AJAD Volume 4 Issue No. 2 December 2007

Risk is an integral part of financial intermediation. Hence, risk management must be at the heart of finance. However, it is disturbing to note that systematic risk management is still not as widespread as it should be in the microfinance industry. Except for a few flagship microfinance institutions (MFIs), which constitute the core of the industry, most MFIs do not pay adequate attention to systematic risk management.

The microfinance industry has grown rapidly during the last decade in breadth, depth, and scope of outreach. The rapid growth seems to continue, given the massive unserved and underserved market. The growth of the industry has changed the risk profile of MFIs. Yet many MFIs seem to continue to seek growth without much attention to attendant risks. Surprisingly, many MFIs appear to neglect even the basic credit risk management which helped MFIs achieve high growth rates historically.

The growing interest of many MFIs in agricultural microfinance must be seen in the broader context of risk management in the industry. Financing agriculture is more risky than financing trade or industry; it is also more risky than financing nonagricultural microenterprises. However, MFIs interested in agricultural microfinance should be more concerned about their internal structures and capabilities rather than the widely discussed, and often cited, pervasive risks in agriculture and their ramifications for the MFIs' pursuit of growth in agricultural microfinance.

MFIs should recognize the inherent risks in agriculture. However, if they build their institutional capacity to effectively deal with risks generally associated with financial services for poor and lowincome households, their prospects for success in agricultural microfinance would certainly be much brighter. In addition, no amount of sophisticated and modern technical tools and analysis can help achieve effective risk management in respect of nonagricultural or agricultural microfinance if risk management is not embedded into the institutional culture and its value is not shared by all employees. Achieving this goal remains one of the most challenging tasks in risk management which MFIs need to address. To help in this effort, we need to bring into the discussion—now dominated largely by issues related to introducing sophisticated systems and technical tools of risk management—the institutional cultural issues and issues related to cognitive biases in executive decision-making behavior.

This paper presents a general picture of the difficulties in developing a sustainable lending service geared toward smallholder agriculture. Drawing on the experiences of the Philippines and other countries, it traces the rethinking of the agricultural credit policy following the collapse of subsidized agricultural credit programs, and the subsequent rise of microfinance, as pioneered by nongovernmental organizations. Acknowledging that the main challenge is not about the straightforward application of microfinance technologies to agriculture, the paper discusses how crafting an approach to sustainable agriculture microfinance is influenced by myriad of issues.

The paper concludes that overcoming the barriers to agricultural microfinance goes beyond the simple provision of credit, extends outside agriculture, and shuns a "one size fits all" approach. To be able to deal with the complexity and risks in agriculture, rural lenders would have to innovate on their product design, lending technologies and risk management strategies; improve their information base; and strive to have access to market-based risk management products. Moreover, policymakers have to recognize and understand the peculiarities of the rural and agriculture sector, namely: information asymmetry, geographic dispersion, heterogeneity of the population, covariant risks, insecure property rights, and the absence of insurance markets and risk-reducing institutions.

The paper examines the possibilities of using trade policy to address the adverse economic effects of an avian influenza outbreak in the Philippines. In particular, it employs a computable general equilibrium (CGE) model for analyzing the likely effects of two options; namely, a) a ban on imported poultry, and b) the removal of tariffs on non-poultry meat products.

Using six model scenarios (i.e., production shocks, consumption shocks, ban on poultry imports, removal of tariff on non-poultry imports, and selected combinations of these shocks), the simulation results reveal that (a) the consumption and production shocks are expected to have a contractionary effect on real GDP; (b) the expected fall in the output of poultry products explains most of the decline in real GDP; (c) the production shock appears to have a larger impact since this explains most of the decline in real GDP as well as the increase in the general price level; (d) while the consumption shock tends to have a larger impact on the poultry products, the production shock dominates the aggregate responses because of its effects on other industries, and (e) avian influenza is likely to have far-reaching effects on the economy, way beyond the poultry sector.

Based on these results, this paper supports the use of an import ban as a preventive measure against the occurrence of an avian influenza attack. This is based on the finding that the economic costs from such a measure appear to be lower than the costs associated with the disease. In contrast, the study finds that there is a weak case for removing tariffs on non-poultry meat products as a means to soften the harmful impacts of an avian influenza outbreak.

In order to explain the trends in the development and farm attributes of Integrated Agriculture-Aquaculture (IAA) systems in the Mekong Delta of Vietnam, a participatory community appraisal and two surveys are carried out in three districts with contrasting fish culture input systems. The first survey, undertaken in December 2002, covers 90 households; the second, held December 2004, covers 80 households. The factors driving changes in the farming systems are the introduction of modern rice varieties, the policy of economic liberalization, market demand, and natural disasters. The principal components of IAA systems in the Mekong Delta which the study examines are the land use intensity, market access, farm diversity, farm inputs, and household income. The study finds that the hard-to-change farm characteristics are the land use intensities of rice, orchard and cash crops. In contrast, the easy-to-change farm characteristics are the number of farm components, the land use intensity of fish ponds, on-farm family labor, off-farm and non-farm income, and farm inputs. The main drivers of the changes over the two years are market demand and a poultry disease outbreak (Avian Influenza). Well-off farmers with good farming practices and enough capital tend to intensify their farming practices, while the poorer farmers tend towards diversification in order to safeguard their livelihood and avoid risks.

Global production of broiler meat has been growing since the 1960s, faster than that of any other meat. In recent years, this growth has occurred in developing countries. Broiler meat is popular because it is cheaper, more versatile, and is perceived to give more health benefits than red meat. In spite of these advantages, the world broiler industry increasingly faces pressure to improve its production methods, with consumers and government citing health, environment, and animal welfare as the areas for improvement. Demand outlook is positive for the Philippine broiler industry because of the continuing growth in population and household incomes in the country. However, it faces threats from cheaper imports as a result of its higher cost of production and its less efficient marketing system. To compete, the Philippine broiler industry must aim for more efficient systems of production and marketing, and the government must provide an environment conducive to productivity improvement.

The paper tackles the issue of food safety, which is generally defined as the assurance that food will not cause harm to the consumer when it is prepared and/or eaten according to its intended use. Echoing the recognition by the Food and Agriculture Organization (FAO) in 1996 that food safety is an element of food security, the paper discusses the importance of the food trade in the economies of many countries, as reflected in the health, economic and political consequences that arise when the food safety system of a country fails. It focuses on the Southeast Asian experience—their food marketing system, the current food safety situation, as well as the complexities brought about by the concern for food safety. Highlighted are the challenges in establishing and strengthening the key components of a food control system to ensure safety along the whole food chain continuum, the relationship between Codex standards and related texts, as well as the enormous responsibility faced by Southeast Asian countries in meeting the obligations of the World Trade Organization. Finally, several recommendations are outlined, stressing the importance of carrying out a needs assessment, participating more actively in Codex work, and taking advantage of the existing collaborative initiatives undertaken, including those in ASEAN, and the various technical assistance available for capacity-building in food safety.

Especially when viewed in the context of the ongoing market liberalization, small land use systems are often considered to be inefficient in terms of commodity production because further externalities, which might also be welfare-relevant, are not sufficiently accounted for. The assessment of all outputs connected with small land use systems can deliver a more comprehensive view on their economic, ecological and sociocultural impacts. This paper reports on a case study carried out in India which investigated the outputs of small sustainable land use systems. Based on the empirical evidences, we show the high complexity of outputs—commodities and externalities—linked with small sustainable land use systems in developing countries. 

The book is one of the few notable books on agribusiness that I came across in recent years. Kim Bryceson has vast experience in the agribusiness and energy sectors. She is a Senior Lecturer in Agribusiness from the University of Queensland (UQ), Australia. UQ is one of her country's sandstone universities while Queensland is an agribusiness region.