The Smallholder and Agri-food SME Finance and Investment Network shares knowledge and experience

Almost a year ago, at the end of its flagship conference on Investing in inclusive rural transformation: Innovative approaches to financing, IFAD took on the challenge of leading the development of a new network of institutions with a shared interest in bridging the gap in access to finance by small and medium-scale agro-enterprises. This commitment came from a shared belief among prospective network partners in the critical role that these enterprises – from small farmers to SMEs working all along the agriculture value chain – play in realizing the 2030 Agenda.

After a first meeting in June in Washington, DC, SAFIN partners met a second time on 27 and 28 November 2017 at FAO – a network partner – to exchange knowledge and experiences in understanding, aggregating, and responding to the demand for finance in the ecosystem, and to discuss their workplan for 2018.The event gathered around thirty individuals, including long-time and new participants in the process.

The first day was dedicated to a workshop on different approaches to representing, aggregating and responding to demand for finance.

The first session focused on the role that farmers' organizations and cooperatives play in representing their members' demand for finance as well as in facilitating access to finance. Presenters from the Asian Farmers Association, East Africa Farmers Federation, and FEDECOCAGUA recalled the main challenges and the solutions implemented by their respective organizations. "Capacity building for farmers organizations leaders and staff to upscale successful initiatives and manage finance is one of the main challenges," said Esther Penunia, Secretary General of the Asian Farmers Association for Sustainable Rural Development.

The second session focused on country-level institutional frameworks to mediate and respond to SME demand for finance. It featured speakers from the African Rural and Agricultural Credit Association, the Junta Agroempresarial Dominicana, FederCasse and the Alliance for a Green Revolution in Africa, each of whom tackled the theme from the perspective of the work done by their organization. The main outcomes of the discussion were the need to strengthen capacity of commercial banks; track innovative models of mobilization and delivery of finance; promote dialogue across different institutional communities; invest in capacity building; improve the regulatory environment for institutions that work on aggregation of demand and/or financial intermediation; and use public development funds in a rigorous, principled, and catalytic manner to better align private sector incentives.

The third session looked at initiatives and instruments for tracking demand for finance and/or to organize knowledge around supply and demand of finance in ways that can facilitate appropriate decisions by relevant actors. It featured panel interventions from the Consultative Group to Assist the Poor, Financial Sector Deepening Trust, the MIX, and Access Development Services. The group discussed the concept of investment prospectuses (IPs) and how these can facilitate strategic decision-making and collaboration among actors and institutions at the country level. The discussion highlighted the need to set clear knowledge agendas around the demand for finance for SMEs; accelerate investment in generating and organizing knowledge; improve the use of knowledge generated through existing initiatives and platforms; and address the incentive system facing actors who hold relevant knowledge.

The last session considered how some of the institutions involved in SAFIN assess and respond to demand in their work and in their respective networks. The key points that emerged were the increase in demand for finance for climate change-related investments; a decrease of public vs. private financing of agriculture; the need to consider how the financing ecosystem incentivizes them to serve SMEs; and the need to invest in growing the market of "bankable" enterprises and projects. "Private’s share of investment in Ag has increased dramatically, reaching 75 per cent in the US" said Yuri Dillon Soares, Unit Chief of the Multilateral Investment Fund from the Inter-American Development Bank, underlying that this trend presents a new landscape in terms of demands around the role of institutions like the IFIs.

The second day focused on activity proposals for 2018 under four of the SAFIN workstreams, namely: innovation in the delivery of finance and technical assistance (TA); mobilization of financial resources for the ecosystem for agri-food and rural SMEs; alignment of partners' efforts in specific country contexts; and, advocacy and policy engagement. In the course of the day IFAD shared its plans for the Smallholder and SME Investment Finance Fund (SIF). The fund will provide debt and equity finance ranging from US$ 50,000 to US$ 1 million to agri-food SMEs.

The SAFIN coordination team will be formulating a roadmap for 2018 based on the activity proposals, suggestions and feedback received from the group during the meeting. The coming year will be an important year for SAFIN, as “we need to work in a perspective of delivering both near-term value to individual partners and longer-term impact on the broader ecosystem, with a clear contribution to addressing the financing and investment gaps faced by rural SMEs within the timeframe of the 2030 Agenda.” said Bettina Prato, Coordinator of the SAFIN Team housed in IFAD.

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