Rural businesses, which are so vital for transforming food systems, will get a much needed boost from an ambitious new financing programme launched by the UN’s International Fund for Agricultural Development (IFAD), as part of its broader efforts to address rising hunger and poverty levels in the world’s poorest countries
The Private Sector Financing Programme (PSFP) aims to spearhead an increase in much-needed private investment in small and medium-sized enterprises (SMEs), farmers’ organisations and financial intermediaries servicing small-scale farmers, which are too often neglected by investors. It will provide loans, risk management instruments (such as guarantees), and equity investments.
Gilbert F. Houngbo, president of IFAD, said, “We can end poverty and hunger! But to achieve this, we urgently need to stimulate more private sector investments to rural areas and unlock the immense entrepreneurial potential of millions of rural SMEs and small producers. With access to capital, they can attract more investors and partners, grow their businesses and create employment opportunities - especially for young people and women.”
As part of its launch, the PFSP announced its first loan of US$5mn to a Nigerian social impact enterprise, Babban Gona, which has a strong background in successfully moving small-scale farmers from subsistence to a more market-orientated model.
The loan will help Babban Gona support 377,000 small-scale rice and maize producers in Nigeria with a comprehensive package of training, quality inputs, and marketing services. Babban Gona will also store and sell the harvest on behalf of its farmers when prices are higher. They aim to create up to 65,000 jobs for women and 66,500 jobs for youth by 2025. By committing these funds, the PSFP aims to stimulate larger contributions from other investors and help Babban Gona meet its target to raise US$150mn to reach millions of small producers.
Lack of financing and access to financial services prevents rural SMEs and small-scale farmers from harnessing opportunities offered by a growing demand for more diverse and nutritious food globally. SMEs involved in food processing, packaging, transport and marketing are essential to small-scale farmers, providing them with services, inputs, and market opportunities, which contribute to increasing their income and employment.
IFAD aims to mobilise US$200mn for the PSFP from public, private and philanthropic sources to leverage a total of US$1bn in private investments. This will improve the lives of up to five million small-scale farmers. The PSFP will focus its investments on job creation, women’s empowerment, building farmers’ resilience and accelerating climate change mitigation.
IFAD’s investments, combined with its 40 years of experience working with rural communities, global field presence and large portfolio in agriculture, give it an advantage in attracting private investors who may be cautious about investing in agriculture and rural economies.