Alvaro Valverde, private sector engagement officer (CABI) and engagement, learning and communication Lead (CASA) said, “The CASA State of the Sector report brings a new level of granularity to the market for agri-SME finance in sub-Saharan Africa and Southeast Asia, highlighting the US$106bn annual financing gap. With almost all of these companies needing sub-commercial finance, coordinated action across the agri-SME finance ecosystem.”
“CASA stands ready to work with our partners and other interested parties to help make better use of subsidies, mobilise existing local financial institutions, make more climate finance available for the investment pipeline,“ he added.
Four change priorities were identified in the report to address this issue..
CASA identifies turning agri-SMEs into commercially investable prospects to anchor local bank markets for finance. Appropriate capital and government policy support continue to be needed across the financing continuum to fill the pipeline of investible agri-SMEs, provide the right growth capital to close the long-term financing gap and promote the emergence of large agri-enterprises that can anchor markets.
The programme also outlined developing capacity, incentives, and infrastructure for local banks and funds to profitably serve smaller, less commercial agri-SMEs over time. According to CASA, local financial institutions have the right locally denominated capital, proximity to clients and cost structure to profitably serve agri-SMEs. Capacity building and long-term subsidised capital can bring this existing banking infrastructure sustainably into the agri-SME market.
With scarce public and philanthropic funds to support the critical sub-commercial agri-SME finance market, blended finance needs to be more efficient and effective. A more sophisticated view of the market and a more transparent, collaborative, commitment by donors, DFIs, development banks, and IFIs to smarter subsidies is required, assisted by more consistent taxonomies, data, and reporting requirements, and a commitment to share learning.
According to the report, building the investment infrastructure around climate finance should be a priority to facilitate the absorption of climate funds at scale. This will include new models and taxonomies to support large donor investments in creating a substantial pipeline of viable investments with climate expertise integrated into all channels of agri-SME finance.
Other takeaways from the report