The latest groundbreaking report from British International Investment (BII), a crucial Strategic Partner of the Commonwealth Enterprise and Investment Council (CWEIC), which is titled “How can gender- and climate-smart approaches unlock financing for SME agribusinesses in West Africa?” was launched to address the major issues confronting small and medium-sized agribusinesses in West Africa.
The research attempts to bridge the gap in the industry in the area and find alternative solutions to merge the gap in financing SME agribusiness among the countries in West Africa.
This paper was created by BII with financial support and direction from BII Plus, the organization’s technical help facility. The research makes specific recommendations that FSPs implement in order to support the region’s SME agricultural financing.
Furthermore, the research aims to assist financial service providers in recognizing credit possibilities in the food and agricultural industry and in implementing a climate-smart, inclusive strategy. In the end, it wants to improve financial accessibility by growing the local loan market for small and medium-sized farms. We hope that the study spurs action and broadens the financial options available to this industry.
Lead writers were Lauren Burnhill, Claire LaBrunerie, and Carmine Soprano from BII and John Schiccitano, Epitace Nobera, and Awa Alyne Daffe from Pangea Global Ventures. Surveys and interviews served as a guidance during its creation.
According to the research, the agricultural, forestry, and fishing sectors are vital to the economy of West African countries, accounting for 60% of Sierra Leone’s GDP1, 37% of Liberia’s, and around 20% of those in Burkina Faso, Ghana, Nigeria, Côte d’Ivoire, and 15% of those in Senegal.
With over 82 million employment, or more than 66% of the workforce in the farm and off-farm agrifood value chain, the industry is also a significant employer. Small and medium-sized companies (SMEs) make up around two-thirds of the food supply channels as a subset of firms in this sector. SMEs have the ability to help low-skill workers and smallholder farmers escape poverty.
Agri-SMEs make up around 10% of all SMEs in Sub-Saharan Africa3, and 83% of them lack the management skills and access to capital necessary to access it, which amounts to a $74 billion
annually.
The well-being of society and national economies in West Africa depend on financing support for small and medium-sized agribusinesses. Private sector lending to agriculture as a percentage of overall private sector loan is still low, ranging from 2.1% in Burkina Faso to 4.7% in Nigeria, despite the sector’s significance to West African economy.
In proportion to GDP, the role of private credit in general is thus somewhat tiny, and within that role, the value of credit for agriculture is comparatively minor. Therefore, the bigger task of raising private sector financing overall comes before the difficulty of expanding finance for SME agribusinesses. Within the industry, small and medium-sized agribusinesses play a significant role.
They provide low-skilled laborers and smallholder farmers with more income and job options, allowing them to escape poverty. Agribusinesses may also encourage inclusivity by empowering youth and women. Forty to sixty percent of workers in formal agriculture are women.
Furthermore, food production is already being impacted by climate change in West Africa. Encouraging farmers and agribusinesses to recognize and manage changing climate risks is essential to food security and sustainability in agriculture.
These companies are significant, but they have trouble getting the funding that is necessary for them to continue operating and expanding. The projected yearly funding deficit for SME agribusinesses in sub-Saharan Africa is $74.4 billion.
Financial services are in a great position to give these companies funding. West Africa is an area that is expanding easily, with Nigeria, Ghana, Senegal, and Cote d’Ivoire leading the way. Data indicates that more and more investment funds are concentrating on African agriculture; yet, there is a dearth of knowledge on the goods, services, and practices of the local financial sector.
This study distinguished between pre- and post-harvest agribusinesses and agricultural production (farming) in order to describe the potential and problems associated with financing SME agribusiness in West Africa. Through an examination of the scope and reach of current investment funds, local financial markets, innovations and innovators in SME agribusiness lending, as well as their potential applicability to bank financing, the report hopes to demonstrate why financial service providers (FSPs) can and should increase credit to this specific sub-sector.
