The food crisis and the financial crisis :  double standards prevail

One law for the rich, another law for the poor

This morning’s news : The US Federal Reserve  has cut the target interest rate by O.5% down to 1%. Again one cannot help but being struck by the gulf that divides the handling of the financial crisis from that of the food crisis.

From April until June 3rd to 5th, when the FAO  held its summit in Rome, all the talk was about the food crisis. But there is a difference, and a substantial one, between the handling of these two crises.

With regard to the food crisis, politicians have limited themselves to fine words. Each and everyone has been keen on delivering speeches, all with the same chorus line: “We must invest in agriculture”.  At the FAO summit president Sarkozy declared: “We must do our utmost for agriculture…”

But nothing seems to be coming our way. No action has been taken by the international community. According to the latest data the number of starving in the world has risen from 854 million to nearly 1 billion.

To alleviate the financial crisis, on the other hand, there appears to be no lack of funds. In one single day, on October 13^th, Europeans alone managed to raise 1 700 billion €, that is over 1 million billions of CFA francs (or 1 400 times the budget of Burkina Faso for the current year,  2008). 

Even more interesting is the fact that each time the Government injects money into the financial system, it declares that it does so in order to prevent “the extinction of credit”. Credit, or money lending, that is vital to our economy and in particular to the survival of small and medium size enterprises.

I am convinced that here lies one of the main keys to our understanding of poverty in the rural world and the fact that the majority of those who starve are peasants. A family farm is a small enterprise. But it is an enterprise to which loans are continuously refused. Or to which loans are granted at exorbitant interest rates.

The only ones prepared to lend money to a poor peasant who needs health care for his wife or his son are the private dealers. They will provide money, at a 100% interest rate. If the peasant  manages to pay back only 50% of his loan, he will have to pay twice as much the following year (as much as he should have paid the first time). In this way many remain indebted for years. At harvest time,  borrowers often give away half of their crop to the money lender and in this way famine will settle down in their home for a long time to come.

But this is not all. The most dynamic of peasants, with a capacity to modernise their farms, have no more access to loans than the poorer ones. Or the rates are too high, often 16 to 17% in Burkina. Those who can get money from the co-operative banks are luckier. They may sometimes be granted a loan at 12%. In Burkina Faso only cotton farmers can get a 10% rate.

Therefore,  access to lending facilities has become one of the major themes on the agenda of the National Confederation of Farmers’ Unions, the CPF. On October 16^th at the launch of the Economic Justice Campaign,  a CPF official made a formal request:

“In view of the present difficulties in obtaining loans, we ask the Government to make representations to the banking institutions to have them grant loans at lower interest rates:

-   7%

-   without VAT

-  softer policy on loan securities (collaterals)”

It was on that same day that the women workers in the rice parboiling shops in Bama in the Kou valley declared:

“To be able to process all the rice grown in this area, we want to obtain loans that will enable us to buy up  the harvested paddy rice, to store it (as a security for the loan). We will pay back the loan in weekly instalments, so that we can take out an equivalent quantity of rice from the stocks to parboil and sell . We can then pay back yet another instalment and thus continue our work. The profits we make will contribute to pay for the basic needs of our families.”

This request should be taken into serious consideration by the government and by traders, for several reasons:

All across the rice districts the women workers have proved their capability. It is they who offer the best price/quality ratio. The main reason for this is that husking rice will yield about 70% (to 75%), as compared to only 62% for milled (white) rice. Moreover, many NGOs are prepared to help the women improve quality by supplying modern parboilers and labeled bags with information on origin, rice variety, etc.  Security for loans may be given by putting rice stocks in closed storage, to which there are several keys, one for the women workers, one for a government delegate or a trader. This is a form of loan facility that has worked will. It even has a sophisticated name: warrantage!

Parboiled rice is healthier than milled husked rice. It is easier to cook and appreciated by customers, in particular those who used to like the Catwel rice brand.

On October 16^th, when the Campaign for Economic Justice was launched, there was a banner reading

To have food is a right

To invest in agriculture is a duty

The coming weeks will tell if the women workers’ call has been heard!

Koudougou, October 30^th 2008

Maurice Oudet

Director, SEDELAN