Kicking off a series of guest blogs on the topic of the European Microfinance Award 2023 – Inclusive Finance for Food Security & Nutrition – EMA2023 consultant (and e-MFP member) Myka Reinsch Sinclair outlines the scale of the challenge, and the role that financial inclusion organisations can play in combatting food insecurity and malnutrition.

The negative trend in food security

Despite impressive growth and innovation in inclusive finance strategies to reduce poverty, the fundamental problem of world hunger is still on the rise. Food insecurity currently affects at least 10% of people worldwide, disproportionately impacting the global South. According to the World Food Programme, “828 million people go to bed hungry every night. The number of those facing acute food security has soared… [and] a total of 49 million people in 49 countries are teetering on the edge of famine”, with 2022 expected to register “a food crisis of unprecedented proportions, the largest in modern history”. The FAO pointed out in its 2022 State of Food Security report that global food insecurity had grown by 150 million people since the onset of the COVID-19 pandemic. Considering the full range of food insecurity and malnutrition, experts estimate that as many as two billion people remain undernourished worldwide.

Based on this current trajectory, global experts (including FAO, IFAD, UNICEF, WFP and WHO) predict that fully 8% of the world’s population will still be coping with hunger in 2030, the year by which the 2015 UN Sustainable Development Goals had targeted to end world hunger altogether. The recent, strong uptick in hunger has been attributed to a combination of climate change (leading to environmental disasters that undermine agricultural production), economic shocks (including acute supply chain disruption from the COVID-19 pandemic), geopolitical conflict (including the war in Ukraine, where a significant portion of the world’s wheat and corn is produced), and the increasing chasm between rich and poor around the world.

Inclusive finance and food security & nutrition

The shocking scope of world hunger today, the urgent need for efficient and effective strategies to address it, and the potential of microfinance to make a difference have inspired the theme for the 2023 European Microfinance Award: Inclusive Finance for Food Security & Nutrition. When I began working nearly two decades ago with Freedom from Hunger (now part of Grameen Foundation), we focused explicitly on addressing the root causes of hunger through microfinance. We collaborated with banks, microfinance institutions and NGOs promoting savings groups to develop multi-sectoral, financially self-sustaining approaches to equip poor women and their families to overcome chronic hunger and poverty, and we saw promising results. As the financial inclusion sector has matured, the appetite for such holistic, value-adding strategies has only grown. The time has never been better to leverage the scale, impact, and ingenuity of the financial inclusion sector to help tackle the urgent social development challenge of hunger and malnutrition.

Although improving food security has never been a direct focus of financial inclusion, hunger and malnutrition are of course integrally linked to poverty. Poverty is at once a major cause and result of food insecurity. Microfinance can therefore affect all four dimensions of food security: availability, access, utilisation and stability of “sufficient, safe, and nutritious food that meets [people’s] food preferences and dietary needs for an active and healthy life,” (The International Food Policy Research Institute). To wit, without economic resources: farmers cannot produce high-quality crops to eat or sell (availability); households cannot afford to buy enough nutritious food to feed their families (access); low levels of education, unaddressed health problems and poor sanitary conditions can impede people’s ability to select and absorb healthful nourishment (utilisation); and people are less able to cope in the face of political unrest, climate disasters or seasonal food shortages (stability). As a tool for addressing poverty, then, financial inclusion has a vital role to play in enhancing people’s economic wherewithal to ensure adequate food and nutrition for themselves and their families.

Conceptualising food security – and ‘hidden hunger’

It is important to understand that food security occurs on a continuum. People can be persistently food insecure (regularly and repeatedly unable to access and utilise sufficient nourishment), chronically or seasonally food insecure (facing periodic shortages, usually due to predictable circumstances), or can experience ‘transitory’ food insecurity due to an unexpected event, such as drought or war. Moreover, hunger is not just about the availability of and access to food; malnutrition falls on the food security spectrum, and it is also serious. Sometimes called the “hidden hunger,” malnutrition can occur when there is inadequate caloric intake (insufficient quantity/frequency of food) – especially during childhood development, or when the food consumed lacks nutritional quality or balance. For example, some people may have access to enough of one staple food to avoid feeling hungry, but their inadequate consumption of protein or other nutrients can still lead to malnutrition that stunts children, undermines productive energy and weakens overall health. Undernourishment and malnutrition can lead to a negative cycle that reinforces intergenerational poverty. This is why the term ‘food security’ is often accompanied by ‘nutrition’.

Food insecurity and malnutrition are caused by a complex combination of interrelated factors that occur at multiple levels of society. At the macro level, government policies–including agricultural sector incentives, international trade and transportation infrastructure investment– and population growth play a critical role. At the micro level, people’s household food behaviours are influenced by income level, education, cultural and social norms, and which foods are affordable and locally available. Between these two levels are behaviours of all the actors in the food system, including small-scale and industrial farms, offtaking companies, consolidators, processors, distributors, transport services, marketing, packaging, storage facilities, importers, exporters, food companies, supermarkets and vendors, among others. Climate is an overarching enabling factor–determining what can be cultivated, how much, where and when–and one that is increasingly causing food security disruptions and risk. All these elements interact to determine the level of food security and nutrition of a given population.

There are various drivers of food insecurity. These include: the unsustainability of food systems, the rising costs of food and the low quality of input material for food production. Unfortunately, financial inclusion does not always have a positive influence on food security. For example, while access to credit can boost livelihoods, household income and food security, the necessity of making on-time loan payments (in order to retain access to finance in the long term) can also exacerbate food insecurity, because clients may choose to reduce food consumption or even go hungry in order to direct available resources to loan maintenance. This troubling loan repayment-over-food trade-off subverts the mission of the financial inclusion sector. So, although financial inclusion has the capacity to help alleviate many root causes of hunger and malnutrition, it can also have inadvertent negative impacts when clients’ food security status and practices go ignored.

The role of the inclusive finance sector

So, what can financial organisations do? Because of the close connection between poverty and food security, there is a broad spectrum of financial inclusion services that ultimately influence the food consumption and nutrition of clients, their households, and the broader community. While financial inclusion is never a panacea and it’s important not to overload the sector with unrealistic and unfair expectations, there does exist a vast array of innovative products and partnerships that combine the power of financial inclusion with other ingredients to enable people to overcome hunger and malnutrition. Such interventions include agricultural finance and risk management, digital platforms uniting food actors across the food value chain, financial product design adapted to food security conditions and agricultural calendars, transportation infrastructure investment, mobile apps promoting healthy behavior change, livelihood development, health protection, nutrition, education and water and sanitation programs, among others.

As a longstanding practitioner in the financial inclusion sector and a member of European Microfinance Platform, I am delighted that the 2023 European Microfinance Award will highlight the crucial connection between food security and financial inclusion. I look forward to seeing the discussions and innovations on this topic over the coming months.

Round 1 of the European Microfinance Award 2023 opens tomorrow, March 15th, and will be open until April 12th at 23:59 CEST.


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