Small- and Medium-Enterprises (SMEs) are the backbone of many food systems and are essential for ensuring access to nutritious, safe foods, especially for low-income consumers. However, they face significant barriers to growth, largely because they lack reliable access to finance and their leaders may have limited managerial or technical skills.
To reach the nutrition targets of SDG 2 on 'Zero Hunger' and ensure that all people can afford a healthy diverse diet, innovative methods of resource mobilisation that focus on nutrition and SMEs are needed. The Nutritious Foods Financing Facility – N3F – aims to address these problems through a blended finance approach that focuses on improving nutrition by supporting SMEs in Sub-Saharan Africa to scale up the production and sale of locally produced nutritious, safe foods destined for domestic markets.
N3F is needed to support the essential role of SMEs for nutritious safe foods
The Global Nutrition Report 2021 estimates an additional USD 39 to 50 billion is needed every year to close the finance gap and reach the nutrition targets of SDG 2. Today, 3 billion people, including three-quarters of all Africans, cannot afford a healthy diet.
In low- and middle-income countries, most food consumed is purchased through the private sector, mainly from SMEs. In Africa, for example, they produce over half of calories and over 80% of animal-source foods, fruits and vegetables, while processing or handling about 65% of food in later stages of the value chain. Throughout the food value chain, SMEs are key drivers of food supply, job creation and regional economic growth.
Despite their vital role in food systems, many SMEs in low- and middle-income countries face significant challenges to grow, largely because they lack reliable access to finance and have limited managerial skills. A GAIN survey in 2018 of 107 African SMEs in the agri-food sector found a funding gap of nearly USD 200 million. Without sufficient access to financial services, SMEs are unable to expand operations and market reach, enhance the nutritional value of their products, improve on their food safety standards or start working more sustainably.
The Nutritious Foods Financing Facility (N3F) programme aims to address the above outlined challenges. Its proof-of-concept approach aims to prove that financing nutritious foods through SMEs works. Through an innovative finance approach for nutrition, aimed at financing SMEs to scale up the production and sale of locally produced nutritious, safe foods for domestic markets, investors, SMEs and consumers can all win.
The three components of N3F
The N3F Fund: The Fund is an impact-first fund with consumer nutrition at its core and a blended finance structure, which will provide debt financing to SMEs providing safe and nutritious foods to local consumers in Sub-Saharan Africa.
Managed by Incofin Investment Management, with GAIN providing nutrition expertise.
Technical Assistance: Provision of technical assistance to the Fund's investee SMEs will focus on general business management practices and nutrition and food safety, both of which aim to support SMEs to reach their potential and become more effective and efficient.
Managed by GAIN
Monitoring, Assessment and Learning: This component will focus on convening and influencing stakeholders, knowledge dissemination and the development and validation of metrics for targeting nutrition-sensitive investments.
Managed by GAIN
The technical assistance and monitoring, assessment and learning component are grant-funded separately from the N3F fund.