As was the case in 2019, this workstream focused primarily on developing the evidence base for the use of blended finance in agriculture. Blended finance uses concessional capital to absorb or redistribute part of the investment risks associated with transactions with positive expected development impact, making them more attractive to commercial investors. In 2018, SAFIN and the OECD took a “deep dive” into blended finance to assess whether and how it could be used to lower risks and costs confronting investors and financial institutions serving agri-SMEs. In 2019, a landscape report on the use of blended finance in the sector was published and discussed at workshops co-organized with the African and Asian Rural and Agricultural Credit Associations and the Asia-Pacific Rural and Agricultural Credit Association. In 2020, the SAFIN/OECD deep dive on blended finance yielded nine case studies.
Case studies on blended finance and agriculture
In July 2020, the SAFIN-OECD deep dive on blended finance and agriculture reached a milestone with nine case studies co-published with the Inter-American Development Bank (IDB) Innovation Lab, many of which were authored by SAFIN partners. Each case study illustrates a different use of blending, and collectively they cover three main areas of application of blended finance in the agri-SME finance space:
- Blended schemes that de-risk, incentivize and build capacity for agri-SME finance across different types of financial institutions in specific countries, with examples from Ghana, Kenya and Tanzania;
- Blended vehicles and project structures that de-risk new value chains, production models and technologies, with examples from Bhutan, Brazil and Paraguay;
- Blending that addresses business model risks associated with the design of new financial products and services targeting agri-SMEs, with examples from India, Mexico and the Philippines.
Contributing to the global debate on blended finance in the agri-SME space
Throughout 2020, the SAFIN Secretariat and Network partners remained active in the global conversation on blended finance for food and agricultural investments. Their involvement included engaging in several policy forums, international conferences and summits, such as the Private Finance for Sustainable Development (PF4SD) Conference and the Finance in Common Summit (see more details below).
At the African Green Revolution Forum (AGRF) 2020 virtual summit, the Secretariat chaired a session on blended finance for agribusiness investment and contributed to a symposium on innovative finance for African agribusiness, chaired by the SAFIN Senior Coordinator. In the wake of an African Union Development Agency conference co-organized with IFAD and the World Economic Forum (WEF) to coordinate regional responses to the impact of COVID-19 on food systems, the Secretariat and some Network partners contributed to a working group on de-risking finance for African agri-SMEs. Together with FIRA Mexico and IDB, the Secretariat and partners also coordinated a dialogue on blending and innovative finance in Latin America. At the WEF Bold Actions for Food as a Force for Good event, SAFIN and several partners presented at a number of sessions on blended finance, agri-SMEs and finance for young entrepreneurs. Finally, the Secretariat contributed to the “Agricultural Finance Year Book 2020 – Digitalisation and Agricultural Financing in Uganda”.
In 2020, SAFIN continued to support the implementation of the IPF. The IPF process involves a two- stage multi-stakeholder approach to identifying transformative investment opportunities in specific agri-SME value chains at country and regional levels. The process identifies areas in value chains where the financial sector is unable or unwilling to unlock investment and where SAFIN partners can design and implement financial solutions for agri-SMEs. Despite travel restrictions caused by COVID-19, further progress on the SAFIN IPF pilots focused on four countries (Dominican Republic, Colombia, Nigeria and India) and the Sahel sub-region in 2020. The IPF process was also synthesized into a “How-to guide” for SAFIN partners and other potential users.
Active pilots in 2020
Progress by country
Dominican Republic: After the SAFIN IPs for coconuts and associated crops was published in 2019, follow up activities during 2020 focused on two fronts: 1) implementing a financing solution to increase the capacity and quality of coconut production and 2) diversifying the range of products made from locally produced coconuts. Efforts towards these activities were led primarily by Hernan Manson from the International Trade Centre (ITC) as part of their “Alliances for Action” programme. ITC, with the support of the Dominican Agroentrepreneurial Board (Junta Agroempresial Dominicana) and Fundación Capital, met with and collected information from public and private sector institutions active in the coconut value chain to inform the design of a financial product for small and medium producers and other agri-SMEs in this value chain. As part of this process, the three institutions worked to identify producer and processor organizations to create new alliances to take the findings of the IP forward. An Investment Brief for the Dominican Republic was published in April 2020.
Colombia: After the publication of a Scoping Analysis on cocoa, coffee and dairy value chains in Colombia, follow up activities in 2020 included dialogue among the Secretariat, a small group of partners, the Colombian Ministry of Agriculture, and the Colombia flagship working group of the Food Action Alliance (FAA). The dialogue was led locally by Rabobank, Internacional de Agricultura Tropical (International Center for Tropical Agriculture) and WEF. The Ministry of Agriculture and Rural Development of Colombia was interested in the potential development of an IP informed by the Scoping Analysis to support their “360-degree risk mitigation strategy”, which covers 12 value chains, including cocoa and dairy. The FAA was interested in using the IPF to frame their efforts and drive investments towards improving the sustainability of the dual-use cattle value chain while also considering a complementary IP on the cocoa value chain, thanks to cocoa’s potential for sustainable reforestation strategies, which may supplement the incomes of cattle farmers.
Nigeria: Building on the 2019 IP for Nigeria, a study of Agro-Service Providers (ASP) was launched in collaboration with AFEX, following an agreement with IP partners to further explore financial solutions for ASP in the agri-SME space. SAFIN partners and local stakeholders held a virtual meeting to validate study findings and discuss the ASP landscape in Nigeria, including different ASP models, their growth potential and corresponding financial needs. The study proposed the design of a funding structure inclusive of a technical assistance component to meet those needs. The study was presented in a second virtual meeting with key stakeholders in the third quarter of 2020. An Investment Brief for Nigeria was also published in May 2020.
India: Following the publication of a Scoping Analysis in December 2019, the pilot for India focused on exploring investment opportunities in the minor millets value chain in the states of Rajasthan and Madhya Pradesh. The IP process was led by the local SAFIN anchor, ACCESS Development Services, which set up a Steering Committee that met virtually in early 2020 to validate the initial market analysis and financing and investment opportunities that later became the focus of the IP. In the third quarter of the year, key findings from the IP were presented to the Steering Committee. The final version of the IP presented investment and financing opportunities across three types of agribusinesses: 1) farmer producer organizations, 2) agri-SMEs that perform primary processing activities for local markets, and 3) agri-SMEs that perform secondary processing for regional or national urban markets.
Sahel: A Scoping Analysis was launched around mid-2020 covering Niger, Burkina Faso and Senegal. The process was initiated when SAFIN partners active in the region were asked to define value chains of priority focus. After an initial market analysis, a first virtual meeting was held with the partners to propose and validate the selection of five value chains, namely: 1) onions (Niger); 2) indigenous cereals (Niger); 3) market gardening (Burkina Faso); 4) maize (Burkina Faso); and 5) mangos (Senegal). In the third quarter of 2020, interested partners reconvened to discuss key findings from the Scoping Analysis. The final version of the Scoping Analysis was published in November 2020.
In 2020, SAFIN increased its efforts to advocate for more investment into agri-SMEs in numerous global and regional forums, including the OECD PF4SD Conference, the AGRF virtual summit, and the WEF virtual Bold Actions for Food as a Force for Good event. The Secretariat also supported relevant high-profile initiatives, such as the Finance in Common Summit, the FAA, the United Nations Food Systems Summit and the AGRF Deal Room. The total number of speaking engagements by the SAFIN Secretariat in 2020 totalled 15. A far larger number of speaking engagements and public events were organized by partners, individually or in collaboration with each other or with other actors.
Private Finance for Sustainable Development Conference
The OECD PF4SD Conference is held in Paris every January to gather policy makers, investors and leading experts in finance and development to discuss how private capital can be mobilized towards the Sustainable Development Goals (SDGs). The theme for the 2020 forum (28–31 January) was “Aligning Finance with the SDGs”. SAFIN co-hosted a session at the conference with the OECD Financing for Development team on the role of blended finance in agri-SME finance, which built on the SAFIN/OECD “deep dive”. The SAFIN Senior Coordinator also spoke about green finance and alignment of private investment in the agri-food sector in a separate session of the conference.
Finance in Common Summit and the Public Development Bank agriculture cluster
On 12 November 2020, Agence Française de Développement (AFD) hosted the Finance in Common Summit. The Summit convened heads of state and government, leaders of Public Development Banks (PDBs) and other institutions to strengthen the contribution of PDBs to realize the 2030 Agenda. The SAFIN Secretariat supported IFAD in convening a cluster of agricultural PDBs with AFD in preparation for the summit, including speaking at a pre-summit, high-level event on financing sustainable food systems hosted by IFAD. Additionally, the SAFIN Senior Coordinator facilitated the cluster and chaired a consultation on the cluster outcome declaration for the Summit at the SAFIN Plenary, thereby opening a new space for dialogue between the PDB community and other actors in the agri-SME finance ecosystem that are part of the network.
Contributing to the Food Systems Summit: Champions network and Action Track 4
In October 2020, the SAFIN Senior Coordinator was appointed a Food Systems Champion in the context of preparations for the United Nations 2021 Food Systems Summit. She was also appointed Vice-Chair of the Champions’ Group for Women and Gender issues, and later as the finance lead for the Summit Action Track 4, which focuses on “equitable livelihoods.” These appointments signalled recognition within the United Nations system of the unique role of SAFIN around the agenda of agri-SME finance and provided new opportunities to advance this agenda in global efforts for food systems transformation. SAFIN engagements in the Food Systems Summit will continue throughout 2021 via independent dialogues and supporting the development of game-changing solutions.
Lessons learned and the way forward
As the final year of the SAFIN pilot phase, 2020 was full of learning opportunities, including how to adapt and even thrive during a global pandemic. It was also a year of consolidating learning from the last three years into strategies and focused activities for the next phase.
In terms of operations, the Network found new ways to strengthen its communication infrastructure and deploy remote connectivity tools effectively and engagingly. The Network also discovered new opportunities to add value to partners via quality webinars, virtual discussions and digital tools, including the “SAFIN Network Roundup” bulletin. Further, the Network learned that although remote participation lacked the informality of in-person encounters, virtual discussions may deliver easy and low-cost access to learning as well as broader participation.
In terms of mandates and strategic positioning, the Network learned that its focus on agri-SME finance as a space for collaboration, research and learning is valuable for partners. The importance of SAFIN’s purpose was not only reaffirmed in the Network Health surveys and during the 2020 Annual Plenary but also by the growing visibility and profile of SAFIN in regional and global forums, like the AGRF or the United Nations Food Systems Summit. SAFIN continues to be unique in its dedication to agri-SME finance work within the global ecosystem and continues to be seen an important source of information, a space for dialogue, and a powerful community of agri-SME investors and partners.
Finally, in terms of Network working experiences, all SAFIN partners and the Secretariat experienced the COVID-19 pandemic in different ways in their professional and personal lives; but to everyone, 2020 was a reminder of the importance of personal resilience, attention and compassion towards each other.
All the lessons learned in 2020 will inform our strategic focus, our operational and communication tools, and how we relate to each other as individuals in the next phase of our journey.