Norway invests USD 9,5 million in Aceli Africa to unlock money for small agro businesses

News story | Date: 24/07/2024| Ministry of Foreign Affairs

Small and medium-sized agricultural enterprises in east African countries often struggle to get bank loans. The lack of capital hampers the development of local food production and growth of the food industry. Addressing this, Norway is now investing NOK 100 million in Aceli Africa, an organisation that reduces the risk for banks in Kenya, Uganda, Tanzania, Rwanda and Zambia.

Most banks in Africa do not lend to small and medium-sized enterprises in the food sector, such as a local dairy or an industrial bakery. Banks often perceive them as unprofitable and risky, and because banks are required to set aside large loss provisions, they often shy away from lending to the agriculture sector. At the same time, climate change increases the risk of crop failure, which also contributes to the perception of agricultural businesses as risky investments. The lack of access to capital means that the industry does not grow and small farmers' market access is weakened.

In order to help solve the problem, Norway is therefore providing NOK 100 million to the organisation Aceli Africa, which works with banks in Kenya, Uganda, Tanzania, Rwanda and Zambia to reduce the risk of such loans.

More jobs and greater food production

'Norway supports greater local food production in line with African states' own ambitions. Local businesses and the food value chain in sub-Saharan Africa plays an important part. Agro-SMEs must have the possibility to invest in themselves to grow. Only then can the sector's true potential for more jobs and improved food security be realised,' says Anne Beathe Kristiansen Tvinnereim, Norway's Minister for Development Cooperation.

The aim of the investment is that more than 4,000 businesses will be able to get financing and have a positive impact on almost 700,000 smallholder farmers.

'By using development funding to unlock private investments, we can multiply the effect of every dollar on growth and improved food security,' says Kristiansen Tvinnereim.

Risk reduction and training in handling of agricultural portfolios

Aceli provides financial incentives to reduce the bank's financial risk and make it more attractive to lend to small businesses. Aceli offers portfolio guarantees, thereby reducing much of the risk that banks in Sub-Saharan Africa often perceive as too great. In addition, Aceli provides training to bank employees in the management of agricultural portfolios. Aceli works with banks that provide loans in the range of USD 15,000 and USD 1,5 million.

Norway also supports other initiatives that aim to mobilise private capital investments in the agricultural sector, particularly the FASA fund. The FASA fund targets higher investments in larger enterprises than those targeted by Aceli Africa. Read more here.

Translated using AI, quality assured by staff.