AFDB, Canada launch ‘Agri-food SME Catalytic Financing Mechanism’

A new special fund has been created by the African Development Bank Group and the Canadian government to assist Africa’s small and mediumsized enterprises (SMEs) in the agricultural sector.

The two organisations made the announcement at a press event during the Dakar 2 Africa Food Summit.

The Agri-food SME Catalytic Financing Mechanism aims to catalyse and de-risk investment for agriculture SMEs, as well as strengthen agricultural value chains and improve food security across the continent.

Dr Beth Dunford, the bank’s vice president for Agriculture, Human and Social Development, told reporters that “at the Africa Food Summit, we have seen a strong commitment to addressing the financing gap for SMEs and creating an environment that encourages private sector investments in climate-smart, gender-oriented agricultural solutions.”

She said the Agri-Food SME Catalytic Financing Mechanism would open doors for these companies in Africa, particularly for women and young people.

Canada contributed CAD 100 million ($73.5 million) to fund the mechanism, which is hosted by the African Development Bank. Small and medium agri-businesses produce process or transport around 65 per cent of Africa’s food, yet they face a financing gap of more than $180million annually.

The mechanism will offer financial intermediaries, such as agribusinesses, microfinance organisations and impact funds, concessional financing and technical support. The funding and support are intended to give the intermediaries the ability to lend money to agri-SMEs that employ women and companies that increase their resilience to climate change.

The bank’s Group’s Affirmative Finance Action for Women in Africa (AFAWA) goal of bridging the $42 billion access to finance gap for women-led SMEs and accelerating their growth would be aided by the Agri-Food SME Catalytic Financing Mechanism.

The mechanism is the bank’s first blended financing facility that is primarily aimed at SMEs that operate along the whole value chain of agriculture. It raises public money to lower the risk associated with agricultural finance, rallies support to increase the bankability of SMEs, and works with capital providers to make banks more agriculture-friendly.

The parliamentary secretary to Canada’s Minister of International Development Anita Vandenbeld said, “The best way to build up food security in Africa is to work with small-and-medium-sized agriculture and food businesses.