Note 21: Innovative Financing Mechanisms

Ratio: 5 / 5

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Innovative financing mechanisms

Examples of fully demand-driven services are few, but some innovations have been implemented. Four different models of innovative financing mechanisms have been identified. (3)
Based on a recent study by FAO which includes four different cases along with relevant literature describing like-minded models: Chipeta, S. and Blum, M. Forthcoming. Innovations in financing mechanisms for demand-driven agricultural advisory services. Framework for analysis and synthesis of experiences. Rome: Food and Agriculture Organization of the United Nations.

Farmer organisation-owned advisory systems/ services with public subsidies combined with farmer payments
Some national FOs choose to provide their own advisory services, such as the Danish Agricultural Advisory Service (DAAS); National Smallholder Farmers’ Association of Malawi (NASFAM); and ProAgria in Finland. In all these cases, AAS are provided by advisers employed by FOs and financed partly by public subsidies, partly by farmers’ own contributions, the latter increasing over time.

Decentralised services with public financing of demand-driven processes and services
In this mode, farmers/FOs are involved in articulating their demands and defining who provides which kind of services to them. Examples include Senegal’s Agricultural Services and Producer Organisations Support Programme (PSAOP); Tanzania’s District Development Funds; Coordinadora Nacional de las Fundaciones Produce (COFUPRO) in Mexico; Corporación Colombiana de Investigación Agropecuaria (CORPOICA) in Colombia; Fadama II in Nigeria; and Decentralised Agricultural Extension through Farmer to Farmer Extension in Nepal.

Public sector-driven privatisation of services through competitive grants and contracts
Some countries aim to improve the effectiveness of AAS by supporting privatisation of services through public competitive grants and contracts available to different types of service provider, including civil society organisations, private enterprises, and FOs. Examples are the Chilean Institute for Agricultural Development (INDAP); Innovation and Competitiveness Programme for Peruvian Agriculture (INCAGRO); and former National Agricultural Advisory Services (5)
NAADS was officially dissolved in 2015.
 in Uganda. Some competitive grants are combined with users’ financial contributions.

Producer cooperative-based embedded services fully financed by own processing and marketing revenue
Globally there are many examples in operation where producer cooperatives provide AAS to their members and finance core services through the revenue gained by marketing their produce. Several of these are dairy cooperatives, such as the Nariño Dairy Products Cooperative (Colácteos) in Colombia. Other commercial organisations, including the Colombian Coffee Growers' Federation, also have outstanding experience.