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New investment program of the International Fund for Agricultural Development (IFAD) to boost private financing of rural enterprises and small farmers

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New investment program of the International Fund for Agricultural Development (IFAD) to boost private financing of rural enterprises and small farmers

Rural businesses, so vital to transforming our food systems, will receive a much-needed boost from an ambitious new funding program launched today by the United Nations International Fund for Agricultural Development (IFAD) (www.IFAD.org) , as part of its broader efforts to address rising levels of hunger and poverty in the world’s poorest countries.

The Private Sector Financing Program (PSFP) aims to spearhead an increase in much-needed private investment in small and medium-sized enterprises (SMEs), farmer organizations and financial intermediaries that provide services to small farmers, who are too often neglected by investors. It will provide loans, risk management instruments (such as guarantees) and equity investments.

“We can end poverty and hunger! But to achieve this, we urgently need to stimulate more private sector investment in rural areas and unlock the immense business potential of millions of rural small and medium-sized enterprises and small producers, ”said Gilbert F. Houngbo, President of IFAD. “With access to capital, they can attract more investors and partners, grow their businesses and create job opportunities, especially for young people and women.

As part of its launch, the PFSP announced its first loan of US $ 5 million to a Nigerian social impact company, Babban Gona, which has solid experience in successfully moving small farmers from a subsistence model to a model. more market oriented.

The loan will help Babban Gona support 377,000 small farmers of rice and maize in Nigeria with a comprehensive package of training, quality inputs and marketing services. Babban Gona will also store and sell the harvest on behalf of its farmers when prices are higher. Its goal is to create up to 65,000 jobs for women and 66,500 jobs for youth by 2025. By committing these funds, the PSFP aims to stimulate greater contributions from other investors and help Babban Gona meet its goal of raising 150 million dollars to reach millions of small producers. .

Lack of finance and access to financial services prevents rural SMEs and small farmers from taking advantage of the opportunities offered by the growing demand for more diverse and nutritious foods globally. SMEs involved in food processing, packaging, transportation and marketing are essential for small farmers, as they provide them with services, inputs and market opportunities that contribute to increasing their income and employment.

Even before the COVID-19 pandemic, financial service providers only covered about 30 percent of the $ 240 billion that rural households required in their financing demands. Furthermore, the credit gap for agricultural SMEs was around $ 100 billion annually in sub-Saharan Africa alone.

IFAD intends to mobilize $ 200 million for the PSFP from public, private and philanthropic sources to mobilize a total of $ 1 billion in private investment. This will improve the lives of up to 5 million small farmers. The PSFP will focus its investments on job creation, empowering women, building farmer resilience and accelerating climate change mitigation.

“With growing hunger and poverty and the urgent need to make our food systems more sustainable and equitable, business as usual is not an option. We need to innovate now, ”said Houngbo. “That is why IFAD is creating new instruments to catalyze increased private sector investment in rural areas where it is most needed.”

IFAD’s investments, combined with its 40 years of experience working with rural communities, global presence on the ground and a broad portfolio in agriculture, give it an advantage in attracting private investors who may be cautious when investing in agriculture and rural economies.

The PSFP is part of IFAD’s broader ambition to increase its engagement with the private sector to reach millions of more rural people and double its impact on eradicating hunger and poverty by 2030. To this end, in 2019 IFAD modified its founding agreement to allow it to invest directly in private sector entities. Previously, IFAD only channeled investments to rural areas through sovereign grants and loans to governments. The IFAD loan to Babban Gona is IFAD’s first loan to a private sector entity.

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