Achieving leverage in unlocking private funding for smallholder agriculture through public resources

Blended finance is all about achieving leverage. The experience in the infrastructure and energy sectors shows that it can work. But achieving leverage in the financing of smallholder agriculture brings its unique challenges. The financing structure needs to efficiently reach a large number of smallholders, for example through large value chain companies, such as processors, or with the help of mobile applications (including for loan disbursements and repayments). Reimbursement is most likely if the project is profitable – which in the case of blending4ag means that a large number of smallholders, often in a precarious situation, have to be assisted in increasing their productivity and returns (which implies input firms, extension agents and the like should be part of blending4ag structures). There is normally a need for both short-term working capital and long-term investment funds, which implies a combination of financing techniques. Agri-finance has its particular risks which ideally are covered by specialised partners in blended finance structures. All this means that blending4ag structures can be difficult to put together, and that given the dearth of bankers, donor officials and others proficient in blending techniques, agriculture may lose out to “easier” sectors. The conference will discuss common “framework” structures and mechanisms that can be rolled out for agriculture, and how by linking different public and private partners together risks and other barriers can be overcome. All this means that blending4ag structures can be difficult to put together, and that given the dearth of bankers, donor officials and others proficient in blending techniques, agriculture may lose out to “easier” sectors. The conference will discuss common “framework” structures and mechanisms that can be rolled out for agriculture, and how by linking different public and private partners together risks and other barriers can be overcome.