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IFAD invests US$9mn to help rural SMEs in developing nations

The International Fund for Agricultural Development (IFAD) has announced an investment of US$9mn into the Agri-Business Capital (ABC) Fund to help small-scale farmers and micro- small and medium size rural enterprises in developing countries create jobs and increase incomes

The investment was made possible due to a contribution from the Swiss Agency for Development and Cooperation.

Under its private sector engagement strategy adopted in September 2019, IFAD can directly fund private sector entities and invest in funds targeting rural small and medium size enterprises (SMEs) and small-scale producers’ cooperatives.

“The private sector’s involvement in the eradication of hunger and poverty was crucial before the COVID-19 crisis. Now it has become even more important as we work to reduce some of the immediate impacts of the crisis and plan for a longer-term recovery when it is over,” said Gilbert F Houngbo, president of IFAD.

Small-scale producers and rural SMEs have always faced real difficulties in accessing the funding they need to grow their businesses. With COVID-19, their situation could become even more precarious without necessary support.

Prior to the COVID-19 crisis, the demand of US$240bn far exceeded the available supply of about US$70bn, leaving a funding gap of roughly US$170bn. About 70 per cent of the demand of approximately 270 million small producers in Latin America, sub-Saharan Africa and South and South-East Asia was unmet.

“Small-scale farmers and rural SMEs are the backbone of the economy of their countries. They have a very high potential for growth and can create jobs – especially for the youth - and drive development in their communities and countries, but they need resources to invest,” added Houngbo. 

IFAD’s investment in the ABC Fund is part of a wider plan to scale up IFAD’s engagement with the private sector and design innovative instruments to help increase investments in rural areas and help the private sector overcome the challenges of investing in small-scale agriculture, recognising that rural SMEs constitute an untapped business opportunity.