Project approach

To achieve the proposed objective and generate the desired impact, the financial system needs to have access to analytical methodologies and innovative technological tools that allow accurate, pragmatic and actionable information at hand, allowing to distinguish more risky production systems.

Because the large amount of data required to achieve the proposed objective and impact regularly exceeds the capacities of financial institutions, the project seeks to implement tools that facilitate decision making and the implementation of appropriate concepts and methodologies. An intelligent use of information and communication technologies (ICT) will help to improve the methodology of data collection and analysis, in order to identify the needs of modern productive and climate solutions.

Along these lines, the project will identify the main climate threats and impacts as well as the most promising responses of a growing range of productive and climate solutions for micro and small agricultural producers and rural communities. Furthermore, it seeks to diversify and technify the supply of agricultural financial products, supporting in particular, agricultural production with a specific focus on climate and environmental issues.

Key concepts

RISKS AND INTERRELATIONS

Agricultural production is not an isolated activity, but highly integrated in its environment. The underlying risks can be defined, categorized and measured. This measurement process provides the basis for the definition of relevant climate solutions:

Agricultural production, such as the commercialization of its products and its financing, is part of a broader and highly interconnected system.

Productive system

The production system includes all activities related to agricultural production, planting and management of a crop or animal ("customers"), on the processing of products until they are sold ("Value chain"). It also includes the financing of value chains.

Climate change

Climate change refers to a lasting variation (10+ years) in the state of the climate system. Although there were always climatic variations, currently an anthropogenic climate change is perceived, that is, caused by humans. Not only does it have consequences such as global warming, but weather patterns generally change (periods and amount of precipitation, extremes of temperatures, among others). These changes affect ecosystem health.

Ecosystem health

Natural ecosystems provide crucial services for the human being (drinking water, soil nutrients, pest control, among others), its global annual value is estimated at USD 125 billion per year, surpassing the international gross product by more than 50%. Ecosystem health regulates the climate, for example through the capture of CO2 from the atmosphere.

Climate vulnerability

The threats of climate change have impacts on the livelihoods of small farmers, which have economic consequences for their business and family. The impacts and consequences of climate change depend on the Vulnerability of small farmers. This is the result of the composition of the following factors:

EXPOSURE

The EXPOSURE to climate change has to do with climatic phenomena and depends on the location of small farmers and cannot be changed unless the location of your farm and its activities is modified.

SENSITIVITY

The SENSITIVITY to climate change refers to the economic activity of the client, this can be changed by changing the specific activity performed by the client: agriculture, animal husbandry, trade in agricultural products, as examples.

ADAPTIVE CAPACITY

The ADAPTIVE CAPACITY to climate change has to do with the way in which the small producer implements its activities, in areas such as nutrient, pest or water management, among others.

As changing location or activity is highly complex, instead the objective is to improve the way agricultural activities are implemented in a defined place, to improve the adaptive capacity of small farmers, in face of climate, economic and social challenges.

ACTIVE AND PASSIVE RISKS

Active risks

Agricultural production (among other sectors) directly impacts the climate, such as ecosystems ("carbon footprint" and "environmental footprint"). Good practices mitigate climate change and strengthen ecosystems, bad practices deteriorate them.

Passive risks

But agricultural production at the same time is subject to adverse impacts of climate and ecosystem systems. Consequences are lost productivity or production, among others, thus directly impacting the economy of the producers.

Climate solutions

Faced with the climate and ecosystem risks identified, the financing of climate solutions supports a triple impact on productive finance for smallholder farmers in economic, social and environmental dimensions. In particular, the climate solutions promoted within the framework of EcoMicro address the following main results:

  • Improve the productivity of small farmers and/or the quality of production
  • Improve the socio-economic and adaptive capacity of customers, and therefore improve their credit risk profile and
  • Improve the management of ecosystems and, therefore, guarantee ecosystem health and the stability of services they provide.

The main focus of the project is to translate such understanding into concrete adjustments at the operational level of partner MFIs. In particular, a financial institution should be able to understand better the potential of each solutions to reduce the risks for its customers and, therefore, its portfolio. On the other hand, climate solutions are aiming to enhance the (socio)economic situation of customers, therefore facilitating their acceptance in the markets. This is expected to increase their ability to serve respective loans, and bears the opportunity to generate positive environmental and climate impact.

In accordance with its strategy, its portfolio composition and concret commercial objectives, the financial institution must be in a position to start selecting climate solutions that are relevant to its areas of operations, and promote these with target customer segments.

Examples of climate solutions are:

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DRIP IRRIGATION

Installation:
Easy installation. A main pipe is necessary, and lateral lines with dispensers that apply water in a controlled way

Benefits:

  • Use water efficiently, without waste, reaching the root, and with greater uniformity in application.
  • Allows irrigation in dry seasons reduction of weeds, pests and diseases (reduces costs in crop management)
  • Increase in productivity between 30 and 45%

Estimated costs:
Depending on the distance of the drippers, it varies between $ 600 to $ 800 per hectare

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ORGANIC FERTILIZERS

Materials:
Vegetable wastes that leave the same crop (pruning remains, harvest, etc.), manure, organic waste, water, molasses

Benefits:

  • Less use of synthetic fertilizers by up to 30%
  • Improves soil structure, (less compaction, better drainage)
  • Increase and improve soil microfauna (beneficial microorganisms)
  • Increase in productivity

Estimated costs:
Approximate labor costs $ 250 / hectare, the rest of the material comes from the crop itself

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LIQUID SOWING

How to apply:

  • Structure is mounted on seeder
  • Plastic tanks

Benefits:

  • Reduction of fertilizer use by up to 90%
  • Reduction of soil preparation costs by up to 50%
  • Productivity increase between 10 and 30%
  • Fertilization, initial irrigation and sowing in one step/li>
  • Sowing technification, uniformity of the crop, germination of up to 95%

Costs:

  • Depending on sowing method: seeder required
  • Estimate of 100- to 200 USD per hectare

EcoMicro in numbers

(March 2022)
total amount analyzed
for environmental climate risk
0
amount approved for financing
of climate solutions
0
MFI employees
trained
0
referential data
cards created
0
climate solutions analyzed
and operationalized
0
Read more

Experiences

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The story of Luiz Arranque

smallholder farmer

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CACPE

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In enim justo, rhoncus ut, imperdiet a, venenatis vitae, justo. Nullam dictum felis eu pede mollis pretium. Integer tincidunt. Cras dapibus. Vivamus elementum semper nisi. Aenean vulputate eleifend tellus. Aenean leo ligula, porttitor eu, consequat vitae, eleifend ac, enim. Aliquam lorem ante, dapibus in, viverra quis, feugiat a, tellus.