Innovative Financing for Agriculture
DATE: Tuesday 23 May 2017
TIME: 14:00 – 15:30
SETTING THE CONTEXT
- Jennifer Blanke, Vice-President, Agriculture, Human & Social Development, AfDB
- Mr. Mezuo O. Nwuneli, Managing Director, Fund for Agricultural Finance in Nigeria (FAFIN)Mr. Sean de Cleene, Vice President, Business Development & Strategic Partnerships, AGRAMr. Mark Suzman, Chief Strategy Officer & President, Bill and Melinda Gates FoundationLord Paul Boateng, Chairman, AECF
- Dr. Vera Songwe, Director, West Africa, IFC
CONTRIBUTIONS FROM AfDB GOVERNORS
- Hon. Henry Kiplagat Rotich, AfDB Governor for KenyaHon. Ambassador Claver Gatete, AfDB Governorfor Rwanda
- Hon. Amadou Ba, AfDB Governor for Senegal
- Ms. Julie Gichuru, News Anchor, KBC
There is a large financing gap for private sector-led development of agricultural value chains, with an estimated gap of US$50 billion for smallholder farmers. The IFC estimates that 84% of all SMEs on the continent, including those in agricultural sectors, have limited or no access to finance. The flow of private capital into the sector is constrained by low risk-adjusted returns, due to high transaction costs driven by small deal sizes, high delivery costs, and inadequate banking technology. These factors discourage banks from developing agriculture sector expertise, or investing in innovative delivery models. There is need to re-align incentives for commercial banks and other financial institutions to get into financing agriculture, by de-risking agriculture as an asset class and building banks’ capacity to serve smallholder farmers. In so doing more attention should be devoted to innovative financial services including technology-based financial services and insurance schemes which contributes to not only enhancing financial access to small-farmers but also enhance their resilience to the growing risks related to climate, market and political shocks.
Our analysis has shown that the recent growth of mobile money has allowed millions of people who are otherwise excluded from the formal financial system to perform financial transactions relatively cheaply, securely, and reliably. Mobile money has achieved the broadest success in Sub-Saharan Africa, where 16% of adults report having used a mobile phone in the past 12 months to pay bills or send or receive money (overall in Africa, 14% of adults used mobile money in the past 12 months). In Kenya, where the M-Pesa service was commercially launched in 2007, 68% of adults report using mobile money. Similarly, in Sudan, more than half of adults used mobile money. This re-alignment requires participation of the public sector to address the structural and capacity constraints in the sector. The Bank is proposing a new approach - the Risk Sharing Model - which aims to address some of these challenges. The Bank also intends to establish national/regional Agriculture Risk Sharing Facilities that will catalyse greater commercial banks’ lending to the agriculture sector by de-risking lending to agricultural SMEs.
This panel will provide the opportunity for the Bank to formally present the planned approach to deploy innovative financing models to stimulate increased agricultural financing on the continent. The panel will also offer an opportunity to engage key stakeholders in the elaboration of these models to ensure successful deployment and sustainability. This event will be organized following a town hall (arena) setting style.