A Chinese saying holds that governing a great state is like cooking a small fish - a matter of light touch and careful proportion. In 1994, China split agricultural credit in two: commercial lending - including to smallholder farmers - stayed with the Agricultural Bank of China, while policy-driven lending was carved into a new Agricultural Development Bank. Behind the split lay a deeper shift in thinking - agriculture was not one problem, but several overlapping ones.
China uses the shorthand "the three rurals": agriculture as industry, the rural area as space, farmers as people. Agriculture means raising output and modernising production. The rural area is spatial - roads, irrigation, storage, and governance are public goods needing patient capital. Farmers are a human question - the survival, income, and rights of smallholder households. Each demands different instruments, risk pricing, and repayment horizons.
That recognition is not new to Africa. In 2003, the African Union's Maputo Declaration committed member states to raising agricultural spending to 10% of national budgets. The 2014 Malabo Declaration went further, centering agricultural transformation in national development agendas. African policymakers have long grasped the challenge's multiple dimensions; but what has remained totally unresolved on the continent is the question of finance. And indeed, translating the recognition of complexity into workable financial-institutional design.
Are there interesting insights from China that can help solve this problem?
Originally published by African Business.