A fund that seeks to address challenges hindering Africa’s agribusiness small and medium enterprises’ (SMEs) access to finance is set to be launched next month, with an initial investment of $70 million, according to an official from Norway. Ambassador Paul Larsen, Norway’s Special Envoy for Food Security, talked about the development at the 2024 Africa Food Systems Forum (AFS Forum 2024) taking place in Kigali. ALSO READ: AFS Forum: Africa’s urban food market share growing, new report shows He indicated that Norway and the United States are putting $35 million, each, in the fund that is expected to be launched at the World Bank meeting in October, in Washington, adding that Rwanda is among beneficiary countries. “It will be much bigger, we hope other donors will join so that we pass $100 million,” he told The New Times, pointing out that the facility is intended to provide a relevant guarantee in order for banks to be willing to lend to small and medium agribusinesses. These SMEs are crucial for small farmers to access seeds and fertilisers and other inputs which they need, but which the agribusinesses cannot get credit for because they are deemed too risky. “Just to mention one particular and innovative initiative which we are launching with the United States at the World Bank meeting next month, is a fund for de-risking lending to small and medium-sized agribusinesses which are so crucial for inputs like seeds and fertiliser to smallholder farmers in Africa”. He said that when agribusiness SMEs cannot secure access to formal banking because they are considered too risky, they are unable to continue supplying farmers with the needed inputs. He said that it will ensure that banks lend money to the SMEs without taking the big risk of losing all the money, indicating that there will be a professional fund manager and the details will be announced in Washington. Some agribusiness SMEs told The New Times that they are required by banks to meet exigent requirements which are beyond such enterprises’ capacities, including a relatively high annual turnover, collateral, and data on performance over a given period – citing the previous five years before the date of applying for financing from banks or other formal financial institutions. This, they said, limits their access to finance required to meet their financial needs and expansion. Hawa Niyigena, Chief Executive Officer of WIZ-UP Ltd, a local food processing company currently focusing on fruits and vegetables, told The New Times that agribusiness SMEs need cheap financing that can help them get profit, grow and create jobs for unemployed young people. High-interest loans, she said, inhibit the profitability of small agribusinesses, adding that lack of low-cost financing is a hindrance to their progress. “During peak [harvest] season, there are many fruits you can buy at a small price and process them so that the consumers get juice at a low cost, but that cannot be done because of a lack of the required automated machinery,” she said, referring to the need for affordable funding to address such an issue.
