Advisory Services also provided technical
assistance to banks to train cooperatives
on financial literacy and corporate
governance.

2 Processing HDFC Bank, one of India’s leading banks, Farmers receive the loan as soon as they
offers a warehouse receipt loan facility deliver the warehouse receipt. Small

HDFC BANK
where farmers and small traders can farmers can participate by pooling their
receive loans starting from $2,250 resources through a representative

INDIA
against storage of some 50 commodities farmer. Profits for farmers range between
in one of 3,500 approved private or state 35% and 40%, while HDFC benefits from
warehouses country wide. Warehouse lower risks.158
receipt financing—the use of securely
stored goods as loan collateral—helps
small farmers to preserve their harvest
and hold off selling until market prices
are higher, while also mitigating the risk
to financial institutions. HDFC finances
65–75% of the receipt value and offers
moderate interest rates of 8-10%.

3 Commercialization Mars Food announced that all the rice In Pakistan and India, Mars Food works
sold under its brand UNCLE BEN’S®, the with 2,000 basmati rice farmers to help

MARS FOOD
world’s largest rice brand, will be sourced them adopt sustainable practices. It
from farmers who are working towards has seen a 17% increase in yield, a 30%

GLOBAL
the Sustainable Rice Platform (SRP) increase in farmer income, and a 30%
standard by 2020 — a first in the global reduction in water use from farmers
rice industry. It has already achieved adopting more sustainable growing
97%. Mars Food is investing to raise living methods.159
incomes of rice farmers and implement
water stewardship programs. It covers 9
countries with 15 partner organizations
like IFC, GIZ and Oxfam across Asia,
Europe and the USA.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 35

4
BLUEPRINTS TO SCALE FINANCE
FOR SUSTAINABLE RICE
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 36
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

4.1
ADDRESSING KEY FINANCING GAPS
TO SCALING SUSTAINABLE RICE
A shift to more sustainable There are considerable barriers to scaling Creating stronger value chains that
private sector finance for agriculture: continuously build the capacity of
and climate-smart production they include the high-risk profile of the smallholder farmers in a way that is
methods in agriculture agriculture sector, the seasonal nature linked to market access and off-takers can
requires upfront investment, of farming, the specialisation needed to make finance innovations more attractive
assess investment opportunities, and by providing a more predictable and
and a transition from existing the low appetite to lend to smallholder consistent flow of income along the value
production systems.160 farmers due to limited or no collateral chain—ultimately ensuring that increased
and established credit histories. These access reaches farmers to help develop
challenges are particularly prevalent in sustainable practices.
the rice sector.
The Sustainable Rice Platform (SRP)
A large range of innovative finance efforts provides an agreed standard and a
exist in various commodities to make foundation of metrics upon which finance
smallholder farmers more bankable by innovations can be developed.
overcoming farm-level fragmentation In this section, we focus on possible
through aggregation, and by managing blueprints to improve the flow of finance
production risks by pairing finance with to sustainable practices in the rice
technical assistance for farmers. value chain based on public-private
collaboration.

Barriers to Finance Barrier 1 Barrier 2 Barrier 3

The absence of a financial The upfront investment The lack of public financing for
infrastructure to service needed for companies, governments to attract private
millions of rice smallholders suppliers and farmers to sector investment through
who lack access to services switch to climate-smart blended finance instruments
production methods

Blueprints for Action Blueprint 1 Blueprint 2 Blueprint 3

Create a digital finance Issue a ‘rice bond’ to Leverage international
platform for financing to finance sustainable rice climate finance to attract
reach smallholder farmers value chains private sector investment
for climate-smart rice
production
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 37
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

BLUEPRINT 1
CREATE A DIGITAL FINANCE PLATFORM FOR
FINANCING TO REACH SMALLHOLDER FARMERS
Enabling Environment

1 2 3
Digital finance solutions can increase There are 400 digital solutions for Better digital infrastructure and data
smallholder productivity and raise agriculture in Africa alone and there governance can reduce fragmentation
farmer incomes. are promising signs that the sector is and promote interoperability but
maturing. regulatory hurdles remain a constraint.
By 2030, GSMA estimates that 275–350
million farmers will gain access to mobile- The total addressable market revenue New initiatives such as the All Africa
based service delivery for agricultural in Africa alone for agriculture digital Digital Economy Moonshot, an effort by
products and services. This can enable technology solutions is an estimated $2.5 the African Union and the World Bank, to
$394 billion in cash payments by billion. The sector grew at about 40% per digitally connect every individual, business
agricultural buyers to be shifted to mobile year between 2016 and 2019, with nearly and government in Africa by 2030, are
delivery channels.161 Bundling digital 60% of the solutions having launched in laying the foundations for robust digital
payments from bulk buyers with access to the last three years. Around 33 million economies in rice-producing countries.
mobile micro-credit, insurance products smallholder farmers in Sub-Saharan
such as weather-index crop insurance and Africa are now registered with a digital The Digital Financial Services (DFS)
savings accounts could lift smallholder solution provider and as many as 200 Working Group of the Alliance for
farm productivity by 30–60%.162 A new million are expected to register by 2030. Financial Inclusion (AFI), a global network
large-scale strategic partnership between of policymakers, provides a common
Mastercard’s Farmers Network (MFN) A small but growing number of providers framework to measure how different
and Rabobank aims to connect one million operate profitable business models digital finance platforms work together
farmers across East Africa and South — digital finance service providers in and core indicators that countries can use
Asia to potential buyers, providing them Africa report average revenues of $4 per to assess financial inclusion—these can
with access to mobile payment tools, and farmer.166 The digitization momentum help to integrate existing digital finance
building a digital transaction record that is further accelerating as ‘big tech’ solutions in line with national objectives
can be used to access formal credit from companies such as IBM, Google, Alibaba, for smallholders.168 GSMA finds that
financial institutions.163 and Microsoft develop large-scale while data sharing among digital finance
holistic digital platforms for the sector providers generally remains limited, there
The Rice Mobile Finance (RiMFin) — in 2019, IBM and Yara International is a growing trend toward data sharing
programme in Ghana is a partnership announced plans to build the world’s partnerships and service integration in
between telecoms groups, agribusinesses, largest digital farming platform, covering the sector — for instance, Twiga Foods
and public agencies to convert rice buyers’ 7% of all arable land worldwide including and Tulaa, Kenya-based agriculture
sourcing and payment systems from cash millions of smallholder farms.167 Digital e-commerce platforms linking farmers
to mobile and turn farmer’s phones into agricultural crowdfunding platforms to markets, share their data to offer extra
e-wallets. In Asia, the Grow Asia Digital are also growing fast — for example, services to farmers such as loans and
Directory documents 19 digital solutions FarmCrowdy in Nigeria connects credit inputs.169
focused on rice such as FarmForce, small scale farmers with sponsors.
Cropital, and Agribuddy, six of which Both farmers and sponsors receive a Despite these developments, countries’
currently provide access to financial percentage of the profits on harvest. restrictive policy and regulatory
products such as value chain financing, environments present a critical constraint
weather-based micro-insurance, and Despite the significant growth of digital to the expansion of digital finance services
crowdfunded capital.164 Some of these finance for agriculture, most solutions are and can stifle investment in product
platforms can be expanded — for example, nascent and the overall sector remains development. GSMA finds that enabling
the Swiss Agency for Development and fragmented. Improving coordination regulation is an important predictor
Co-operation (SDC) has supported a across solutions, increasing use by of success in digital finance services
platform to facilitate bundled financial farmers, and demonstrating impact on and provides regulators with specific
services for smallholders across Uganda, farm-level practice is an important next recommendations where targeted policy
Indonesia and Zimbabwe, which a quarter frontier for the sector. interventions can be employed to enable
of a million farmers are using.165 digital finance uptake.170
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 38
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

BLUEPRINT 1
CREATE A DIGITAL FINANCE PLATFORM FOR
FINANCING TO REACH SMALLHOLDER FARMERS

Action Recommendations

4 Recommendation 1 Recommendation 2
Digital finance platforms can enable SRP to convene a Digital Rice Finance Develop an integrated digital finance
smallholders to access government Task Force involving agribusinesses, pilot which demonstrates how
credit and insurance programmes. banks, and technology providers to technology, finance, government and
define the scope and services of an value chain actors can partner to
Large-scale government digital financing integrated digital finance platform for enhance finance access to smallholders
initiatives are also emerging, such as sustainable rice. working towards the SRP standard.
Indonesia’s digital platform to distribute
state subsidised loans and farm The task force would aim to understand Building on the work of various SRP
insurance for rice farmers projected the applicability of existing digital partners in a focus country offers a focal
to result in an increase of rice outputs solutions, and define the scope, point to develop and pilot a digital finance
by at least 20%.171 Governments are requirements, and technical specifications platform that integrates value chains and
critical to scaling finance, for example by for how these models can be integrated projects. For example, in Thailand, 5,000-
helping to de-risk private sector capital more effectively and tailored to the 10,000 smallholder farmers participate
through guarantees, or part-subsidising regulatory context of countries or in sustainable rice production at different
insurance products to support their regions. The task force would define key sites, with a plan to scale to 150,000
adoption by smallholders. Insurance considerations and criteria, such as data farmers in the next five years.
provider AXA’s pilot programme in collection and verification; identify ways
Indonesia gives rice farmers insurance to enable data sharing (e.g., common This provides a basis for a technology
to protect them against weather-related farmer ID) and interoperability via API or digital payments company committed
crop losses, with the government paying across digital platforms (public as well as to sustainable agriculture, such as
up to 80% of the premium cost. The pilot proprietary operated by agribusinesses) Mastercard, to partner with SRP
was successful, and the project is being and consider country-level parameters and member companies on a Thai
scaled up.172 around enabling policies and regulations, platform pilot. A partnership between
mobile connectivity and penetration, and SRP, its members and a company like
These initiatives can be further availability of financial services. Mastercard, would allow the creation of
supported by new global funds such a series of finance-sector partnerships
as the GSMA Innovation Fund for For example, Olam International’s Farmer to deliver bundled financial services
Digitisation of Agricultural Value Chains, Information System (OFIS) is operational for smallholders, ranging from local
and at a multilateral level by UN-led in the rice sector in Thailand and banks to insurance companies. The
strategies with member states, such as Vietnam and aims to expand to 100,000 Thai government has approved a $682
a programme led by the United Nations smallholders globally by 2020. In markets million national rice insurance scheme
Capital Development Fund (UNCDF): where Olam sources from local agents for over 4 million farmers launched by
‘Leaving No One Behind in the Digital and co-operatives, it deploys OFIS in the Thai General Insurance Association
Era’.173 combination with its Olam Traceability and and reinsurer SwissRe.175 It is part of a
Digital Warehouse solutions to achieve series of services that could be bundled
end-to-end traceability of the entire supply together to benefit SRP-implementing
chain. The information system supports smallholders.
links to third-party providers to bundle
financial services, inputs, and technical A digital finance platform would also
support to smallholders.174 enable faster, cheaper and more
transparent payout of crop insurance to
smallholders, for example by integrating
the satellite monitoring technology used
by SwissRe and the RIICE partnership to
create a faster trigger of crop insurance
payments based on extreme weather
events.176
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 39
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

BLUEPRINT 1
CREATE A DIGITAL FINANCE PLATFORM FOR
FINANCING TO REACH SMALLHOLDER FARMERS

CASE STUDY
MASTERCARD FARMERS NETWORK (MFN)

Launched in 2015 by the Mastercard The platform enables third party In late 2018 MFN partnered with the
Lab for Financial Inclusion, MFN gives financial institutions to issue credit government of Andhra Pradesh in India
farmers a unique ID and helps to and insurance products and process to expand the platform’s services to
connect them with potential buyers, payments to farmers and others in over 1 million small and medium size
links their businesses to payment the value chain. Already operational in farmers, working with a large commodity
systems, and enables them to build a East Africa, MFN recently expanded its buyer and producer co-operatives.177
digital transaction record they can use operations to millions of smallholders
to access formal credit from banks and across Uganda through a public-private
other financial institutions. partnership with the International Center
for Tropical Agriculture (CIAT) and the
United States African Development
Foundation (USADF).
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 40
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

BLUEPRINT 2
ISSUE A ‘RICE BOND’ TO FINANCE
SUSTAINABLE VALUE CHAINS
Enabling Environment

1 The initial payments by impact investors 4

2020 is expected to be a milestone year identified by co-sponsor Bank Lombard Global banks are signalling innovative
for the development of green bonds for Odier enable the ICRC to run the activities sustainable finance for agriculture.
agriculture. at each rehabilitation centre and hence
expand the ICRC’s Physical Rehabilitation Rabobank and UN Environment have
Globally, the market for green bonds is Programme (PRP). At the end of the launched the AGRI3 Fund, designed
expected to grow from $167 billion to a 5th year, ‘Outcome Funders’ — the to unlock $1 billion in finance towards
record $180 billion in 2019. However, in governments of Belgium, Switzerland, sustainable agriculture by bridging
2017, agriculture and forestry comprised Italy, the UK and “La Caixa” Foundation — the gap between the needs of farmers
only 1% of the overall climate-aligned will pay the ICRC according to the results and the limitations of banks. The fund
bond universe and in 2018 it did not grow achieved. These funds will in turn be used provides de-risking financial instruments,
much.178 The Green Bond Principles to pay back the social investors partially, tailored technical assistance and seeks
— the main voluntary guidelines for in full or with an additional return, to catalyse access to capital for farmers
issuing green bonds developed by the depending on how efficient the ICRC’s new through structured programs involving
International Capital Markets Association, centres are.182 commercial banks, agribusiness
consider sustainable agriculture and companies and local governments.184
climate-smart farm inputs (e.g. drip
irrigation investments) as eligible for the 3 ING has developed a ‘sustainability
use of a bond’s proceeds.179 Some rice-producing countries are improvement loan’ where the interest rate
encouraging sustainable finance by is linked to a borrower’s sustainability
To catalyse the growth of green bond domestic banks. performance, rated by a third party.185
issuance in agriculture, the Climate In 2018, Olam International, one of the
Bonds Initiative (CBI), a standards-setting Financial regulators and banking leading companies advancing sustainable
body, is developing the taxonomy to guide associations from 34 emerging markets rice and a member of SRP and Chair
issuers, banks and investors in developing representing close to $43 trillion in of WBCSD, secured a three-year
agriculture-related green bonds. A first assets have convened as a Sustainable sustainability-linked revolving credit
draft will be published in Q4 2019, creating Banking Network (SBN). Over the past five facility for $500 million — Asia’s first
expectations the market could take off years, they have introduced sustainable sustainability-linked club loan issued by
in 2020.180 The World Business Council finance policies and principles to build 15 participating banks, based on achieving
for Sustainable Development (WBCSD) capacity and motivate changes in their sustainability targets.186
and the Task Force on Climate-related banking sectors. They include several
Financial Disclosure are organising rice-producing countries such as Nigeria, BNP Paribas and ADM Capital have
forums to clarify how agribusinesses Vietnam, Bangladesh and Thailand. For linked with UN Environment and the
should disclose climate risks to investors, example, the Central Bank in Bangladesh World Agroforestry Centre to create the
providing additional momentum.181 has set up an exclusive refinancing window Tropical Landscapes Financing Facility
to encourage green finance initiatives and (TLFF) in Indonesia. The partnership aims
has issued a requirement that all banks to bring long-term finance to projects
2 devote at least 5% of their portfolios in and companies that advance sustainable
Experimentation with bond-like debt green finance to pre-defined sectors agriculture and rural livelihoods in
instruments is providing a creative way including agriculture. Indonesia. In 2018, BNP Paribas arranged
to attract the private sector to finance a $95 million multi-tranche sustainability-
development. These local ecosystems enable other labelled series of project bonds issued
finance vehicles — such as the Council on by a special purpose vehicle to fund
For example, in 2017 the International Smallholder Agriculture Finance (CSAF) PT Royal Lestari Utama (RLU), a joint
Committee of the Red Cross (ICRC) issued — to provide financial incentives that can venture between France’s Michelin and
the world’s first ‘Humanitarian Impact raise the risk appetite of domestic lenders Indonesia’s Barito Pacific Group to finance
Bond’ to support the financing of aid in to invest in more inclusive agricultural a sustainable rubber plantation on heavily
conflict-hit countries — it is actually a value chains.183 degraded lands.187
private investment placement, rather than
a bond.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 41
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

BLUEPRINT 2
ISSUE A ‘RICE BOND’ TO FINANCE
SUSTAINABLE VALUE CHAINS

Action Recommendations

Recommendation 1 Recommendation 3 International agencies are increasingly

Integrate SRP performance indicators A global rice processor, trader, retailer using bond-like debt instruments to
into the Climate Bonds Initiative’s or brand that has off-take agreements enable the private sector to finance
taxonomy for green bonds in agriculture. with sustainable rice farmers and an development. Such a ‘rice bond’ could
integrated value chain to consider help WFP to prioritise the sustainable
In 2020, the Climate Bonds Initiative’s issuing a ‘rice bond’. procurement of rice, while focusing on
Working Group on Agriculture will release maintaining food security outcomes (i.e.
an initial taxonomy for the agriculture Tight supply chains linking farmers, the same level of quantities purchased)
sector, which can directly integrate the suppliers and buyers of sustainable rice that are vital to WFP’s mission in
SRP performance indicators to define a with existing contractual relationships humanitarian contexts. In order to do this,
globally-accepted taxonomy framework and trust will be easier starting points for such a ‘rice bond’ will need to develop
for rice bonds. This will establish the SRP a rice bond given existing relationships innovative roles for international donors,
as the framework for companies, banks (e.g. millers can provide pre-financing to which could help bridge the differential
and investors to use as a common basis farmers before the season starts). Global in any added costs for purchasing
for bond design, issuance and reporting. companies such as Mars Food, Phoenix, sustainable rice.
Olam, Galaxy, or Ebro, which are export
oriented and off-takers of sustainable By providing guarantees and outcome-
Recommendation 2 rice, can provide the necessary trust driven financing, international donors
Convene a Working Group involving and guarantees for millers to pre- would help to maintain WFP’s mission
banks and agri-businesses to define the finance farmers based on agreed future on food security, while at the same
parameters of a ‘rice bond’. purchases. This creates the conditions time incentivise the global demand for
for a rice bond to enable global retailers sustainable rice and climate-smart
This can be co-convened by SRP and the to finance the growth of their sustainable agriculture transition. On the production
World Business Council for Sustainable rice sourcing process. side, initial calculations show that such
Development (WBCSD) through its a bond could make upfront financing
work on climate-smart agriculture with available to help 75,000 farmers in
companies and banks. The working group Recommendation 4 Southeast Asia to invest in a switch to
would define important parameters for the Develop a ‘rice bond’ that uses the sustainable rice production, with the
further specification of this instrument. purchasing power of the World Food goal to deliver 150,000 metric tons of
These include: identifying companies Programme (WFP) to drive global sustainable rice each year to WFP. Further
along the value chain that are suitable for demand for sustainable rice, enabling exploring this potential mechanism will
issuance (including large-scale growers, upfront investments in climate-smart require the design of a focused process of
millers and processors, and service production. dialogue and prototyping involving WFP,
providers); ensuring that the options make SRP, donors and innovative financing
more financing available to smallholder In 2018 WFP delivered a total of 3.9 million agencies such as UNCDF.
farmers, who are ultimately most in need, metric tonnes of food around the world.
by for example considering the integration WFP’s food procurement increased 64%
of smallholder finance funds; and the between 2014 and 2018, driven by large-
integration of verification and insurance. scale emergencies in Syria, Yemen and
South Sudan.188 Rice makes up almost
10% of the total food procurement of WFP.
From 2017 to 2018 rice volumes purchased
by WFP have gone up significantly, by
34%.189
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 42
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

BLUEPRINT 2
ISSUE A ‘RICE BOND’ TO FINANCE
SUSTAINABLE VALUE CHAINS

CASE STUDY
THE RESPONSIBLE COMMODITIES FACILITY IN BRAZIL:
A GREEN BOND TO FINANCE RESPONSIBLE SOY
Launched in July 2019 at the London The facility is expected to provide $1 The investment will contribute to
Stock Exchange, the Responsible billion over the next four years to fund national targets of agricultural
Commodities Facility will provide low- the production of more than 180 million expansion into currently underused
interest credit lines to 1,000 medium- tonnes of responsible soy and corn, land. Over the same period, the
sized soy farmers who commit to worth around $43 billion over the next facility aims to protect or restore 1.5
using degraded lands and avoiding decade. The financing for RCF will be million hectares of natural habitat
deforestation, re-directing soy raised by issuing investment grade- in Brazil’s Cerrado, cutting carbon
expansion to degraded cattle pastures rated green bonds through a special dioxide emissions by around 250 million
in the Brazilian Cerrado region. purpose vehicle aimed at institutional tonnes.190
investors. Responsible soy will be sold
on an exchange that links producers
with international buyers interested in
sustainable sourcing. The first $300
million bond issuance is planned for the
planting season of 2020.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 43
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

BLUEPRINT 3
LEVERAGE INTERNATIONAL CLIMATE FINANCE TO ATTRACT
PRIVATE SECTOR INVESTMENT FOR CLIMATE-SMART RICE PRODUCTION
Enabling Environment

1 2 3
Public climate finance can help Sovereign green bonds can help Governments can attract private sector
governments to unlock private governments raise capital to investment by using blended finance
investment in agriculture. implement their NDCs. vehicles.

The United Nations’ Food and Governments are issuing green bonds Blended finance uses public funding
Agriculture Organisation (FAO) says to finance infrastructure plans in line to de-risk the profile of investments in
that international public climate finance with the climate targets set out in their order to attract the private sector (e.g.
can help address the constraints NDC in line with the Paris Agreement. providing part-subsidies, first-loss
many developing countries face in Public pension funds and sovereign guarantees, etc. that change the risk-
attracting private investment towards wealth funds in developing countries, as return profile for investors). Despite
agriculture.191 Public climate finance well as international investors, can be the growing use of these mechanisms
by donors or multilateral funding, can well placed to invest in such instruments by development finance institutions
support governments to roll out services given their mandate to invest in their and donors, only 3% of blended finance
such as rural credit ratings, crop country’s development. globally focuses on agriculture.196
insurance and value-chain finance 192 Examples of blended finance instruments
or support blended finance mechanisms A sovereign green bond can help reduce for agriculture include:
that provide public guarantees to attract the cost of capital for green projects by
private sectors investors to transform attracting new investors, and mobilise — The Africa Agricultural Capital
agriculture sectors. Forty eight countries private capital towards climate resilient Fund (AACF). Established in
have committed to implement climate- infrastructure. Sovereign green bond 2011, the $25 million fund invests
smart agriculture measures in their programmes can include financial capital from $250,000 to $2.5
rice sector in their NDCs to the Paris incentives such as tax reliefs and million in small and medium-sized
Agreement.193 subsidies to develop low-carbon assets agricultural enterprises in East
to crowd-in private investments in Africa, providing concessionary
If NDCs have a more strategic framework priority sectors. Sub-sovereign issuers finance and loan guarantees that
to finance climate-smart rice production, such as states and cities have pioneered reduce the risk for lenders, making
this may incentivize large producers green bond issuance in the public agribusiness companies that can
that have not included rice in their NDCs domain.195 Developing countries are provide opportunities to smallholder
(India, Indonesia, Pakistan, Philippines increasingly using this tool. For instance, farmers more bankable. The Gates
and Thailand) to do so. The development Vietnam’s green bond market — Foundation, Gatsby Foundation and
of carbon markets under Article 6 primarily comprising sovereign bonds— Rockefeller Foundation provide
of the UN Framework Convention on has had the highest growth rate in the $17 million in concessionary equity
Climate Climate (UNFCCC) also plays world in the last five years, reaching an investment while J.P. Morgan provides
a key role in establishing mechanisms outstanding volume of 18% of GDP — $8 million in commercial debt that is
to generate and trade carbon credits the economy’s second biggest capital 50% guaranteed by USAID. A technical
between countries, with several rice funding source after banking credits. assistance (TA) facility funded by
growing countries in SE Asian countries USAID supports SMEs to use the
expected to trade credits.194 This viability financing effectively. The fund’s social
is also being guided by the development impact objective is to positively affect
of public-private partnerships and at least 250,000 smallholder farmers
voluntary market mechanisms by the by increasing individual household
Natural Climate Solutions Alliance, income by a minimum of $80 per
hosted by WBCSD and World Economic household per year.197
Forum, with the role of rice GHG
emissions featuring as a key area of the
Sustainable Rice Landscapes Initiative
(SRLI).
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 44
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

BLUEPRINT 3
LEVERAGE INTERNATIONAL CLIMATE FINANCE
TO ATTRACT PRIVATE SECTOR INVESTMENT FOR
CLIMATE-SMART RICE PRODUCTION

— The BUILD Fund is a partnership — The West African Initiative for 4

between the UN Capital Development Climate-Smart Agriculture Multilateral development banks
Fund (UNCDF) and the impact fund (WAICSA), a newly conceived vehicle can provide catalytic funding to
manager Bamboo Capital to invest targeted at smallholder farmer help countries scale private-public
in SDG-positive enterprises in Least organizations and agribusinesses partnerships for sustainable rice.
Developed Countries (LDCs). To to promote the adoption of climate-
mitigate risk, it is designed as a blended smart agriculture practices. It The Islamic Development Bank (IsDB) is
finance vehicle that tiers investors is led by the Commission of the responding to a request from member
according to their risk appetite in Economic Community of West African countries in Sub-Saharan Africa, which
three ‘layers’: a first-loss ‘catalytic States (ECOWAS) and comprises a want to lift domestic production to
capital’ ($8 million), which is used Financing Facility (80% of the fund) minimise their dependence on rice
to attract a mezzanine tranche ($15 managed by the ECOWAS Bank for imports. These countries include: Benin,
million), which in turn protects a senior Investment and Development (EBID). Burkina Faso, Cote D’Ivoire, The Gambia,
tranche ($25 million) of investors. The This provides concessionary loans, Guinea, Mali, Niger, Senegal, Sierra
investors targeted for the Fund include guarantees, and equity investments Leone, and Sudan. A new programme
foundations, family offices, corporate directly to smallholder organizations will seek to substantially lift production
social responsibility and strategic or through local finance institutions and productivity, and develop effective,
venture arms, development finance based on climate-smart agriculture profit-oriented national and regional
institutions, and UN member states. conditionality; a Technical Assistance value chains with strong private sector
The Government of Luxembourg has Facility (20% of the fund) managed by participation, to directly improve the
committed $2 million towards the first the Regional Agency for Agriculture livelihoods of 2 million smallholder
loss tranche. Additionally, the BUILD and Food (RAAF) and funded through households. The programme will invest
Fund includes a technical assistance grants from the 15 ECOWAS Member in infrastructure development including:
(TA) sidecar vehicle (the BUILD States and donors such as USAID, the critical production and post-harvest
Enterprise Resource (“BUILDER”) European Union, and SDC. ECOWAS infrastructure, better-quality seeds
TA Facility), which provides pre- and public resources comprise the ‘first- and fertilizers, and public-private
post-investment technical support loss’ tranche (22% of the total), which partnerships to strengthen value chains.
to companies that are set to, or have bear the highest risk and are designed
received, financing from the Fund.198 to attract funds from development The initial estimated investment is $300
finance institutions, impact investors, million, of which IsDB is expected to
and commercial investors. WAICSA finance $175 million, $25 million will
projects will launch in 2020 in six come from the 10 beneficiary countries
ECOWAS Member States with plans to and $100 million from development
expand to all 15 in coming years.199 partners such as the Gates Foundation,
the Kingdom of Saudi Arabia, United Arab
Emirates and Qatar.200 In addition, the
Sustainable Rice Landscapes Initiative
(SRLI), established in 2017 through a
partnership between the WBCSD, SRP,
UN FAO, UN Environment Program,
IRRI and the GIZ, focuses on both on
farm sustainable cultivation, as well as
the restoration of upland forests and
mangroves in rice growing landscapes.
SRLI is receiving funding from the Global
Environment Facility (GEF) based on its
focus on public-private collaboration to
ensure economically viable rice value
chain development, with $100 million of
financing for ten rice growing countries
across Asia.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 45
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

BLUEPRINT 3
LEVERAGE INTERNATIONAL CLIMATE FINANCE
TO ATTRACT PRIVATE SECTOR INVESTMENT FOR
CLIMATE-SMART RICE PRODUCTION

Action Recommendations

Recommendation 1 Recommendation 2 For instance, using donor funding,

West African countries that already Multilateral climate funds should UNCDF could create a guarantee for
receive donor funds for climate-smart consider supporting national local banks in a few pilot countries to
rice development should consider governments in preparing for the encourage them to lend to local farmers
issuing a sovereign green bond to planning, design and issuance of a in a particular value chain, including
attract private investors to develop the sovereign green bond for climate- work with local financial service
rice sector. smart rice investments. providers to digitize payments to improve
the speed, transparency and efficiency of
A sovereign green bond could The preparation stages for developing transactions to and from farmers.
help developing countries attract and issuing such instruments will
international investors in climate- require concessional finance. Funding
smart agriculture, unlocking capital for could be provided by multilateral Recommendation 4
governments to support through blended support programs such as the African Agribusiness and international donors
finance mechanisms or investing in Development Bank’s Green Bond can collaborate to develop and scale
infrastructure, such as smart irrigation, programme; the $1.2 billion Pilot nature- and landscape-based solutions
which could increase paddy yields in Programme for Climate Resilience for sustainable rice.
some areas of West Africa by up to (PPCR) of the Climate Investment Funds
300% and consolidate transboundary (CIFs), the Global Environment Facility The Sustainable Rice Landscapes
water security in the region.201 Such an (GEF) or the Green Climate Fund (GCF) Initiative (SRLI) should investigate
instrument could be linked to a country’s to help governments and implementing the potential to use market-based
NDC, National Adaptation Plan (NAP) agencies design the mechanisms to climate finance mechanisms to scale
for agriculture, or National Agricultural leverage climate finance for sustainable forest, soil and watershed restoration
Investment Plan (NAIP)’s irrigation rice production. These programmes in rice growing regions. This could
targets. support developing countries and regions enable governments to use regulatory
to build their adaptation and resilience mechanisms to meet their NDC
These instruments could build on the to the impacts of climate change and commitments, while also financing
performance metrics outlined by SRP to can catalyse through grant funding, the landscape restoration for the benefit
report on eligible projects. West African development of new climate financing of natural resources and ecosystem
governments that are interested in mechanisms applied to adaptation in services for rice overall productivity.
exploring this mechanism can leverage agriculture. Carbon market mechanisms could also
the support of key stakeholders that be used to incentivise on farm rice GHG
are actively investing resources and reductions, while further strengthening
expertise in scaling smart irrigation in Recommendation 3 farmer support and value chains for low
the region, including the World Bank Agribusinesses and international or zero carbon rice production.
Group, the Islamic Development Bank, donors can collaborate to develop
and Helvetas — the Swiss development blended finance funds that increase
organisation that is working with 17 the support and financing directly
private and public sector partners to to smallholder farmers and helps to
improve the water productivity of rice mobilise the domestic financial sector.
farmers in the region.
The UN Capital Development Fund, a
UN agency equipped to develop and
test blended finance instruments in
developing countries, has a deep base
of technical expertise on creating
and structuring new financial tools
and is well positioned to partner with
agribusinesses to pilot mechanisms to
de-risk local bank loans to farmers.
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 46
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

BLUEPRINT 3
LEVERAGE INTERNATIONAL CLIMATE FINANCE
TO ATTRACT PRIVATE SECTOR INVESTMENT FOR
CLIMATE-SMART RICE PRODUCTION

CASE STUDY
INDONESIA’S GREEN SUKUK

In 2018, Indonesia issued a $1.25 billion The green sukuk includes sustainable The budget tagging process starts with
“green sukuk” (Shari’ah compliant agriculture among eligible sectors under the environmental benefits of each
securities backed by a specific pool a budget tagging process to identify project being assessed by the individual
of assets, otherwise known as an climate change spending. The process ministries together with the Climate Change
‘Islamic green bond’) to support the is being expanded to cover both climate Secretariat of the National Development
implementation of its climate change change mitigation and adaptation Planning Agency. The Ministry of
mitigation targets, as set out in its NDC, expenditures under 17 ministries. Environment and Forestry confirms that the
as well as its climate adaptation plan, expenditure is consistent with Indonesia’s
which is integrated in the National Eligible green sukuk projects are NDC. It is then endorsed by the Ministry
Development Plan. selected from expenditures in ministry of Finance as being tagged for budget
budgets that are tagged to have climate allocation.
change benefits in line with Indonesia’s
climate objectives. The proceeds will Almost 30% of proceeds are allocated
be managed within the Government’s to sustainable agriculture, afforestation
general account until proceeds and rainforest conservation, as well as
are transferred into the account of climate change adaptation measures.
the relevant ministries for funding The bond framework aligns with the
exclusively eligible projects. Green Bond Principles, the ASEAN
Green Bond Standards, and Indonesia’s
Financial Services Authority’s green bond
regulations.202
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 47
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

4.2
THE NEXT FRONTIER FOR
BUSINESS DIPLOMACY
Private sector advocacy is While the private sector is a key driver In order to champion this market
of innovation, government policies and environment, companies must develop
needed to help governments an enabling regulatory framework new ways of supporting, informing and
support sustainable rice at a that incentivise sustainable practices influencing governments to drive a wider
landscape level are needed for these innovations to transition towards sustainable production
be implemented at scale. Ultimately, and trade.
governments have the greatest leverage
to define a sustainable path for rice
production systems and markets at scale. Pathways for business diplomacy
Private sector companies at the forefront
of the sustainable rice agenda will There are three ways in which private
be more successful in a market that sector companies can work with
incentivises sustainable behaviour and governments, advance blended finance
penalises unsustainable practices. mechanisms or engage in policy advocacy,
working through innovative coalitions such
as the Sustainable Rice Platform (SRP)
and the Sustainable Rice Landscapes
Initiative (SRLI):

Pathway 1 Pathway 2 Pathway 3

Help governments prioritise Advocate for regulatory Advocate for trade tariff
infrastructure investments to policies that incentivise reforms to incentivise
support sustainable rice climate-smart behaviour sustainable rice

Governments also play a critical role in Given the strategic importance of Since rice is one of the most protected
infrastructure development. This includes rice to political stability and security, traded commodities, there is considerable
physical infrastructure such as building governments commonly intervene to scope for market liberalization. Import
roads, logistics and irrigation systems. influence domestic prices and policies. and export tariffs will impact the market
Government investments in infrastructure This can range from public procurement price of rice and quantities and flow of
in Asia have played a key role in to releasing rice from stocks or trade.206 A coalition of private, public and
developing the rice value chain.203 It also changes in trade policies. This includes civil society stakeholders working under
includes financial infrastructure, such as environmental requirements, setting the framework of the Sustainable Rice
the creation of national-scale funds that subsidy levels, strengthening property Platform (SRP) can advocate for a tariff
use subsidies and other public finance rights systems and impacting the costs reduction or exemption for sustainable
instruments to make financing available of inputs such as water and energy, all of rice, through a new Customs Code under
to smallholder farmers. For example, which shape the economic behaviour of the Harmonized Commodity Description
the Thai government has developed a farmers and the entire value chain. For and Coding System (HS). Representations
national rice insurance scheme that will example, in Bangladesh, a major barrier would also need to be considered at the
benefit over 4 million farmers.204 Private to the adoption of the Alternate Wetting level of the World Trade Organisation
sector guidance in particular can help and Drying (AWD) practice was found to (WTO). Qualifying for a tariff reduction
governments identify opportunities for be the absence of any water pricing, which would be based on third-party assurance
specific types of physical or financial removed the incentive for farmers to of the SRP standard. A reduction in tariffs
infrastructure that can attract and reduce their water consumption.205 for sustainably-grown rice could offer a
leverage private sector-led value chains game-changing incentive for traders and
and financial mechanisms. exporters to find new pathways to procure
and trade sustainable rice, which could in
turn be passed on to farmers to incentivise
a wide-scale transformation to sustainably
produced rice.207
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 48
BLUEPRINTS TO SCALE FINANCE FOR SUSTAINABLE RICE

4.2
THE NEXT FRONTIER FOR
BUSINESS DIPLOMACY

CASE STUDY
INNOVATIVE COALITIONS: THE SUSTAINABLE
RICE LANDSCAPES INITIATIVE (SRLI)
SRLI aims to build the private and public — Policy and planning to strengthen SRLI is being applied in rice-growing
delivery ecosystem to streamline national government policy and landscapes of SE Asia (e.g. Mekong
sustainable rice at scale. institutional development for Delta countries) and South Asia with
opportunities for scale across West Africa
sustainable rice (e.g. policy instruments
Since 2017, the SRLI’s six global partners for land use planning, financing and Latin America. Key current countries
which combined global business, instruments). are Thailand and Vietnam. SRLI will help
government policy and technical know- to deploy financing to players ranging from
how, have been working to deliver — Production practices that address government ministries to implementing
GHG emissions cuts in rice production, on-farm and landscape-level needs partners and regional initiatives. It
minimise environmental impacts, and linkages (e.g. technical training will bring together multiple initiatives
and make farmers more resilient. on proven methods such as Alternate undertaken by its partner organizations,
The partners are the WBCSD, UN Wetting and Drying, improved including the Sustainable Rice Platform
Environment, the UN Food and Agriculture watershed planning). (SRP), Better Rice Initiative (GIZ), Source
Organization (FAO), the Sustainable Rice to Sea (FAO), Climate Smart Agriculture
Platform (SRP), the German Corporation — Market-based instruments supporting project (WBCSD), GEF Food, Land Use
for International Cooperation (GIZ), and efficient and sustainable value chains and Restoration Impact Programme
the International Rice Research Institute (e.g. adoption of SRP standard), (FOLUR) and Low Carbon Rice (IRRI).
(IRRI). maximising productivity/economic The initiative will be funded by a range of
margins, creating value chain wide international climate finance funds and
SRLI delivers an integrated approach to approaches. facilities. The SRP standard provides a
transition to sustainable rice landscapes, clear performance monitoring framework
combining: — Knowledge management, metrics that can help countries to quantify targets
and monitoring systems (e.g. adoption and progress.
of ICT-enabled decision support
tools, metrics that address MRV and
carbon financing options, standardized
metrics).
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 49

ACKNOWLEDGMENTS

Financing Sustainable Rice Christ Vansteenkiste Louke Koopmans Photography

for a Secure Future Rikolto Mars Food
Innovative Finance Cindy Lim Luz Maria Fernandez Garcia Page 1 + 9
Partnerships for Climate Syngenta UN Environment Shutterstock
Mitigation and Adaptation Colin Taylor Lynette Ryan Jason KS Leung
IFC Sunrice
Publication date Constant Van Aerschot Mark Radka Page 4
December 2019 WBCSD Asia Pacific UN Environment Shutterstock
Dechen Tsering Matthew Reddy wk1003mike
This report was written by UN Environment Global Environment Facility CatherineLProd
Alejandro Litovsky, Donika Diederik Pretorius (GEF) arrowsmith2
Dimovska, Katie Micklethwaite Ebro Foods Matthias Bickel
of Earth Security Group. Emelyne Cheney GIZ Thailand Page 5 + 37
UN Environment Max Zieren Shutterstock
ESG is grateful to the Esther Pan Sloane UN Environment Chatrawee Wiratgasem
partners and sponsors that UN Capital Development Fund Napaporn Rattanametta
have contributed to the (UNCDF) GLOBAL GAP Thailand Page 11 + 18
development of the report. Gareth Davies Oliver Benjamin Frith Shutterstock
Columbia Threadneedle International Rice Research TOM...foto
We are particularly grateful Gavin Power Institute (IRRI)
to the following individuals PIMCO Paul Nicholson Page 13
who have provided inputs and Guy Hogge Olam International Shutterstock
insights through interviews Louis Dreyfus Paul Teng puwanai
and workshops: Gwen Wu Nanyang Technological
BNP Paribas University, Singapore Page 16
Aamer Sarfraz Hans Loth Pauline Blandin Shutterstock
Better Grain Rabobank BNP Paribas SimplyDay
Aaron Becker Ian Slater Pedro Moura Costa
FAO Regional Office for Mastercard Sustainable Investment Page 23
Asia and the Pacific Isabella Pagotto Management (SIM) Shutterstock
Alison Eskensen Swiss Agency for Development Roland Treitler Oliver S
Mastercard and Cooperation (SDC) GIZ Thailand
Andrew Meimes Jacelyn Tan Sanjay Sethi Page 29
Mastercard Syngenta Phoenix Group Shutterstock
Anjuli Pandit Jaffer Machano Shahid Tarer Tong_stocker
BNP Paribas UN Capital Development Fund Galaxy Rice Mill
Bas Bouman (UNCDF) Simon Zbinden Page 30
CGIAR Program on Rice James Lomax Swiss Agency for Development Shutterstock
Beau Damen UN Environment and Cooperation (SDC) Homo Cosmicos
FAO Regional Office for Jarrod Pirie Song Saran
Asia and the Pacific SunRice AMRU Rice (Cambodia)
Bo Zhou Jean-Bernard Lalanne Stephen Edkins
FAO Regional Office for Competitive African Rice Rice Exchange
Asia and the Pacific Initiative (CARI) Steve Tunstall
Carolyn Florey Jeffrey Khoo Tunstall Associates
International Rice Research SwissRe Tony Siantonas
Institute (IRRI) Jens Soth World Business Council for
Catur Utami Dewi Helvetas Sustainable Development
Rikolto Indonesia Jonathan Gilman (WBCSD)
Chris Brett UN Environment Wyn Ellis
World Bank Group Kristina Spantig Sustainable Rice Platform
Chris Brown GIZ Nigeria (SRP)
Olam International Lauren Hendricks Yasemin Lamy
Chris Quick Grameen Foundation CDC Group
Sunrice Lisa Conibear Zoe Knight
Shell Foundation HSBC
FINANCING SUSTAINABLE RICE FOR A SECURE FUTURE 50

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