The African Development Bank Group (AfDB) and the Government of Canada have established a new special fund to assist Africa’s small and medium-sized enterprises (SMEs) in the agriculture sector.
The Agri-food SME Catalytic Financing Mechanism, according to AfDB and the Government of Canada, aims to boost and de-risk investment for agriculture SMEs, strengthen agricultural value chains and as well improve food security across the continent.
According to the Bank’s Vice President for Agriculture, Human and Social Development, Dr. Beth Dunford averred that there has been a strong commitment to addressing the financing gap for SMEs and creating an environment that encourages private sector investments in climate-smart and gender-oriented agricultural solutions. “The Agri-food SME Catalytic Financing Mechanism will help unlock opportunities for these businesses in Africa, particularly for women and youth,” she said.
The African Development Bank, which is hosting the mechanism, received an amount of CAD 100 million ($73.5 million) as funding from Canada in support of the initiative. Around 65% of Africa’s food is produced, processed, or transported by small and medium agribusinesses, but they have a $180 million yearly funding deficit.
The mechanism, according to both parties seek to offer concessional finance and technical assistance to financial intermediaries including agribusinesses, micro-finance institutions and impact funds. “The financial assistance aims to enable the intermediaries to make loans to agri-SMEs working with women and businesses that build resilience to climate change,” they disclosed.
AfDB further revealed that the Agri-food SME Catalytic Financing Mechanism will add to the Bank Group Affirmative Finance Action for Women in Africa’s (AFAWA) goal of closing the $42 billion access to finance gap for women-led SMEs and to accelerate their growth.
Bringing The Best Out Of Agriculture
Anita Vandenbeld, the Parliamentary Secretary to Canada’s Minister of International Development, divulged that the mechanism represents the Bank’s first blended financing facility to specifically target SMEs operating across the agricultural value chain.
According to her, it mobilizes public funds to de-risk agricultural financing, crowds in support to make SMEs more bankable, and collaborates with providers of capital to make banks more ‘agriculture-friendly’.
“The best way to build up food security in Africa is to work with small-and-medium-sized agriculture and food businesses. Through a shared commitment between Canada and the African Development Bank, the Agri-food SME Catalytic Financing Mechanism will advance resilient growth and climate adaptation.
It will also help African SMEs to pursue climate smart models, and support women by shifting attitudes that perpetuate gender gaps in financial inclusion.”
Mrs. Anita Vandenbeld
The Mechanism, which is structured as a multi-donor trust fund, is open to welcome and encourage the involvement and contributions of other development partners. By co-financing with the African Development Bank’s financial instruments, the Mechanism seeks to boost the quantum of attractive capital de-risking agri-SMEs and leverage more private sector finance toward impactful agri-food sector investments.
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