twitter RSS Feed linkedin acp contact

Report focuses on turning agri-SMEs into commercially investable prospects

A new report has been published by the Commercial Agriculture for Smallholders and Agribusiness (CASA) programme, titled ‘The state of the agri-SME sector – bridging the finance gap’

AF CASAThe report aims to identify change priorities to address financing issues in the agri-SME sector. (Image source: Adobe Stock)

Alvaro Valverde, private sector engagement officer (CABI) and engagement, learning and communication Lead (CASA) said, “The CASA State of the Sector report brings a new level of granularity to the market for agri-SME finance in sub-Saharan Africa and Southeast Asia, highlighting the US$106bn annual financing gap. With almost all of these companies needing sub-commercial finance, coordinated action across the agri-SME finance ecosystem.”

“CASA stands ready to work with our partners and other interested parties to help make better use of subsidies, mobilise existing local financial institutions, make more climate finance available for the investment pipeline,“ he added.

Four change priorities were identified in the report to address this issue.. 

CASA identifies turning agri-SMEs into commercially investable prospects to anchor local bank markets for finance. Appropriate capital and government policy support continue to be needed across the financing continuum to fill the pipeline of investible agri-SMEs, provide the right growth capital to close the long-term financing gap and promote the emergence of large agri-enterprises that can anchor markets.

The programme also outlined developing capacity, incentives, and infrastructure for local banks and funds to profitably serve smaller, less commercial agri-SMEs over time. According to CASA, local financial institutions have the right locally denominated capital, proximity to clients and cost structure to profitably serve agri-SMEs. Capacity building and long-term subsidised capital can bring this existing banking infrastructure sustainably into the agri-SME market.

With scarce public and philanthropic funds to support the critical sub-commercial agri-SME finance market, blended finance needs to be more efficient and effective. A more sophisticated view of the market and a more transparent, collaborative, commitment by donors, DFIs, development banks, and IFIs to smarter subsidies is required, assisted by more consistent taxonomies, data, and reporting requirements, and a commitment to share learning.

According to the report, building the investment infrastructure around climate finance should be a priority to facilitate the absorption of climate funds at scale.  This will include new models and taxonomies to support large donor investments in creating a substantial pipeline of viable investments with climate expertise integrated into all channels of agri-SME finance.

Other takeaways from the report
 

  • There is an estimated US$160bn demand for financing from around 220,000 SMEs in Sub-Saharan Africa and Southeast Asia, but only US$54bn is being provided, principally by commercial banks. 
  • The accepted challenges around high costs to serve, high risk of agricultural markets and low levels of investment readiness amongst potential borrowers, are key limiting factors for agri-SMEs to engage with formal financial markets.

  • Most of the market is for sub-commercial capital, and even in the longer term, most agri-SMEs will never be in a position to access fully commercial capital.

  • There is a small group of high-potential agri-SMEs at the top of the market served by private equity, a much larger set of relatively mature companies in the middle financed by banks and a bottom of the market of lower-performing companies that are reached by highly concessional finance providers.

  • Currently, only 1.5% of global climate finance, approximately US$10bn is channelled to small-scale agriculture – almost all of which is provided from public sources and supports mitigation, not adaptation.

  • The significant and impending investment needed to build resilient supply chains with adaptation to climate change is met with a negligible capital flow towards agri-SMEs. Even if funds were made available, the infrastructure required to channel the finance to where they are needed is not currently available.

  • Increasingly sophisticated blended finance approaches and the use of specialised funds have opened up a range of potential mechanisms to drive investment towards agri-SMEs but there needs to be a greater understanding of the costs of subsidising these tools

LATEST NEWS IN Agriculture

African food imports bill predicted to double by 2030

African food imports bill predicted to d…

Experts have warned that the cost of Africa’s yearly food imports could increase from US$50bn to US$110bn by 2030 if immediate measures aren’t taken to increase food production

Wildlife and forestry sector in the spotlight

Wildlife and forestry sector in the spot…

On August 22, the 23rd session of the African Forestry and Wildlife Commission, hosted by the Government of the Democratic Republic of the Congo opened in Kinshasa, putting the future...

Boosting investment for Africa-made cotton

Boosting investment for Africa-made cott…

At a partner’s conference on cotton, jointly organised with the World Trade Organization (WTO) and the UN Conference on Trade and Development (UNCTAD), donors were urged to mobilise resources for new partnerships.   

Nature-based solutions help farmers in Ghana

Nature-based solutions help farmers in G…

Organic pesticides, waste-based fertilisers and forest regeneration are just a few of the green initiatives being employed in Ghana to boost farming communities’ resilience to the impacts of climate...

Boosting soil nutrient mapping in sub-Saharan Africa

Boosting soil nutrient mapping in sub-Sa…

The Food and Agriculture Organization of the United Nations (FAO) is set to fast track an impact-oriented project in sub-Saharan Africa and Central America for digital soil nutrient mapping, after...

Gambia-Korea partnership seeks to double rice production to curb food insecurity

Gambia-Korea partnership seeks to double…

President Adama Barrow has received a delegation led by the Korean Ambassador to The Gambia, HE Kim Ji-Joon, at the State House in Banjul to announce the delivery of sample rice...

Prev Next

OTHER RELATED ARTICLES - Agriculture

AfDB initiates strategy to attain 513mn tonnes of additional food production

AfDB initiates strategy to attain 513mn …

The African Development Bank (AfDB) has developed the technologies for African agricultural transformation (TAAT) initiative, a knowledge and innovation-based response, aiming to meet the need of scaling up proven technologies...

Rwanda launches farm mechanisation campaign

Rwanda launches farm mechanisation campa…

Rwanda has launched a nationwide campaign to promote agricultural mechanisation to improve the country’s agricultural productivity

Tobacco-free farms launched in Kenya

Tobacco-free farms launched in Kenya

Hundreds of farmers in Migori County, Kenya will break free from risky tobacco farming and transition to producing more sustainable crops, through the Tobacco-Free Farms Project

Electricity can unlock US$4bn in Ethiopia’s agricultural processing sector

Electricity can unlock US$4bn in Ethiopi…

Ethiopia faces numerous threats to national food security including disrupted trade and import channels, food price spikes, water supply risks, and delayed or compromised harvest yields during COVID-19

Nigerian government intervenes in food crisis

Nigerian government intervenes in food c…

The Nigerian government has planned to import food in large quantities to help overcome the  poor yields experienced by farming sin the country following recent flooding

USAID-DuPont partnership to boost maize production in Ethiopia

USAID-DuPont partnership to boost maize …

The Advanced Maize Seed Adoption Program (AMSAP) has been immensely successful in outpacing the maize production target in 2017 by 150 per cent in Ethiopia, which, in addition, has boosted...

Economic fragility and rising food prices drive up hunger in West and Central Africa

Economic fragility and rising food price…

The Food and Agriculture Organisation of the United Nations (FAO) and the United Nations World Food Programme (WFP) have warned of acutely food insecure people in West and Central Africa...

Namibian minister stresses need for agricultural research

Namibian minister stresses need for agri…

The Namibian minister of agriculture, John Mutorwa, has said that investment in agricultural research can address sustainable food production issues worldwide

WHO develops handbook to improve food safety and protect people from disease

WHO develops handbook to improve food sa…

The World Health Organisation (WHO) has developed a handbook to help countries measure their foodborne disease burden and identify food safety system needs and data gaps so they can strengthen...

African leaders, FAO delegation meets for food security workshop

African leaders, FAO delegation meets fo…

Representatives from the UN FAO and members of the Pan-African Parliamentary Alliance for Food Security and Nutrition met in South Africa for a workshop

US launches aflatoxin and chronic malnutrition study in Mozambique

US launches aflatoxin and chronic malnut…

The government of the US, through its Agency for International Development, has launched a study to assess the relationship between aflatoxin exposure and chronic malnutrition in children, in a new...

West African IFAD programme declared a success

West African IFAD programme declared a s…

IFAD and the EU have successfully completed the US$26.6 million Food Facility (EUFF) programme in West Africa

Prev Next