The global food environment is largely dominated by private sector actors, particularly small- and medium-sized enterprises (SMEs).
Even in Africa, where subsistence farming is still common, over 70% of the total food consumed is purchased through the private sector, mainly from SMEs. SMEs such as input providers, off-takers, processors, and distributors along the food value chain are key drivers of food supply, job creation and regional economic growth.
Despite their vital role to 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. Without these key ingredients for success, SMEs are unable to expand operations and market reach, enhance the nutritional value of their products, or improve their food safety standards. In Africa, SMEs face challenging financing conditions from domestic banks, such as strict collateral requests and high interest rates.
On the other hand, international investors often struggle to find viable investment opportunities. Those that do enter the market focus mostly on export commodities and their financing is usually based in hard currency, such as the USD or Euro, which can pose further challenges to domestic focused SMEs. A GAIN survey in 2018 of 107 African SMEs in the agri-food sector found a funding gap of nearly USD 200 million.
Therefore, efforts to increase available financing for nutritious foods-producing SMEs in Africa and other low-income regions is essential to strengthen food value chains and increase the supply of nutritious foods.
GAIN’s Nutritious Foods Financing programme aims to both influence investors and existing funds to better support nutritious foods value chains, and to lead by example through a new investment facility that will specifically target nutrition in Africa. The programme aims to:
- Set up the Nutritious Foods Financing Facility (N3F), a new investment facility to invest and provide technical assistance to 50-60 Sub-Saharan African SMEs operating across the foods value chain. The N3F will be launched in 2021.
- Develop novel impact metrics for measuring commercial investments in nutrition.
- Develop and maintain an investible pipeline of SMEs production nutritious foods across the supply chain.
- Regularly undertake landscape and market analysis and write seminal reports of nutritious foods financing.
- Convene stakeholders, run pitch competition, and deal rooms to ease and encourage the financial services industry to invest in nutritious foods.
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