The World Bank’s broken food system: how agricultural lending is failing smallholder farmers

Reforming multilateral development banks is currently a hot topic, with much talk about costs of borrowing, leveraging climate finance and increasing financial flows.

But we need to look beyond how much banks lend – the focus should be what they fund and how effective they are at reducing poverty, hunger and tackling climate change.

I recently co-authored a report for CAFOD examining the World Bank’s agricultural lending. Our research found the World Bank is more interested in ensuring private finance flows towards a broken food system based on industrial agriculture than it is in reducing hunger.

In fact, they’ve been attaching a string of conditions to their loans which are lining the pockets of big agribusiness while smallholder farmers suffer. This matters because the World Bank has a mandate to reduce poverty and is a key driver shaping the policy for agricultural development in low-income countries.

Why does agriculture matter?

Agriculture is a vital engine in reducing poverty, especially small-scale agriculture. The sector is two to four times more effective than any other sector in raising incomes amongst the poorest people. Large-scale commercial agriculture, on the other hand, is shown to have less impact on poverty reduction. Yet, this is the model that the World Bank continues to prioritise through its loans.

CAFOD’s analysis found the World Bank measures success in agriculture as greater participation of the private sector in providing access to hybrid seeds and fertilisers, instead of measuring impacts on reducing hunger and poverty.

We found that in country after country, the World Bank puts conditions on its loans for agriculture projects which lock farmers into using specific seeds and fertilisers. This includes restrictive seed laws and regulations which make it difficult – and in some cases illegal – for farmers to save or sell their own seed varieties.

As well as being unethical, this also has financial consequences for countries as they must spend money subsidising these expensive projects which line the pockets of big business. This is contributing to the global debt crisis.

It is not farmers or the people facing hunger who benefit, but large-scale agribusiness companies who are profiting from increased sales and greater control over the global agricultural sector.

Why seeds matter

Seeds are the starting point for all food production and access to a wide diversity of seeds is vital for farmers to be able to grow the food we all need. Genetic diversity is also vital for climate resilience and to combat biodiversity loss.

Historically, farmers grew, owned and exchanged their own seeds. In Africa, 80% of farmers’ seeds are still exchanged freely but this is rapidly shrinking because of the World Bank’s policies. Countries are being pushed to introduce restrictive laws to prohibit this centuries-old tradition.

This will impact women the most because they have less access to the money to buy seeds in commercial markets and commercial breeders often do not produce seeds for the crops that women grow for home consumption.

Communities that CAFOD works with, from Bangladesh to Bolivia, are fighting to protect their traditional seeds from the expansion of industrial agriculture. CAFOD is calling on the World Bank to stop undermining their rights to save, share and sell their seeds.

The World Bank should fund an agroecological transition

The World Bank has admitted in internal papers and evaluations that the viability of this model is not working. Yet they continue to pursue intensified agriculture. In a climate crisis, we need to move the food system away from being dependent on destructive fertilisers and pesticides, with long-supply chains and focus on more diverse local food systems.

Diverse local food systems rooted in agroecological approaches are shown to produce higher yields compared to those dependent on chemical inputs – plus they improve soil health and biodiversity. Crucially, agroecology supports small-scale farmers’ rights too.

The World Bank needs to put local diverse approaches front and centre of its policy and financial support. It needs to stop supporting restrictive seed laws which harm farmers and do little to tackle world hunger. It is nonsensical to spend so much on subsidies for climate-damaging chemical fertilisers.

The World Bank should instead invest in sustainable and climate-resilient production models, supporting farmers to use local seeds and grow crops that work for their communities.

But the World Bank will only be able to do this if it stops focussing on measuring private sector involvement in agriculture and instead focuses on metrics that really matter, such as: reduction in levels of poverty, hunger and malnutrition; gender equity; soil and water quality and access to indigenous seeds.

The World Bank exists to help reduce poverty and help the world’s poorest, not to enable big-agribusiness to line its pockets. Until the World Bank changes its approach, we will continue to see small-scale farmers suffer and the number of people facing hunger grow.