Agroecological enterprises stand to benefit from very promising market opportunities and growth potential as they are much better positioned to address and withstand the new realities of climate change, limited natural resources and unpredictable global politics, which all have implications for global trade and prices. But more importantly, they also offer better solutions for consumers, who are increasingly aware of health and food safety.”
Ivan Mandela, Co-founder and CEO, Shona Capital
This section shares insights on key aspects of how to invest in AEEs:
- Specific financial needs: access to patient and flexible capital
- Non-financial needs: capacity building, networks and an enabling environment
- How to build an investment pipeline
- How to assess and conduct due diligence on existing agroecology financing vehicles
- Creative financing models to inspire investments in AEEs.
As highlighted in previous sections, a systemic approach, such as agroecology and other related concepts, is needed to fix the underlying and interconnected crises our food systems currently face. Consequently, we also need forward-thinking and systemic, innovative investment that is aimed at enabling real systems change. The vast majority of agricultural investments continue to go into high-input, industrialised farming systems that are inherently exposed to greater hidden risks. Our current financial system has also created concentrated monetary wealth, but failed at preserving natural capital and creating equality.
We need to invest in smarter, more future-proof solutions and be more aware of social and environmental elements to capture the right opportunities and avoid assets becoming stranded.
The challenging question remains – how do we do that?
First and foremost, it is increasingly clear that replicable silver bullet solutions are falling out of fashion, as they tend to fail to respect and address the complexity and context specificity of different realities and solutions. An increasing number of actors, organisations and vehicles are starting to do things differently, offering us opportunities to learn, get inspired, and replicate and build on new approaches and learnings.
The trajectory of our investments needs to change and align with the long-term protection of our environment. Focus must be placed on regeneration, circulation and restructuring. The financial system’s current extractive logic will prevent it from being able to serve the needs of agroecological enterprises and other social enterprises, community-centred initiatives and regenerative approaches.
Investing in systems change requires more than making minor adjustments to an investment strategy. Agroecology offers investors a compass – a set of 13 principles to guide investment approaches for delivering systems transformation. A set of agroecological tools has been developed by different organisations, which when used in combination can support investors in practically applying agroecological principles to their investment strategies.
AEE’s different financial needs and challenges
Current realities in most contexts are not (yet) favourable to AEEs developing their full potential. Rather, they are slowing them down. Nonetheless, some AEEs – notably in the organic inputs sector or ICT solutions – are already highly profitable and fast growing. They can provide entry points for investors, paving the way for other AEEs that are connected to them in value chains and the food web to attract investment.
Many of the more production-oriented AEEs are still struggling and lack access to capital and other resources. The reasons for this are manifold, and often additional to the already high risks associated with agricultural SMEs.
One main challenge for AEEs is accessing suitable capital, beyond initial funding (e.g. grants or microcredit). AEEs often lack collateral and larger financial institutions or investors view them as too small, immature or expensive to invest in, given the additional effort required to identify AEE investment opportunities.
Another key challenge is accessing finance for the transition period in which farmers and agribusinesses are transforming their production system to an agroecological one, as well as for capacity building in agroecological practices for farmers and other value chain actors (e.g. extension services).
An additional barrier hampering investments in AEEs is the general difficulty for agribusinesses to communicate their credible cases for attracting investments. The inherent complexity of agroecological businesses and their lack of access to formal funding mechanisms means such investments have a limited track record in the area of sustainable investing, despite the fact that investments in agroecology by definition comply with, and even exceed, ESG criteria.
This means that there is a wide gap between the amount of investment that is needed to transform food systems and the financing that is actually available to AEEs.
Open Capital has also compiled a list of challenges facing SMEs in Sub-Saharan Africa to access suitable finance:
- Narrow and restrictive definition for how to measure sustainability and impact
- No alternative debt products that provide medium- to longer-term patient capital
- Limited or no long-term non-financial support available
- High collateral demands hurt smaller businesses and especially women and youth
- Insufficient innovative financing models (e.g. invoice factoring or revolving credit) that help ease working capital constraints.
👉 Resources:
- Challenges for AEEs collected during a convening with AEEs and territorial markets organised by PELUM Uganda and AFSA
- Hot seat session from Footprints Africa on regenerative agriculture
What kind of finance is needed to close the gap for AEEs?
While not-for profits, foundations and donors more generally are starting to move into the agroecological space, additional private investors are needed to help overcome AEEs’ challenges accessing suitable finance. To unlock the full potential of agroecological enterprises, actors from the private philanthropic sector and more traditional impact investors need to come together to offer flexible catalytic capital.
For finance to enable systemic investment and be truly impactful, it should:
- be more patient
- be offered also in smaller ticket sizes
- be more accessible (e.g. with alternative, innovative forms of collateral requirements)
- be affordable (potentially including submarket or concessional rates, alternative repayment models, or local currency loans).
See further recommendations from Open Capital on how to provide more suitable catalytic capital for agricultural SMEs in Sub-Saharan Africa:
- Use risk-mitigation tools such as insurance and guarantees to minimise risk perceptions.
- Offer smaller capital tranches over longer-term debt injections (e.g. one to five years).
- Extend timeframes for return on investment and impact KPIs.
- Provide technical assistance over the life of each investment to strengthen SME competitiveness.
- Use innovative credit models, such as revolving credit and factoring, to ease cash constraints.
- Enable a streamlined due diligence process to ensure both investor risk mitigation and fast decisions for small and growing businesses.
- Offer fund manager incentives that balance social impact and ROI.
There are already a number of examples around the globe that prove the time is right to invest in agroecological enterprises. As the number of financially successful AEEs increases and whole value chains of agroecological and regenerative businesses appear, an ecosystem of mutually reinforcing and supporting enterprises (e.g. agroecological input providers and agroecological producers mutually benefitting from each other) will emerge and contribute to a sector that becomes more viable, profitable and self-sustaining.
Donors and investors can already select from an array of investment solutions and innovations, while others still need to be invented. We present below an overview of some of these vehicles and structures that offer impact-oriented donors and investors a way to invest in AEEs.
Non-financial needs: capacity building, networks, and an enabling environment
No one says it is easy to invest in AEEs and it is important to understand the need for capacity building and training, which is necessary alongside an investment. It is therefore not only about investing, but also about creating market opportunities and promoting product differentiation. It is also about working with policy actors to create a more conducive enabling environment for AEEs to thrive in the long-term. My main advice is you cannot do it alone, we need to share the risk among different players.
Richard Midikira, Senior Manager, Technical Assistance, ACELI Africa
As the challenges outlined above demonstrate, AEEs also need additional support to strengthen their business case. There are various initiatives and organisations working to create an enabling and supportive environment for AEEs:
Network building
AEEs often feel isolated and suffer from a lack of knowledge exchange with other experts and practitioners, which makes it challenging for them to build continuous and stable agroecological supply chains. The Alliance for Food Sovereignty in Africa (AFSA) is therefore working on a programme to strengthen AEEs and agroecological territorial markets, and to build networks of AEEs in five countries in Africa. This will help the AEEs learn from each other, feel less isolated and build a real movement for agroecological food systems transformation.
AFSA and its members are pivotal in supporting AEEs by establishing vital connections, facilitating access to funding opportunities, offering targeted training and capacity-building initiatives, advocating for favourable policies, enhancing market access, sharing knowledge, promoting collaborative research, and fostering a supportive community. Through these efforts, AFSA empowers AEEs to overcome barriers related to limited capital, financial management, and market access, enabling them to implement sustainable farming practices and thrive within an enabling environment that recognises and values agroecological approaches.
👉 Explore AFSA’s work on agroecological entrepreneurs and territorial markets here: Agroecological Entrepreneurs – AFSA (afsafrica.org)
Capacity building and business training
Besides learning from peers, agroecological entrepreneurs often seek capacity-building opportunities to improve their knowledge about and expertise in financial and business planning as well as agroecological practices.
A good example of this is the Neycha Accelerator & Fund, which has a sophisticated capacity-building element built in to support enterprises with strategic visioning, growth plans, integrating the 13 principles of agroecology, and investment readiness.
YALTA for youth
Another example is the Youth in Agroecology and Business Learning Track Africa (YALTA), which supported young people to gain job and entrepreneurial skills to start a business or career in agroecology in Ethiopia, Kenya, Rwanda and Uganda. It also built a map including 83 young entrepreneurs in East Africa, to enable them to share learnings and experiences from their agroecological businesses, showcasing the impact agroecological entrepreneurship can have on their livelihoods.
The power of YALTA was to help early-stage, youth-led businesses at the grassroots level take the step from business idea to implementation. Raising awareness about business opportunities in agroecology by showcasing successful young role models motivated entrepreneurial youth to take their business idea seriously. Many young entrepreneurs moved on to register their business after awareness-raising activities such as YALTA’s video campaign, national summits and youth in agroecology caravans.
Peer-to-peer learning in the youth caravans helped entrepreneurs implement more agroecological practices. Existing entrepreneurs, such as David Ssembajwe, diversified their products and services, adding composting, biomass digesting and insect farming, for example, to their product range.
Local markets are the most suitable markets for agroecological products. And showcasing agroecological products at agricultural exhibitions and shows and integrating exhibitions in YALTA events proved good ways to increase exposure for businesses and attract new customers. But it was still a challenge for entrepreneurs to market and differentiate their agroecological products in more centralised markets and reach buyers that are willing to pay higher prices for agroecological products.
Providing a consistent supply of product, ensuring product quality and safety, and accessing adequate packaging to meet the requirements of premium market buyers (e.g. restaurants and hotels) also proved challenging. Young entrepreneurs suggested that recording existing and expected volumes could help to regulate supply and demand.
Rootical business builder
Other initiatives that focus on building AEEs that can disrupt current systems and create paradigm change include the start-up studio Rootical. By enabling purpose-driven entrepreneurs in Uganda to build and own their regenerative agrifood companies, Rootical helps to shake up the country’s food system. It focuses on co-creating commercially viable and purpose-driven enterprises, helping to distribute ownership and build inclusive and sustainable food systems. Rootical believes that to reach different outcomes and achieve real food systems transformation, we need innovative ways of collaborating.
Enabling policy environment
A project by FAO and ECDPM highlighted the need for an enabling policy environment and the importance of policy reforms to unlock sustainable investments in agriculture..
Lack of regulation and coherence is a big challenge for AEEs. We need a more progressive policy environment that promotes holistic, true-cost approaches that benefit AEEs, rather than adding additional layers of barriers and challenges while using expensive subsidies to support enterprises engaging in harmful practices.
👉 See AFSA’s comprehensive study on the policy environment for AEEs in Sub-Saharan Africa:
How to identify agroecological enterprises to invest in
Recommended first steps for investors looking to make direct investments in AEEs:
- Investors sometimes already know more about AEEs than they think. So use the B-ACT tool to analyse your portfolio and see whether and to what extent enterprises you already invest in are aligned with agroecology. This will also give you access to credible data on the performance of AEEs within your own portfolio.
- Use the B-ACT or ACE tools to also analyse and select an initial pipeline of agroecological enterprises for potential investment.
- Consider different sources for investable AEEs:
- Identify trustworthy networks that already work with agroecological enterprises. One of the main pieces of advice given by Mkayla Ventures when it comes to women-sensitive investments is to ask women what they need. The same is true for AEEs – so learn from them and their networks directly.
- Work with accelerators or other initiatives that focus on agroecology.
Innovative funding models for AEEs
Blended finance: mobilising fresh finance through innovative funding models for AEEs
This guide presents multiple blended financing mechanisms and vehicles that could offer a starting point for investors and donors that are interested in investing in AEEs and enabling them to scale. While not all the examples shared below focus on agroecology, they nevertheless offer opportunities and finance that AEEs can benefit from.
To tackle the hurdles faced by AEEs and to incentivize more investments into AEEs and SMEs more general, iGravity suggests leveraging innovative finance tools that can “channel both private money from the global financial markets and public resources towards solving pressing global problems” (innovative finance definition of the ILO). The innovative finance toolbox includes a variety of financial instruments serving different purposes and each to be applied in a specific context, for example:
- For private investors that want to directly invest into AEEs:
- De-risking mechanisms including for example a first loss protection or loan guarantee.
- Impact incentive payments to enterprises for outcomes generated through their business operations and improving profitability.
- For asset managers that are willing to launch an AEEs focused fund with an underlying portfolio:
- Blended capital structure including grant capital or concessional capital from philanthropic partners improving the returns of private investors who would otherwise not invest.
- De-risking features to improve the risk/return (and hence marketability) of the fund.
- Technical Assistance facility to provide operational support to borrowers and strengthen enterprises’ business operations (e.g. financial planning, governance, etc.).
- For donors and philanthropic capital:
- Impact-linked finance or result-based payments that remunerate either the value creator (e.g. enterprise or service provider) or investors for actual realized outcomes, etc.
The selection of the appropriate finance tool will depend on a variety of factors including selected strategy, investment universe features (sector, business stage, size, geography) and risk/return and liquidity considerations of the investor/donor, which can significantly vary.
Neycha Accelerator & Fund
The Neycha Accelerator & Fund is a unique facility run by Shona and tailored to meet the specific needs of AEEs in Kenya and Uganda. Neycha uses the ACE and B-ACT tools to select enterprises to fund and seeks to support food system innovators and entrepreneurs who are working towards a more regenerative and agroecological food system. These enterprises, whose activities range from input provision, producing and processing to retail and hospitality, are contributing to a more holistic and circular agrifood economy in East Africa.
The Neycha Accelerator & Fund offers a credit facility in combination with business development services, capacity building on agroecology and access to networks. The capacity-building component is set up and financed through philanthropic grants (mainly from Biovision Foundation, IKEA Foundation and the Swiss Agency for Development and Cooperation). The credit facility is offered in the form of concessional loans (direct or revenue based) of USD 10,000–50,000 in local currency – the ideal size for plugging the ‘missing middle’ in agricultural finance. Funders’ motivations for lending this ‘patient’ capital are mainly capital preservation, but they also aim to potentially open up the facility to more conventional investors in the future.
Besides helping AEEs overcome some of their main barriers to growth, Neycha also serves as a learning lab to test and optimise a structure that is designed to meet the very specific needs of AEEs along the whole agricultural value chain. It develops tailor-made curricula while learning from AEEs and exposing them to decision makers in the investment and policy sphere. The learnings and insights from Neycha are shared in a Community of Practice, which supports the development of a thriving ecosystem, where AEEs and other stakeholders can exchange and learn from each other.
Neycha attained a score of 100% for its holistic fund design in systems investing analysis conducted by the Transformational Investing in Food Systems Initiative (TIFS): Investing-in-East-Africa-Food-Systems-Aug2023-Final.pdf (tifsinitiative.org).
“The Neycha boot camp was more of a one-week MBA. It gave me the challenge that I needed and got me out of my comfort zone. It was engaging, the mentors were very insightful, and the networks were invaluable.”
Sandra Ejang, CEO of Western Silk Road LTD
Agroecology venture accelerator in Ghana
The Agroecology Venture Accelerator in Ghana is a joint project by the 11th Hour Project and Innohub and funded by The Schmidt Family Foundation (TSFF). The project aims to support businesses that focus on the environment, healthy food production, local resilience, and community empowerment. The programme offers financial and technical support to Ghanaian agroecological businesses to enhance their operational capacity while improving their social, environmental, and economic impact.
For more information visit: Innohub | Agroecology Venture Accelerator.
Roles of local banks and how to incentivise more catalytic capital for agricultural SMEs
Aceli Africa is a market facility designed to bridge the gap between supply and demand for capital by agricultural SMEs in Sub-Saharan Africa. Aceli's research shows there's an opportunity cost to lending to agricultural SMEs, particularly at lower ticket sizes, which presents the least served segment. To meet the risk-return expectations of lenders and address the capital needs of high impact agricultural SMEs, Aceli offers financial incentives to lenders to unlock capital where it is most needed.
The three types of financial incentives offered by Aceli feature the following core mechanisms:
- The first category, portfolio first loss coverage in case of loan default, provides protection against risks inherent in agricultural loans ranging from USD 25,000 to USD 1.75 million. The extent of coverage ranges from 2% to 6%, depending on the type of borrower and value chain. New borrowers and those operating in informal value chains, which pose higher risks, receive higher coverage.
- Origination incentives supplement lenders’ earnings for smaller loans ranging from USD 25,000 to USD 500,000 that may not generate sufficient revenue to cover lending costs. These incentives are especially impactful to lenders when originating loans to agricultural enterprises located in remote areas or operating in specific value chains, such as locally sold food crops.
- Aceli offers impact bonuses for loans that meet higher standards in predefined impact areas, including gender inclusion, food security and nutrition, and climate and environment. Impact bonuses can increase incentive amounts by 30% to 50%, potentially adding an additional 2% on top of the baseline incentives (ranging from 2% to 6%) for portfolio first loss. These bonuses encourage lenders to actively pursue and support initiatives with the greatest potential impact.
Aceli’s impact report from 2023 also indicates that loans to agricultural SMEs are positively impacting farmer’s lives.
Its 2024 benchmarking report further demonstrates that incentives offered by Aceli are effective at nudging lenders towards smaller ticket sizes, new value chains, more remote areas and enterprises that focus on women, youth and the environment.
Aceli’s experience offers an interesting learning opportunity and demonstrates how such models can be used to support agroecological enterprises. Its origination incentives in particular could motivate lenders to consider agroecological enterprises, which remain otherwise challenging for them to fund given the extra costs lenders incur for vetting and identifying more complex enterprises.
👉 Read the Aceli case study here: The Case of the Catalytic Market Facility Aceli Africa (Aceli) (shareweb.ch)
Root Capital
Root Capital invests in agricultural SMEs to bring about positive change in rural communities. These enterprises, which buy crops like coffee, cocoa and grains from small-scale farmers, have the potential to significantly impact society. As they grow, they generate higher incomes and employment opportunities, facilitate gender and youth empowerment, and help sustain peace and protect fragile ecosystems. Root Capital supports these businesses by providing essential resources such as capital, trade and technical partnerships, and specialised training. Its contributions thus far include distributing USD 1.6 billion to more than 740 agricultural SMEs and training over 1,570 of them. Through these endeavours, over 2.4 million smallholder farmers in Latin America, Africa and Indonesia have been reached.
One project, for example, involved the use of a market-correcting payment to incentivise Root Capital to finance early-stage agricultural SMEs. This enabled Root Capital to close the gap between the cost of providing loans to otherwise unprofitable enterprises and its own financial returns. The project was the result of a partnership with Roots of Impact, the Swiss Agency for Development and Cooperation (SDC), and the Inter-American Development Bank’s Lab (IDB Lab).
👉 More information on the project can be found here: How impact-linked finance incentivizes high-impact investment in agricultural SMEs (rootcapital.org)
The Root Capital project demonstrates two things: a) offering capacity building alongside investments is crucial for SMEs, and b) blended finance can help create meaningful impact. At this stage Root Capital still encounters challenges in moving out of cash crops to support more holistic and agroecological value chains. Nevertheless, this successful blended finance project offers a model that could be replicated with a specific focus on agroecological enterprises.
Inspirational funds: the Transformative 25
I wanted to inspire foundations and investors to learn about underrecognised and innovative funds engaging with the critical issues of the day: structural racism, climate change, economic inequality.”
Jen Astone, Principal, Integrated Capital Investing
The Transformative 25 (T25) is a curated list of funds, banks and initiatives that demonstrate how the financial system can work for people and the planet and which have the needs of borrowers and communities at their centre. Unlike traditional financial models that aim to maintain the status quo and do not address inequalities or attempt to redistribute wealth, these funds are truly transformative and disruptive. Through the T25, investors are able to find inspiration in funds that employ creative financing to challenge the norms of our financial system and traditional ownership and governance models.
When analysing T25’s latest cohort, three trends emerged:
- Many of these funds are moving away from credit checks towards recognising multiple factors to assess risk and focusing more on building relationships of trust. They address risks through, for example, offering technical assistance, career development or grant support.
- They offer flexible loan structures and terms and reduce barriers to capital by reducing or eliminating fees.
- Decision-making power is given to the community and not the investor, which supports impactful outcomes.
👉 You can learn more about these transformative funds here: Integrated Capital Investing – the Transformative 25 (iciaptos.com)
Finance through carbon credits
As governments implement new regulations, monetising the positive impacts enterprises have could become a common way for such enterprises to gain access to additional finance. For investors and donors, it is key to keep abreast of enterprises’ new opportunities for this.
Some enterprises already use carbon credits to monetise their positive externalities on the environment, but payments for environmental services (PES) schemes for water source protection or biodiversity schemes could be considered.
The example of COMACO: prevented deforestation and carbon credits
COMACO incentivises forest conservation and sustainable land management through the creation of a carbon credit programme.
Zambia is one of the most forested countries in Africa but faces significant threats due to environmental degradation in the form of agricultural expansion, use of wood fuel and charcoal, timber extraction, infrastructure development such as mining, human encroachment for settlement, uncontrolled late-season forest fires, and poaching.
Between 2013 and 2017, farming communities supported by COMACO were responsible for emission reductions of 214,695 tonnes of carbon dioxide equivalent (tCO2e), which translated into voluntary carbon credits at a value of USD 2,636,640. Subsequent monitoring reports in 2019 and 2021 demonstrated emission reductions of 540,336 tCO2e and 883,062 tCO2e, respectively. Access to carbon markets is a co-benefit of the large-scale adoption of agroecological farming practices and community-led forest conservation.
COMACO’s approach ensures that farmers receive a fair and transparent share of market benefits to 1) be committed to a long-term process of change in adopting more sustainable, nature-based ways of farming, 2) be sufficiently incentivised to reform land-use practices that turn conservation into a cultural ethos, necessary for accelerating opportunities for carbon market benefits, and 3) recognise and appreciate the value of trees and other natural resources through the receipt of nature-based revenue benefits.
COMACO established a benefit-sharing mechanism (BSM) outlining the distribution of benefits among communities, COMACO and the Zambian Forestry Department. According to the BSM, 55% of benefits go to communities, 45% to COMACO, and 10% to the Forestry Department to oversee enforcement of its forest protection laws. Community participation has grown from 7,372 farmers initially to 75,045. COMACO’s promotion of sustainable energy, forest conservation and sustainable agriculture and land management contributes to Zambia’s National Determined Contribution (NDC).
In addition to the revenues generated for COMACO and farming communities, COMACO’s verified carbon credits appear on its balance sheet, which improves its financial position and ability to negotiate favourable financing terms.
The community-protected forest area generates use values (industrial wood, fuel wood and non-wood forest products such as honey) as well as non-use values (ecotourism, erosion control and sediment retention). A True Cost Accounting assessment estimated these values at over USD 34.2 million per year.
Mobilising money and movements: creative finance for food systems transformation
Another source of inspiring and creative finance approaches is the Mobilizing Money and Movements report by the Global Alliance for the Future of Food and the Transformational Investing in Food Systems (TIFS) Initiative.
The report analysed creative finance approaches that maximise economic, natural, human and social capital returns and contribute to food systems change.
It highlights that more creative finance is required and that public, private and commercial investments are necessary to bring about real change. The report’s key messages are as follows:
- To catalyse food systems transformation, a blended finance approach is required to generate positive externalities for communities and nature. Private, public and commercial finance should be complemented by investments in social movements, advocacy, creativity, policy-making and time.
- Successful food systems initiatives pursue business and operational strategies that are grounded in solidarity economy principles, including shared governance and participation of all stakeholders, cost-saving approaches, working with nature, investing in training and dignified work, and values-aligned blended finance.
- A food systems investing approach enables public and private finance to be better coordinated, augmented and strategically aligned, resulting in maximised environmental and social value for initiatives and funders alike.
- Impact investors, catalytic capital, fund managers and philanthropic donors are in a prime position as ‘early adopters’ to replicate, adapt or scale the models and initiatives demonstrated by the six ‘Beacons of Hope’ in this report. More active and instrumental partners are required to scale and replicate these kinds of transformative initiatives.
- Whether motivated by commitments to deliver the SDGs, climate action or gender equity and racial justice, a growing number of investors are looking to food systems as a way to catalyse meaningful change.
The report further identified five investment strategies these transformational enterprises applied:
- Mobilised different types of investment to accomplish returns
- Provided guaranteed markets
- Sought fair and inclusive finance and returns and value-aligned investors, and further focused on shared-ownership strategies
- Embraced models of shared ownership
- Used existing resources to create self-reliant systems.
Leveraging private finance for sustainable agrifood value chains
The FAO and the European Centre for Development Policy Management (ECDPM) developed a methodology for investing in agricultural value chains in Africa. The methodology emphasises the importance of strengthening collaboration between the private and public sectors to increase finance into food systems, focusing on marginalised groups. It focuses on five steps:
- A package of policy reforms
- A set of financial instruments including blended finance
- A multi-stakeholder platform
- A vision of why investment should flow into a selected value chain and territories
- A theory of change defining how the proposed mix of interventions will scale investments.
The joint project concluded that the following six conditions are key to sustainable investing in agriculture:
- Conducive financing environment:
- Establish a national agrifood finance policy framework.
- Focus on underserved communities and under-resourced groups, especially smallholder farmers and SMEs led by women and youth.
- Support savings mobilisation, expand collateral substitutes, subsidise digital financial channels in rural areas, and scale up agricultural risk management tools.
- Coordinated deployment of investors and schemes:
- Involve various stakeholders, including governments, farmer organisations, SMEs, development banks, private equity funds, banks, pension funds and impact investors.
- Use a multi-stakeholder platform for coordinated investment planning and technical assistance.
- Balanced risk-return-impact profile:
- Combine individual and collective assessments for a more balanced risk-return-impact profile in selected value chains or territories.
- Systematic use of public funds:
- Employ public funds systematically to mitigate risks and attract private investments through blended finance instruments.
- Adapt funding criteria for smallholder-based value chains, with longer repayment schedules, reduced ticket sizes and increased interest-rate flexibility.
- Explicit targeting of SDGs and beneficiaries:
- Target specific SDGs, beneficiaries and value chains explicitly in blended finance.
- Use screening criteria and due diligence practices systematically, including portfolio guarantees for intermediaries like impact investors.
- Demand-side capacity building:
- Complement ‘supply side’ finance interventions with actions on the ‘demand side’.
- Invest in building the capacity of agrifood actors to formulate profitable business plans and develop a pipeline of eligible investment opportunities.
This programme by FAO and ECDPM further highlights the complex nature of investments in specific agricultural value chains and the different players that ideally collaborate with each other. This is why facilitating collaboration and multi-stakeholder platforms are key for increasing investments in AEEs.
👉 Read the FAO/ECDPM value-chain analysis of Burkina Faso, Ethiopia, Kenya and Niger: AgrInvest – Food Systems Project – Leveraging private finance for sustainable agrifood value chains in Burkina Faso, Ethiopia, Kenya and Niger (fao.org)
👉 Read their full methodology here: Applying a sustainable food systems approach to value chain investment processes (fao.org)