EU supports smallholder agri-businesses in rural Africa

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Neven Mimica, Commissioner for International Cooperation and Development, was in Rome for the launch of the new Agri-Business Capital (ABC) Fund, which will help deliver on the Africa-Europe Alliance for Sustainable Investments and Jobs.

Speaking at the launch, organised by the International Fund for Agricultural Development (IFAD),  Mimica said: “The EU is committed to boosting agri-business investments, strengthening livelihoods and creating sustainable jobs in rural areas, especially among traditionally under-served communities. The ABC Fund will help us achieve this – which is why it has our full backing.”

The EU has made €45 million (R713.3 million) available to the fund. The Luxembourg Government and the Africa Green Revolution Alliance, an international NGO, are contributing €5 million (R79.3 million) and US$5 million (R70 million) respectively. The new ABC Fund, established by IFAD, is primarily geared towards individual smallholders and farmers’ organisations, with loan sizes that range from US$25 000 – US$1 million (R350 000 – R14 million), improving their access to finance. The ‘missing middle’ has the potential to be profitable and to impact development, but has lacked sufficient funding until now. It is expected to mobilise more than €200 million (R3.1 billion) in investments and could benefit up to 700 000 households in rural areas.

Underwriting the risks

The ABC Fund is a major blending operation for agricultural investments in developing countries. It covers direct investments such as small-scale loans for small and medium-sized enterprises, farmers’ organisations and ‘agripreneurs’.

The fund also covers indirect investment in local financial institutions for subsequent on-lending. It builds on existing IFAD development activities to screen opportunities and reduce the risk attached to subsequent investments. It is expected to attract significant additional funding from other sources – private and impact investors. Based in Luxembourg, it draws on the expertise of a professional fund manager and uses technical assistance adapted to investees’ needs.

Building on experience, the ACP Farmers’ Organisations Programme will strengthen farmers’ organisations and cooperatives so that they can increasingly access capital directly, for the benefit of their members. In this way they will become a key element in the supply of bankable deals for the ABC Fund and form another angle of the sustainable investment the EU is seeking to promote. – Press release