1. INNOVATIVE FINANCING AND
INVESTMENT IN
AGRICULTURE: AFRICA’S
EXPERIENCE
Okoruwa V.O. (Ph.D)
Professor of Agricultural Economics,
University of Ibadan,
Ibadan, Nigeria.

2. Outline of the Presentation
The place of Agriculture in Africa’s
Development
Innovative Financing in Agriculture: A
Global Perspective
Recent Innovation Around the World
Experiences of Success Stories in Africa
The Way forward for Africa

3. Place of Agriculture in Africa’s
Development
Contributes to the
continent’s GDP
(between 30% and
40%),
Makes up about 60%
total export earnings,
Employs over 65% the
population
Growing at about 3.3%
each year since 2000
Over 60% of Africa's
agricultural population
live in rural areas
Rural agricultural
workers are among the
poorest in Africa with
poverty rate of about
50% in the continent
Agriculture major factor of development in most
economies

4. Place in Agriculture in Development
cont’d
Most farming operations
still at subsistence level
and small scale (less than
2ha of land),
Low level of technology,
Weather-dependent
production,
Poor market access,
Weak infrastructure
Low farmers’ incomes,
and limited ability to
influence government
policy
Over 600 million are
youths under 30 years of
age.
Rural agricultural workers
among poorest in Africa
with poverty rate of about
50% in the continent
Sector remains largely under-
developed

5. Agriculture Driver of Growth &
Poverty Reduction
Agriculture has
potential to serve as a
strong driver of growth
and poverty reduction in
the continent.
Investing in agriculture
most important and
effective strategy for
reducing poverty and
hunger in both rural and
urban areas through
multiple pathways
Farmers’ productivity
and incomes are
enhanced,
Food availability is
enhanced,
Demand for other rural
goods and services are
stimulated,
Employment is created
Incomes for the
landless rural poor
enhanced

6. Poor Access to Finance for
Agriculture
 Seasonal nature of
agriculture which causes
price fluctuations of inputs
and products
 lowers farmers’ incomes
and risk bearing ability,
 Under-investment and
inability to break out of
poverty
 The vulnerable groups (Women
and youths) - the larger
proportion of the agricultural
labour force, are more
disadvantaged by insufficient
finance due to access to fewer
assets and younger age
respectively
 Implications for agricultural
development and strategies for
increased agricultural finance
is pertinent for eradication of
hunger and poverty.
A key impediment to improving the efficiency
of African farmers and adopting better
technologies.

7. Poor Access to Finance for
Agriculture cont’d
Allocation to agriculture
by African governments
is only about 5%
(Despite Maputo
declaration of 10%
government allocation
to the sector in 2003).
Public funding
generally restricted
and unpredictable
even in times of crisis,
Need for new ways of
financing the sector for
development
Public Allocation to Agriculture

8. Innovative Financing in Agriculture:
A Global Perspective
 New ways of raising funds,
often from extra-official
sources, to foster
development in the sector.
 Catalyst for private
sources (far below their
potential in developing
countries), to contribute to
development through
public, public-private and
private innovations.
 Rely on new partnerships
between wide ranges of
stakeholders (i.e. countries
of diverse levels of
development, local
authorities and private
sectors).
 Sustainable and based on
a supportive policy
environment.
 Innovative in source but
also innovative in use
(investment)

9. Innovative Financing in
Agriculture Cont’d
Figures from International
Expert Report (2012)
reveals
 Global food supply needs to
increase dramatically in
order to meet the world
demand.
 By 2050 the world’s
population will reach 9.1
billion, 34 percent higher
than today, in particular in
developing countries.
 Combination of this growth
and increasing per capita
meat consumption, will
require a 60 percent
increase in global food and
feed production.
 Africa among developing
nations is the region where
the challenge will require
most efforts. -- Africa lags
behind in productivity of
gains on major crops and
food dependency.
Rational for Innovative Financing and Investment in
Agriculture

10.  Region is facing severe
threats in the maintenance
of soil fertility, because of a
fragile environment,
increasing land pressure
and very low adoption of
effective soil conservation
practices.
 Fertilizer consumption is
only 9 kg/ha/year (in
nutrient content), against
140 kg in average in
developed countries.
 SSA where population growth
will be highest, hunger index is
alarming and most likely the
most affected by climate
change.
 Challenges from climate
change represent major risks
for long-term food security and
nutrition for the continent
where agricultural output up
to 2080-2100 could be
between 15 and 30 percent if
required efforts to adapt
agriculture to climate change
are not made in due time.
Rational for Innovative Financing and Investment in
Agriculture

12. Innovative Financing in
Agriculture Cont’d
Meeting these challenges
will require a
considerable scaling-up
of investment in Africa’s
agriculture.
Estimates from the FAO’s
report (How to feed the
world by 2050) suggests
Developing countries will
need to invest USD 83
billion per year (net of the
renewal cost of existing
equipment) or USD 209
billion including this cost,
Compared to a current
level of investment of
USD 142 billion in order
to cope with the
challenge.
Considering the
enormousity of the
challenge and the
existing budget
constraints,
Need to find innovative
ways of sourcing funds to
help meet the challenge
confronting the continent

13. Innovative Financing in
Agriculture Cont’d
Private investment key to
agricultural development
Although severely
constrained, public
investment is necessary
to build up a favorable
environment and required
infrastructure, to ensure
such investment to occur
Traditional ODA through
public driven projects is
limited in their capacity
to foster private
investments,
Their implementation is
often too rigid, and
because they are
insufficiently market-
driven and result-based.
Private investment key to agricultural development

14. A for Agriculture/Forestry/Fisheries 200-2010 (millions of constant dolla

15. Recent Innovative Financing Around the World
 Mexico and Pakistan - rural
leasing a form of credit that
provides farmers with a
means to acquire productive
assets
 China, Brazil, Paraguay -
financial education for
farmers on loan products
and debt capacity has led to
positive changes in savings
behaviors
 India - non-financial
services such as soil testing
and health monitoring of
livestock, along with credit,
to farmers in a way that
maximizes returns to credit
services
 India and Mexico- risk
management such as index
base issuance which is an
innovative measure to
share climate risk among
members of an issued
population

16. Experiences of Success
Stories in Africa
Concerted efforts put in
place not only by the
governments but also
the private individuals
in agriculture,
Contribution of some
governments in the
provision of basic
infrastructure and
ensuring security of life
and property is highly
commendable
Many of the regional
governments are also
adopting market-
friendly policies and
committing more
resources to the
sector.

17. Experiences of Success Stories in
Africa cont’d
Government’s role in
the innovative financing
and investment in the
continent has however,
been dual
Direct government
financing with examples
in Nigeria, Kenya,
Ghana and Uganda,
Ethiopia etc
Government partnership
with private investor.
In either case (public or
public-private
partnership), the aim of
the governments remain
the same: creation of
employment
opportunity, enhance
revenue and ensuring
food security.

18. Success Stories in Africa cont’d
Strong indication that
the rest of the world is
appreciating current
efforts and
achievement is
investors’ is revealed by
Figures from Info agra
and McKinsey (2010)
45 private equity firms
plan to invest $2 billion
in the region’s
agriculture in the next
three to five years.
Consequently the
continent’s agricultural
output could treble from
the current $280 billion
a year to $880 billion by
2030.

19. Success Stories in Africa cont’d
 Farmers’ now pull
resources together through
cooperatives to assist one
another and great
achievements have been
recorded in terms of
number of beneficiaries
and loan repayment.
Kenya, Ghana, Togo, Benin,
Tanzania and Uganda etc.
 Local and foreign investors in
the continent are involved in
production, processing,
marketing and provision of
improved farm inputs to farms.

20. Public Financing and
Investment
 Nigeria: The YouWin! is a
new youth empowerment
government initiative in
Nigeria.
 Ethiopia: The Ethiopian
Commodity Exchange (ECX)
regulates trade of major
agricultural commodities.
 Ghana: Cocobod Monopolist
marketer of cocoa in Ghana,
extends seasonal credit and
provide a significant degree
of organisation to the value
chain.
 Kenya: The Kenya Tea
Development Authority
(KTDA) provides farmers with
extension services and inputs
and also receive assistance
in collection, processing and
marketing of the green leaf
tea.

21. Public-Private Financing and
Investment
In the last ten
years, the ICT-
based applications
have gained a lot of
popularity in SSA
Busoga Rural Open
Source and
Development Initiative
and FoodNet in
Uganda;
MPESA (literal
meaning: mobile
money), Kenya
Agricultural
Commodity
Exchange (KACE)
and Drum-Net in
Kenya;

22. Public-Private Financing and
Investment cont’d
Malawi Agricultural
Commodity Exchange
(MACE) in Malawi;
Manobi in Senegal;
TradeNet/E-Soko in
Ghana;
Kilosa Rural Services
and Electronic
Communication in
Tanzania
And the most recent e-
Wallet under the
Growth Enhancement
Scheme (GES) of the
Nigerian government.

23. Private Financing and
Investment
 Maendeleo
Agricultural
Enterprise Fund
(MAEF) in East
Africa- Kenya,
Uganda and Tanzania
 A grant-making fund
that aims to
sustainably improve
the livelihoods of
smallholder farmers
 Investment in innovative agri-
business enterprises that seek to
either create or adapt
technologies for improving
agricultural productivity,
increasing profitability and linking
smallholder farmers to viable,
profitable and sustainable
markets.
 Helpful to women farmers in the
region trying new ways of working,
setting up businesses and finding
profitable new markets. Since
2002 more than 150,000
households across

24. Private Financing and Investment cont’d
 ESOP in Togo, Burkina Faso and
Benin
 Promoted by two NGO’s (CICR and
ETD) linking processing
agribusiness for urban supply
(mainly for rice, and at time soya
beans) to farmers’ organizations.
 The enterprises are run as joint
ventures between private individual
operators and farmers groups
through a contract, which provides
them with improved seeds and
other inputs on credit financed by
local banks under specific credit
lines.
 Farmers are paid upon
delivery of the
produce to the
agribusiness
warehouse through a
system of warehouse
receipts at a selling
price set in advance.
 Repayment of the
input supply loan
takes place upon
delivery of the
produce to the
warehouse.

25. Private Financing and Investment
cont’d
 Savannah Integrated
Export Processing Farms
(SIEPF) and OLAM
 SIEPF, a tomato processing
plant, and OLAM, a rice
processing mill, provides
inputs such as seeds,
fertilizers, extension services
and even land to farmers in
northern Nigeria on loan in
return for procurement of
high quality produce from the
farmers.
It provides a guarantee to
farmers to buy the
products of a certain
quality at a fixed price
thereby increasing output
for the companies.

26. Private Financing and Investment
cont’d
 Weinco Maize Project
and Blue Skies- Ghana
 ‘Weinco’ an input supply
company, and ‘Blue Skies’, a
major processor and
exporter of fresh cut fruit
supply small farmer-groups
in Ghana with quality seeds
which guarantee increased
yield, fertilizer and technical
support.
 After harvest, the companies
buy the products from the
farmers at a minimum price
set in the contract, thus
reducing postharvest loss of
farmers due to lack of
storage facilities.
 The repayment of the input
credit is done by reduction
on the proceeds of the sales
paid on the farmers’ bank
account.

27. Private Financing and
Investment cont’d
 Gatsby
Gatsby (African Agricultural Capital) provides access
to markets for smallholder farmers by stimulating
new value chains, adding value to agricultural
products and connecting smallholders with buyers
and customers.
About 1.4m smallholder farmers have benefitted
across Kenya, Tanzania and Uganda.
 The major challenge of Gatsby is low return to
capital invested.

28. The Way forward for Africa
Promote and
encourage voluntary
contribution from
consumers, firms and
employees and/or by
food and nutrition
correlated industries.
Lotteries can also be
considered
Promote the use of migrant
remittance which can be
considered both as new and
renewable sources of financing
as well as existing private
capital that may be channeled
into agriculture.
Seek ways of accessing funds
generated by carbon emission
allowances auctions in the
European Union Emission
Trading Systems (EU ETS)

29. The Way forward for
Africa
Enhance private
investment in
agriculture, by building
up a favourable
environment and
developing catalytic
tools providing
incentives and
alleviating the
constraints to
investment.
Encourage private
participation on
insurance
programmes which
are specifically
tailored to suit the
peculiarities of African
farmers particularly
the vagaries of
weather.

30. Thank you for listening