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April 25th, 2018

Critical capital for African agrifood small and medium enterprises

Published by ICCO Cooperation, Rabobank Foundation, AgriProFocus and Food & Business Knowledge Platform,

This study (PDF) by ICCO cooperation, Rabobank Foundation, AgriProFocus and the Food and Business Knowledge Platform focuses on agrifood small and medium enterprises (SMEs) that form the ‘missing middle’: too large for micro-finance and too small for mainstream banks and private equity firms. The study evaluates the access of risk capital by agrifood SMEs. SMEs are key for establishing sustainable food systems, since they occupy critical positions along the value chains: as input suppliers, off-takers, processors, distributors or otherwise. They constitute a pull factor, aggregating smallholder farmers into the value chain and upgrading the quality and efficiency of farming, leading to a more sustainable food system.  At the same time SMEs face difficulties to access capital. A major conclusion is that there are very few investment funds that meet the financing needs of agrifood SMEs; the need for funding is usually under 250.000 USD, whereas most funds start investing from 1M USD. Such smaller investments are tedious and costly for investment funds, even for those set up with the explicit goal to stimulate the development of the agrifood sector. The main recommendation for policy makers is to promote the development of a deliberate graduation strategy by investment funds, that allows them to offer an assortment of services to agrifoods SMEs that match their development stage. Governments and international development agencies can contribute to such a strategy by reorganising their own investment vehicles; giving them a wider mandate and access to relevant – low cost – financial resources to invest in the missing middle.

Curated from icco-cooperation.org