AGRF Experts Recommend New Financing Strategies For Agribusiness Growth in Africa

AGRF 2020

In 2017 the Agricultural Business Initiative (aBi) Trust made an unspecified investment to Uganda’s Ankole Coffee Producers Cooperative Union.

As a result of the funding, the union’s storage capacity grew tremendously resulting in the creation of 1621 full time equivalent (FTE) jobs.

Josephine Mukumbya, aBi’s CEO, speaking at the 2018 Africa Green Revolution Forum (AGRF) in Kigali, Rwanda, says that a partnership between public and private institutions for similar funding ventures could greatly improve the state of African agriculture.

“There is potential for complementarity with the public sector, but it is underexploited. This is because when you are fighting things like the Fall armyworm, for instance, you need to work with governments especially for such things like research,” said Mukumbya, while reinforcing that agribusinesses in Africa are long-term viable projects.

Supporting Mukumbya’s assertion, Jerry Parkes, the Managing Principal of Injaro Investments Limited, notes that agricultural finance is a yet-to-be-exploited market, and one that should be given critical thought by forward-thinking financial institutions.

“The area of agriculture financing has great potential. With Africa requiring at least $11 billion investments in agriculture annually to feed itself, a lot of success can be achieved by companies that come up with innovative financing products,” said Parkes.

Similarly, Peter van As, a senior partner at the Phatisa Group, notes that public and private stakeholders might be called to team up and develop products that have an impact at local levels.

“If smallholder farmers will not get the attention they need, something will come up and it will be sizeable, and will make a difference,” said van As.

In this regard, Noor Ullah, the Global Head of Agriculture Investments at Acumen advises that the goal should be to come up with products and plans that greatly improve the lives of farmers.

“An enterprise might reach millions of farmers but for it to make sense, it needs to have  great depth in regards to the impact it has on the lives of farmers. In addition to focussing on reaching many people, it is important to ensure that developed products improve the financial well-being of affected farmers,” said Ullah.

Millicent Omukaga, the head of operations at Kenya’s state agency Agricultural Finance Corporation (AFC), agrees with Ullah, noting that she has witnessed first-hand the importance of properly thought-out strategies in the creation of agricultural funding products.

“From research, we realised that there are so many commercial lenders in the country, but they were exercising caution against farming because it was considered a highly risky industry,” said Omukaga.

“And that is how we ended up developing partnerships with institutions like the Alliance for a Green Revolution in Africa (AGRA) to develop strategies for de-risking the industry. By providing some form of security against loans afforded to farmers, we realised that commercial lenders were now getting drawn to the sector.”

Such public-private partnerships are critical for bridging the gap between farming funding needs and the financials, according to Aliyu Abdulhameed, the CEO of the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending (NIRSAL).

Abdulhameed further advises governments to keep increasing their investments in the agricultural sector, as a strategy for attracting private players. African heads of state have been taking steps in this direction after committing to invest at least 10 percent of public funds in agriculture in 2003.

And even though the progress towards this bid has been slow, with just a handful of countries having honoured the pledge, the average public spend in agriculture per country has risen almost 17 percent.

AGRA estimates that public funding for agriculture could increase threefold if all countries make good on their promise.