(CARICOM Secretariat, Turkeyen, Greater Georgetown, Guyana) Director of Finance and Planning, Caribbean Development Bank (CDB), Dr. Warren Smith on Wednesday told key stakeholders in the agriculture sector, who are gathered at the Jolly Beach Resort, Antigua for the Caribbean Regional Agriculture Symposium, that the entire economy of the Region was likely to be impacted without measures to mitigate risks in the sector.

Speaking during the first working session of the Symposium on the topic The State of Agricultural Financing in the Caribbean, Dr. Smith said that the combination of risks associated with adverse weather systems and other challenges, had made agriculture susceptible to high levels of losses transmitted throughout the value chain, to the distribution of trade and the financial institutions.

The CDB finance head noted that, indeed, funding agriculture was particularly challenging for those financial institutions which lend directly to entrepreneurs as they had the burden of high administrative cost to service a larger number of small loans, due to the relatively small farm sizes across the Region.

With particular reference to the CDB, he said that over the period 1970 to 2009, the Bank had disbursed approximately US$342 million through loans, equity and grants to the sector, but over the past decade, there had been a sharp decline in demand for resources for agriculture. However, he noted that this was not indicative of a shift in the Bank’s priorities, as it had remained receptive to requests for support to the sector.

Dr. Smith explained that the decline in demand for CDB’s financing for agriculture was likely due to a shift in focus by Borrowing Member Countries (BMCs) away from export crops such as sugar, bananas, which were affected by the removal of trade preferences in the late 1990s.

Other possible reasons he posited were the unattractiveness of re-engineering the production of the traditional agriculture export crops, and the failure to replace them with viable alternatives; the difficulties encountered in mitigating and transferring the high risks which were inherent in agricultural production. It was not surprising therefore, Dr. Smith said, that the regional food import bill had reached US$ 1.7 billion and had risen significantly since then.

While admitting that there were myriad challenges facing the sector, the CDB finance head stressed that it would be a major disincentive if effective risk mitigation strategies were not developed to continue financing the of the sector.

He told the stakeholders who are gathered in Antigua to address the absence of a sufficiently coordinated framework for disaster risk management for agriculture that the necessity of continued investment in the sector was evident in the global food crisis of 2008, which had highlighted the Region’s “extreme vulnerability” to shortages and sharp increases in food prices. He added that there were also implications on poverty, particularly in rural communities which were dependent on the agriculture sector as the main economic activity.

It was therefore necessary, Dr. Smith stated, for financial institutions to adopt techniques to mitigate the risk of losses from exposure to the sector’s volatilities.

Among the measures he suggested were: pricing risks into lending interest rates; requiring stringent collateral cover for loans; and favouring lending that was supported by government guarantees.

Dr. Smith said that examples of the resilience of the agriculture sector can be seen in the example of Guyana where sugar, rice, fruits, vegetables and ground provisions, had shown some prospects of growth.

He noted that the Jagdeo Initiative, which had articulated the constraints to the development of a “dynamic” agriculture sector, can make a meaningful contribution to economic development, food security and poverty reduction in the Caribbean Region.

CONTACT: piu@caricom.org