September 19, 2023

By Lynda Kiernan-Stone, Global AgInvesting Media

The U.S. Administrator for the U.S. Agency for International Development (USAID), Samantha Power, and the Norwegian Minister of International Development, Anne Beathe Tvinnereim, announced the coordinated launch of a new fund – the Financing for Agricultural Small-and-Medium Enterprises in Africa (FASA) Fund – at the 2023 UN General Assembly. 

Launched with a funding goal of $200 million and a mission to unlock hundreds of millions in financing for SME agricultural businesses in Africa, the U.S. and Norway are each seeding the fund with an initial commitment of $35 million.

This fund has the potential to support 500 small and medium agricultural enterprises, and 1.5 million smallholder farmers, ultimately being a benefit to almost 7.5 million people and generating approximately 60,000 private sector jobs. 

These are critical goals for the region, as agricultural SMEs are the top employers and economic engines on the continent and are on the front line of the fight against hunger and food insecurity. Despite this, three quarters of Africa’s SMEs are unable to access financing through bank loans, but are too big to qualify for microfinancing programs, creating a gap estimated to be $100 billion in unmet need for critical funding.

It is these agricultural SMEs – the input suppliers, agro processors, traders, and retailers – that support 95 percent of smallholder farmers in sub-Saharan Africa with the critical tools needed to increase productivity and become profitable. 

And although it is true that extreme poverty across Africa has been eased over the past 25 years or so, Ibrahim Mayaki, the Africa Union Special Envoy for Food Systems, explained to the UN that concurrently there is an increase in malnutrition, even among the smallholders who produce 80 percent of the food.

While progress has undeniably been made in some regions, the challenges of hunger and food insecurity in Africa remain. For instance, the mid-year update to The Global Report on Food Crises (GFRC) 2023, issued by the European Commission, stated that between 2022 and August 2023, Sri Lanka and Niger showed the greatest reduction in food insecurity with 2.4 million and 1.1 million people experiencing improved conditions, respectively. However, East Africa remains the hardest-hit region with almost 65 million people living with either high-or-acute levels of food insecurity, representing an increase of 8 million people since last year, largely due to ongoing conflicts in Sudan, which have displaced 3.5 million people since April 2023.

Addressing these issues requires collaboration, sustained effort, and a focus on both short-term relief and the long-term strategies that address these pressing and complex challenges for millions of people across the continent.

The opportunity to reduce hunger and poverty in Africa through agricultural investment is enormous, and is key to transforming a widely subsistence agriculture sector into a commercially sustainable industry. But to realize these opportunities fully, it is essential that agricultural investment in Africa is well-targeted, sustainable, and inclusive.

This new fund is one of the ways that USAID, in its role as lead for the U.S. government’s Feed the Future Initiative, is working to address food insecurity through partnership with the private sector.

The fund was announced today at an event with Administrator Power, Minister Tvinnerim, U.S. Secretary of Treasury Janet Yellen, Kenyan President William Ruto, African Development Bank President Akinwumi Adesina, U.S. International Development Finance Corporation CEO Scott Nathan, and Acumen CEO Jacqueline Novogratz. 

And through the financing catalyzed through this vehicle, Africa’s agricultural SMEs will be better situated to combat climate change, reduce hunger and poverty, close gender gaps, and drive economic growth for a more resilient and prosperous future. 

~ Lynda Kiernan-Stone is editor in chief with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Unconventional Ag. She can be reached at lkiernan-stone@globalaginvesting.com.

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