CTA Blending4Ag 3rd Newsletter, November 2016
Blending4Ag: paving the way forward!
In the United Nations' Third International Conference on Financing for Development, in July 2015, blended finance as an approach to fill the gap in development finance was considered so important that it was mentioned seven times in the Conference's outcome. The Technical Centre for Agricultural and Rural Cooperation, CTA (EU-ACP) agrees, and hence decided to organize the "Blended Finance for Agriculture" (Blending4Ag) conference. The meeting aims at strategizing innovative means of driving private, public and philanthropic initiatives to bolster flows of agricultural financing (both for working capital and investments). With blended finance, opportunities for smallholders and agribusinesses can be unlocked while financiers can achieve their return targets. It is clear that linking farmers and (international) providers of finance is fraught with difficulties. But these can be overcome. In this event, we look forward to engaging an array of experts and decision-makers to discuss possible partnerships to conquer obstacles and mitigate risks.
We expect over 150 participants, mostly practitioners responsible for blended finance transactions and for managing agricultural financing portfolios. We will be reporting on the various session topics throughout and following the event, and hope that you can join us in the debate on social media #Blending4Ag . In the meantime, you can keep up-to-date by subscribing to our newsletter.
For logistical and networking purposes, we encourage all confirmed participants to send their short biography and photograph to be listed among the Blending4Ag participants.
Blended finance: a case of innovative partnership in Burkina Faso's critical cotton sector
Cotton is the main cash crop in Burkina Faso. The cotton sector provides a livelihood for more than 3 million people, and is the largest employer and the second largest foreign currency earner in the country. However, shifts in global demand and commodity prices have made it difficult for cotton companies to secure financing. This threatens the economic development of Burkina Faso, a country that recently went through political unrest.
Unlocking capital for smallholder farmers through blended finance
The Initiative for Smallholder Finance (ISF) explains its approach to helping small-scale farmers access the finance they need.
Over the last decade, the agricultural finance community has realised that addressing the market and financing needs of smallholder farmers and their families requires collaboration across multiple types of organisations, from buyers to financiers to non-governmental organisations (NGOs) and community-based organisations. Moreover, the diversity and intensity of risks involved in small-scale farming means that growth and productivity can only be achieved through effective risk-sharing and risk-mitigation strategies. Putting all of this together requires complex partnership structures and blended forms of financing.
Building up the rural asset base
New report discusses how collaboration can create an effective ecosystem for asset finance, and how blended finance models are already showing success
A critical part of agricultural and rural development is that farmers and agribusinesses get access to more and better capital assets. Indeed, the ability of farmers in developed countries to organize themselves into cooperatives and jointly buy capital-intensive equipment played an important role in the sector’s growth in the late 19th and early 20th century.
Developing countries’ own financial sector can support blended finance arrangements
A forthcoming CTA report discusses what Central Banks are already doing, and what they can do to achieve greater leverage
Much of the formal sector finance for agriculture in developing countries comes from these countries’ own public bodies, through state banks, guarantee facilities and the like. However, particularly in Africa there are sound opportunities for Central Banks to play a more deliberate role in agricultural finance, and in particular, to introduce and expand facilities that will crowd in private sector funding (from local sources –banks and investors– as well as international ones).
Is Blended Finance the Future for Development Finance Institutions?
In this interview, Paul Horrocks, one of the expert contributors for the Blending4Ag event, expresses his personal opinion on the status quo and challenges of blended finance, and the involvement of development finance institutions (DFIs).
Is blended finance becoming a mainstream approach for development DFIs?
Many DFIs are increasing their ability to deliver blended finance. At the same time, DFIs do not always consider that they are operating in the blended finance space: many offer finance at non-concessional market rates and consider blending to be based on concessionality and therefore do not consider that their activities are actually blending.