Financial Innovation & Reforms Vital for All Markets

GLOBAL - Financial innovation and reforms are strengthening emerging markets and expanding the market for agricultural productivity investment, according to the Chief Sustainability Officer of Novus International.
calendar icon 1 June 2011
clock icon 4 minute read

Financial innovation and reforms are key to strengthening the economies of emerging markets and providing the risk management tools for farmers and food processors to adopt innovative sustainable agricultural practices. Joyce Cacho, Ph.D., Chief Sustainability Officer at Novus International, Inc., shared this encouraging news during a presentation at the 2011 Ag Innovation Showcase on 23 May. She also said that to improve agricultural practices sustainably, collaboration frameworks of major stakeholder groups – in particular scientists, farmers, processors, commodity exchanges, the finance industry and policy-makers – are critically needed. Under the leadership of Thad Simons, President and CEO of Novus International, a portfolio of partnerships have been developed to support customers in local markets and environments worldwide.

Dr Cacho said: "In developing countries, financial innovations are deepening the financial markets by increasing accessibility to a broader cross segment of the economy. Innovations are also increasing the alignment of financial products with customer needs and lowering financial transaction costs. There is a strong recognition in these countries and emerging market regions that financial reform designed to improve access to the formal economy also magnify the positive impact of other policy changes."

She participated in the Global Ag Economic Forum, on a panel discussion that opened the Third Annual Ag Innovation Showcase at the Donald Danforth Plant Science Center in St Louis. The event is considered to be the leading international conference focused on exploring innovative ideas and opportunities related to agriculture in solving long term issues in food production and security, environmental and energy concerns.

Dr Cacho said that the value-chain approach to agricultural finance focuses on understanding that farmers are both producers and consumers in economies. It is by bankers having this understanding, and by learning the steps from 'farm to fork', that cash flow financing products for primary processors or collectors are developed.

She continued: "In many ways, finance in emerging market countries and regions has grown beyond the focus on microfinance. For example, there is a tremendous push to establish systems of warehouse receipts and commodity exchanges in emerging market regions. These tools help with managing risk across seasons and across distances. This in turn gives farmers more flexibility – more choice – in converting their crops to cash or investments.

"Many developing country economies are charging ahead with expanding the accessibility of finance to bring more of the growing population into the formal economy. For example, deposits made with mobile telephone banking mechanisms are increasing. Community savings organisations, which are the beginnings of credit unions as we know them in North America, are improving in service quality and expanding their investments to include agricultural equipment, where they previously focused on transportation services," Dr Cacho said.

Novus International, Inc. was a sponsor of the event and a key player in the development of new technologies needed to close the productivity gap between the world's demand for food and the resources available to produce that food sustainably.

Dr Cacho concluded: "We care about ag financing innovations and reforms because our customers need access to adequate risk management tools as we work with them to develop and implement productivity enhancements, environmental innovations and best management practices. Investing in rural development, reducing energy costs while increasing energy availability, increasing accessibility to quality, nutritious, affordable food, improving environmental management, and addressing social justice are all needed to achieve total food sustainability in emerging economies."

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