Themicroloanfoundation's Blog

Malawi and Food Security
April 23, 2010, 1:14 pm
Filed under: Uncategorized

WFP recently released its analysis of Malawian food security for 2010. Having been both lauded and criticized by donors for its food policies, Malawi remains an interesting, if at the very least, irregular case of food security.

Until 1986, most of the agricultural sector was under the control of the state. Staple crop distribution was handled entirely by the Agricultural and Marketing Development Corporation, a parastatal. Price controls were heavily regulated by the Ministry of Agriculture and heavy subsidies were the order of the day.

With the oil price crisis of 1979, export earnings plummeted and the World Bank and IMF were called in for Structural Adjustment. Part of the package included the complete liberalisation of Malawi’s agricultural sector, the liquidation of most parastatals and an end to subsidies. The goal being to encourage new entrants and stimulate competition and innovation in the agricultural sector.

For our clients (who work almost entirely in the agricultural sector) and their fore-bearers, this had mixed results. Though one can safely say it was catastrophic for most. While those living in peri-urban areas enjoyed access to new private traders, most were not so lucky. Those living far from urban areas (eg: most of our clients/Malawi’s rural population) saw no private traders to fill the gaps and ADMARC’s markets disappeared.

While donors had hoped that the withdrawal of the state would foster the development of a vibrant private sector, the goal never materialised. The road to hell is after all, paved with good intentions.

In 2005, Malawi suffered from a drought that devastated the private agricultural sector. Malawi’s President, Bingu wa Mutharika, in so many words, told donors to buzz off and reinstated subsidies and ADMARC’s control over Maize distribution. By subsidizing the price of fertilizer, many of our clients were able to acquire cheap inputs that revitalised their productivity. By 2008, Malawi was once again producing a food surplus, and by FAO standards, food secure.

Two years later, it is clear that this is no time for anyone to rest on their laurels. WFP’s report notes that half of children under five are stunted (under height, a key indicator of malnutrition). In the same vein, USAID noted that informal Maize prices at the border reached a five year high in February, 2009, pointing to an abnormally high demand spurred by a hunger season.

The WFP report showed that crop diversification was one of the key factors in reducing a household’s vulnerability to malnutrition. This is where microcredit comes in. By providing vulnerable households with pro-poor agricultural loans, we can play a crucial role in combating malnutrition.

Low-interest, flexible loans such as those provided by MLF are key in helping to supply key inputs to an agricultural household. More importantly, it can help diversify a households income. WFP found that households with more diverse incomes were far less likely to be vulnerable to food insecurity.

By helping households find additional sources of income (eg: starting additional small businesses), one can mitigate their risk of falling victim to external shocks. For instance, if a household has only one source of income, like selling a certain type of vegetable, price shocks can throw the household even deeper under the poverty line. However, additional sources of income can go a long way to providing stability.

What this shows is that improving credit access for the rural poor is not just about smoothing consumption but about providing a crucial opportunity to prevent hunger at the household level.$File/full_report.pdf


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