(AFRICAN DEVELOPMENT BANK) – The African Development Bank Group and the Government of Canada announced on January 27 in Dakar that they have created a new special fund to support African small and medium-sized enterprises (SMEs) in the agricultural sector. The announcement was made on the sidelines of the Dakar 2 Summit on Food in Africa.
Titled Catalytic Finance Facility for Agribusiness SMEs, the new fund aims to catalyze and de-risk investments for agricultural SMEs, while strengthening agricultural value chains and improving food security on the continent.
“At the Africa Food Summit, we saw a strong commitment to closing the financing gap for SMEs and creating an environment that encourages private sector investment in climate-smart and gender-focused agricultural solutions” , Beth Dunford, the African Development Bank’s vice president for agriculture and human and social development, told reporters. “ The Catalytic Funding Facility for Agribusiness SMEs will help unlock opportunities for these businesses in Africa, especially for women and youth“, she added.
Canada contributes 100 million Canadian dollars (approximately 73.5 million US dollars) to the financing of the mechanism, hosted by the African Development Bank. Small and medium-sized agribusinesses produce, process or transport around 65% of food in Africa, but they face a financing gap of more than US$180 million per year.
This facility will provide concessional finance and technical assistance to financial intermediaries, including agribusinesses, microfinance institutions and impact funds. The financing and technical assistance aim to enable intermediaries to lend to agribusiness SMEs working with women and businesses that build resilience to climate change.
The Catalytic Finance Facility for Agribusiness SMEs will help achieve the goal of the bank’s Affirmative Finance Action for Women in Africa (AFAWA) program, which aims to close the $42 billion access to finance gap for SMEs led by women and to accelerate their growth.
This facility is the bank’s first blended finance facility that specifically targets SMEs operating in the agricultural value chain. It mobilizes public funds to de-risk agricultural finance, provides support to SMEs to make them more bankable, and works with capital providers to make banks more “favorably disposed towards agriculture”.
“The best way to strengthen food security in Africa is to work with small and medium-sized agricultural and food enterprises,” said Anita Vandenbeld, Parliamentary Secretary to Canada’s Minister for International Development. “Through a joint commitment by Canada and the African Development Bank, the Catalytic Finance Facility for Agribusiness SMEs will advance resilient growth and adaptation to climate change. It will also help African SMEs adopt climate-friendly models and support women by changing attitudes that perpetuate gender gaps in financial inclusion” added Anita Vandenbeld.
Structured as a multi-donor trust fund, the mechanism is open to participation and contribution from other development partners. By co-financing with the African Development Bank’s financial instruments, the facility will increase the volume of attractive capital to de-risk agribusiness SMEs and leverage more private sector finance for effective agribusiness investments.
The Dakar 2 Summit, held on the theme“Feeding Africa: Food Sovereignty and Resilience”,is a high-level continental conference organized by the President of the Republic of Senegal, Macky Sall, and the African Development Bank Group. Thirty four heads of state took part.
The Dakar 2 Summit also brought together ministers of agriculture and finance, governors of central banks, representatives of the private sector, farmers’ organizations and development partners to mobilize high-level political will and financial resources for Africa’s agricultural transformation.
