The Global Agriculture and Food Security Program (GAFSP) has announced the first allocation from its new private sector financing window to the African Development Bank Group, providing R246 million in de-risking capital that aims to unlock R3.5 billion from the private sector to enhance food security in low-income countries.
By Maile Matsimela, Digital Editor at African Farming
GAFSP provides financial and technical resources, including grants, blended concessional finance, technical assistance and advisory services in the world’s poorest countries to support projects across the agriculture value chain.
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New Financing Track Launched to Catalyse Private Investment
The new window, the Business Investment Financing Track, was launched in 2024 as GAFSP’s second-generation private sector financing window. It blends the programme’s grants and concessional finance with financing from multilateral development banks to catalyse private sector financing for smallholder farmers, producer groups, agribusinesses and start-ups.
The African Development Bank Group says the first allocation from the track will go towards the establishment of an Agro-Inputs Risk Sharing Facility, a R3.5 billion fund to be hosted by the Bank, with a R176 million tranche of derisking capital. “An additional R70 million in grant resources will support technical assistance designed to catalyse up to R3.5 billion in private-sector lending for small- and medium-sized agricultural companies in Ethiopia, Uganda, Tanzania, Malawi and Zambia. The Agro-Inputs Risk Sharing Facility will work to incentivise local banks to extend credit to agro input suppliers.”
Addressing Critical Financing Gap for Vulnerable Farmers
Smallholder farmers and early-stage agrifood businesses in fragile and low-income countries struggle to access credit, insurance and investment capital because of perceived high risks, constraining their ability to meet rising food demand.
The Bank says the Agro-Inputs Risk Sharing Facility, to be implemented by African Trade & Investment Development Insurance, a Pan-African institution providing political risk and credit insurance to investors, will address this gap by providing guarantees to financial institutions, a risk-sharing move to encourage commercial banks to lend to these underserved agribusinesses.
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Blended Finance Model Promises Multiplier Effect
“This first allocation demonstrates the appetite for funders to work together in this new model to solve an age-old challenge of finance for smallholder farmers: risk,” said Natasha Hayward, Programme Manager for the Global Agriculture and Food Security Program.
“By blending GAFSP donor funds with multilateral development and commercial finance, every Programme rand will leverage many more in private investment, multiplying the positive impact on food security and resilience to rising temperatures and unpredictable weather patterns.”
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Climate-resilient Agriculture Inputs to Benefit More Than 1.5 Million Farmers
The Bank says financing will help expand access to certified seeds, organic fertilisers, soil enhancers, mechanisation and other inputs that help agribusinesses to withstand extreme and prolonged heat, water scarcity and other impacts of extreme climates. More than 1.5 million smallholder farmers and 500 agro-dealers and cooperatives are expected to benefit.
Strengthening Africa’s Food Systems from the Ground up
“By targeting agro-input dealers and smallholder farmers, this facility intends to strengthen the entire value chain, from input supply to market access, building food systems able to withstand market shocks, including, and especially, environmental pressures. With the establishment of the Agro-Inputs Risk Sharing Facility, we are planting the seeds of a more food-secure Africa,” said Philip Boahen, African Development Bank Coordinator of the GAFSP.
This debut allocation aligns with broad-based African commitments to transform food systems, including the Comprehensive Africa Agriculture Development Programme and the Kampala Declaration on Accelerating the Implementation of Africa’s Food Systems Transformation.
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