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Think Regionally...Hack Locally (Agricultural Smallholder)

Land-banking and land-sharing to help diversify agricultural monocultures, promote sustainable land-use, and empower communities with alternative ownership models and healthier food options.

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Written by DeletedUser

Identifying and Diversifying:

Typical of most post-colonial states, Caldas is an economic monoculture. Coffee brought by the French became its sole cheap export, dominant land-use for arable land, and the life-blood for Caldas and much of Colombia. Since 2006 coffee yields nationwide have fallen by 30% due to an epidemic of insect spread plant diseases. Linked to climate change, dwindling yields have resulted in coffee futures soaring globally. Monocultures in any system are the weakest link and first to collapse when conditions are unfavorable. Strategically re-thinking the agricultural chemistry of Caldas may provide for additional economic resilience, local food security, and sustainable land-use practices.

The Caldas Landbank for promoting equitable ownership opportunities:

Through the mechanisms of land-banking or similar collaborative ownership instruments, existing low-yielding monocultures might be purchased and divided for polycultural multi-tenant use. Such a tactic is the reverse of “Land Consolidation” typically used to unite small agricultural parcels for large scale agribusiness. This form of agricultural “Land Hacking” identifies underperforming properties for purchase and unites them with a diverse consortium of stakeholders.  The goal is resilience without subsidy.

A Land-grab for Good:

Across the globe, agricultural land is being purchased by foreign investors for protectionist and strategic goals, and is commonly referred to as the “global land-grab”. What if, land acquisition for agricultural production was re-thought as a social business? A Land-grab for Good would facilitate appropriate ownership opportunities for communities in resource limited settings. Through brokering agricultural land transactions between public and private actors, the Caldas Land-bank’s mission is to increase or secure land tenure. The most fundamental social security is asset endowment. Thus the goal of the land-bank is to facilitate the growth of socioeconomic vitality, through the ownership of property. By securing land tenure, struggling communities may begin to build healthy and resilient local economies, which are adequately prepared to weather trade shocks and other unforeseen global events.


If you did not see this in the above image/video links, here it is again:

Agricultural Microfinance Overview

International Fund for Agricultural Development (IFAD)'s article about agricultural microfinance in Latin America:

Capturing ‘the State of Smallholders in Agriculture’ in Latin America

A balanced evaluation of agricultural microfinance cases from the Consultative Group to Assist the Poor (CGAP) & International Fund for Agricultural Development (IFAD):

Emerging Lessons in Agricultural Microfinance

A well regarded landbank outside of Detroit:

Genesee County Landbank Flint, MI


How do you envision this idea making money?

The Caldas Landbank would help finance land purchases through low interest loans to approved parties. Interest capitalized would go towards agricultural education and training, shared infrastructure, and the purchase of open-source seed varietals. Farmers participating in the Caldas Landbank would use profits from their harvest to pay their debt to the land-bank and to increase the equity in their property. The Landbank would be designed to adjust and buffer rates according to market, weather, and labor fluctuations.

How does this idea create social impact, particularly around improving health?

Through the Caldas Landbank’s agricultural education program, knowledge about healthy foods, sustainable farming techniques, and appropriate land-use is disseminated. By increasing awareness of healthy food alternatives coupled with economically and environmentally cognizant principles related to food production, the land-bank will take leadership in promoting appropriate commodities that improve health both physically and ecologically.

How does this idea add social value at every step of the process?

The Caldas Landbank simultaneously offers services that allow for farmers to purchase arable land, and as an education institution provides training for aspiring farmers. The process of loan approval requires that farming cooperatives (and sometimes individuals) receive or pass certifications to prove their competence in sound farming practices, as well as business management best practices.

What are the short term steps we could take to implement this idea tomorrow?

Begin a discussion with the Faculty of Agricultural Sciences at the Universidad de Caldas, and the credit bureaus Computec, Datacrédito and Covinoc.

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Photo of Sarah Fathallah

I remember this CGAP research! I think the Bolivia case study is pretty similar to what you could envision to happen in Caldas. A few problems that will need to be tackled though:
- I am not sure whether Colombia or the specific region of Caldas has an established credit bureau. This is a sine qua non condition to giving away any types of loans, both because of the risk of high delinquency / non-repayment rates, and because it could harm the borrowers themselves (risk of overindebtedness).
- The operational costs of managing the loans and monitoring repayments on a regular basis might be higher than you think. I don't know if you envision the loans to be given to individual farmers, or to a cooperative, or a bigger type of association, but the more borrowers you have, the more expensive (VERY expensive) it can become.
- There should be some sort of 'contract' in order to make sure the lended money will serve to buy lands, and not something else. In a lot of countries, rural farmers are known for being too tempted to spend their agricultural loan money right away, and not necessarily towards productive ends. In some cases, in Malawi for example, the agricultural loans have been couples with commitment savings products in order to help educate the farmers that it's way more beneficial for them in the long term.

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DeletedUser

Hi Sarah,

Deeply appreciate your informed feedback. I am familiar with some of these hurdles that are typical of such enterprises. The CGAP research is prefaced with examples of numerous failures and the existence of only a few successes. That said, there are some helpful lessons that may be carried over from the successful precedents, granted that we keep contextually specific variables in mind.

I agree that overindeptedness is a huge problem (as we have seen with microfinance in general), therefore a strict approval process would be necessary. Loan recipients would likely be farming coops, where multiple families manage a collection of parcels. This would serve two purposes: to avoid the problem of awkwardly small tracts that cannot yield profitably, and to diversify the risk amongst multiple stakeholders (contractual obligations within the coop is yet another planning issue, yet models exist to build on). Additionally, education and apprenticeship would need to be a “huge” part of this idea (maybe this is actually the vehicle to land ownership instead of the bank... okay new concept :/). A successful farmer requires just as much wisdom and experience as they do education, and therefore it may be necessary for a certification program to be completed as a prerequisite to loan approval.

Microfinance providers would need to complement their agricultural portfolio with other loan products (such as mortgages, and business loans), to reduce institutional risk and provide more robust operating margins. The operational costs may be ameliorated with the above, or as in the case of Bolivia:


“These rural offices do not lend exclusively to rural clients; so, the lower cost of lending to clients in town, combined with the slightly higher interest rates charged for agricultural loans, helps cover the expense of lending to clients in more isolated areas. The
cautious provision of some consumer credit to salaried employees also helps offset agricultural lending expenses.”

Source: Emerging lessons in agricultural microfinance, IFAD 2006

Additionally, as with the Bolivia case, loan officers would need to have a background in agriculture or agronomy, and have substantial knowledge and experience living in the area. This knowledge of the region, its micro-climates, seasonal production cycles, and labor flows, has proven to substantially increase the likelihood of repayment as sited by the successful cases. And, regarding contracts to limit loan awards spent on things other than agriculture, I think here you are right-on to suggest a contract. Many of the cases employed comprehensive audits of potential recipients to evaluate projected agribusiness related expenses as well as household expenses. Such “household” assessments helped to identify where an individual recipient may be tempted to use the loan award for expenses unrelated to agribusiness. But, a contract might be a helpful line of defense to mitigate irresponsible spending.

I will incorporate some of these thoughts and responses into the concept to make it more clear. Sorry for the long reply.

Photo of Sarah Fathallah

I definitely agree with you and I'm certainly not saying this is not feasible (I for one am so hopeful that these type of initiatives should be thoughtfully designed in order to make them work). Just pointing out a few challenges to keep an eye on, but I see that you also have them in mind :)

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