Dakar 2: African Development Bank Group, Government of Canada announces financing facility to grow small and medium farms | African Development Bank

(from left to right) Nungari Mwangi, AgriSME Strategy and Partnerships Officer, AfDB, Atsuko Toda, Director, Agricultural Finance and Rural Development, AfDB, Andrew Mude, Lead, AgriSME Development and Financing, AfDB, Beth Dunford, Vice President, Agriculture, Human and Social development, AfDB, Anita Vandenbeld, Parliamentary Secretary to the Canadian Minister of International Development and Edmond Wega, Executive Director for Canada, AfDB, pose for a photo during the press conference for the launch of the African Development Bank’s Agri-food SME Catalytic Financing Mechanism”.

The African Development Bank Group and the Government of Canada have established a new special fund to support African small and medium-sized enterprises (SMEs) in the agricultural sector.

Tea Catalytic financing mechanism for SMEs in the agri-food sector aims to catalyze investments for small and medium-sized farms and reduce risk, strengthen agricultural value chains and improve food security across the continent. The two organizations announced this during a press event on January 27 during the Dakar 2 Africa Food Summit.

“At the Africa Food Summit, we saw a strong commitment to addressing the funding gap for SMEs and creating an environment that encourages private investment in climate-smart, gender-focused agricultural solutions,” Dr. Beth Dunford, Vice President of the Bank of Agriculture, Human and Social Development told reporters. “The Catalytic Financing Mechanism for agri-food SMEs will help unlock opportunities for these businesses in Africa, especially for women and youth,” she said.

Canada contributed CAD 100 million ($73.5 million) to fund the mechanism, which is organized by the African Development Bank. Small and medium-sized farms produce, process or transport about 65% of Africa’s food, but face a funding gap of more than $180 million annually.

The mechanism will provide concessional financing and technical assistance to financial intermediaries, including agribusiness, microfinance institutions and impact funds. The funding and assistance are intended to enable the intermediaries to provide loans to agri-SMEs working with women and companies building resilience to climate change.

The Catalytic Financing Mechanism for agri-food SMEs will contribute to the Bank Group Affirmative Finance Action for Women in Africa (AFAWA) goal of closing the $42 billion access to finance gap for women-led SMEs and accelerating their growth.

The mechanism represents the bank’s first blended finance facility specifically targeting SMEs operating across the agricultural value chain. It mobilizes public funds to make agricultural financing risk-free, supports to make SMEs more bankable and works with capital providers to make banks more ‘farm-friendly’.

“The best way to build food security in Africa is to work with small and medium-sized agricultural and food companies. Through a shared commitment between Canada and the African Development Bank, the Catalytic Financing Mechanism for agri-food SMEs will promote resilient growth and climate adaptation. It will also help African SMEs pursue climate-smart models and empower women by changing attitudes that perpetuate the gender gap in financial inclusion,” said Anita Vandenbeld, Parliamentary Secretary to Canada’s Minister for International Development.

The mechanism is structured as a multi-donor trust fund and is open to and welcomes the participation and contribution of other development partners. Co-financed with African Development Bank financial instruments, the Mechanism will increase the number of attractive capital-lowering SMEs in agriculture and attract more private sector financing for impactful investments in the agri-food sector.

The Dakar 2 summit, held under the theme Feed Africa: food sovereignty and resilience, is a high-level continental conference organized by President Macky Sall of Senegal and the African Development Bank Group. Thirty-four heads of state were present.

The Dakar 2 Summit also attracted agriculture and finance ministers, central bank governors, private sector representatives, farmers’ organizations and development partners to mobilize high-level political will and financial resources for the transformation of African agriculture.