Multi Donor Fund Unlocks Financing for Africa's Small and Medium Sized Agricultural Enterprises

On October 24, 2024, Norway and the United States, through the Agency for International Development (USAID), announced that the United Kingdom and Republic of Korea will join them as partners in a multi-donor fund, the Financing Agricultural Small-and-Medium Enterprises (SMEs) in Africa(FASA)Fund. The UK will provide an initial contribution of £7 million (c.$9 million). These new donor financial commitments add to the $70 million from USAID and the Government of Norway and bring FASA closer to its goal of catalyzing a total of $200 million in multi-donor contributions.

Norway and USAID also announced that Investisseurs & Partenaires (I&P) - a pioneering impact investment group dedicated to financing and supporting African entrepreneurs while strengthening entrepreneurial ecosystems across the African continent - was competitively selected as the FASA fund manager. The CGIAR Hub for Sustainable Finance (Impact SF) will be its agricultural and climate partner.I&P brings a strong track record in fund management and the agriculture and food systems sector. The Small Foundation is the first philanthropic organization to make a financial contribution to the FASA investment fund and will support the Fund's learning agenda.

The combined announcements initiate operations of the FASA Fund that could ultimately support 1,000 agri-SMEs, create and maintain over 70,000 jobs, and benefit over one million smallholder farmers over ten years. Agri-SMEs support 95 percent of smallholder farmers in sub-Saharan Africa, handle over 60 percent of all food production and trade on the African continent and create 70 percent of formal employment in food systems. Together with the farmers they support, agri-SMEs are the driving force behind transforming agriculture and food systems in Africa and are essential for creating a prosperous and more resilient future for all.

FASA, which was announced by USAID Administrator Samantha Power and the Norwegian Minister of International Development Anne Beathe Tvinnereim during the United Nations General Assembly in 2023, will invest catalytic capital in funds focused on agri-SMEs across Africa to unlock business growth and build a robust ecosystem. The Fund is designed to help fill the estimated $100 billion financing gap in sub-Saharan Africa and unlock hundreds of millions of dollars more in financing for agri-SMEs by reducing the risk of investing in agriculture - a risky sector compared to others. FASA will be providing catalytical capital to underlying investment funds that will lend to or invest in agri-SMEs across Africa. With anchoring from FASA, these investment funds will be able to attract more needed capital to serve larger numbers of agri-SMEs. USAID's contribution is part of Feed the Future - the whole of U.S. government initiative to address hunger, poverty, and malnutrition.

CGIAR's Role in Supporting FASA's Impact

As the agricultural and climate partner, the CGIAR's ImpactSF plays a critical role in enabling FASA to meet its ambitious goals. ImpactSF will harness CGIAR's scientific expertise to measure impact from the underlying investment funds, and help to advance the fund's learning agenda to create a robust ecosystem of agriculture-focused investment funds in Africa. ImpactSF will:

• Leverage CGIAR's science to support underlying investment funds using AI and deep learning tools for climate and environmental risk assessments, along with science-based intervention recommendations.
• Build the capacity of fund managers by improving monitoring, evaluation, and reporting processes across the agri-SME portfolio to track impacts effectively.
• Advance FASA's learning agenda through a centralized impact data monitoring platform, evaluating the effectiveness of catalytic capital in achieving outcomes in food security, nutrition, livelihoods, and climate resilience.

The combined expertise of I&P and ImpactSF will ensure that FASA not only bridges financing gaps but also establishes a new standard for sustainable agricultural investments, creating opportunities that transform African agriculture for the future.

Originally published by Norway, Oct 25, 2024. Adapted for CGIAR.

PHOTO: ©2017CIAT/GeorginaSmith