(Ecofin Agency) - The UN’s International Fund for Agricultural Development (IFAD) launched yesterday a Private Sector Financing Program (PSFP) as part of its broader efforts to address rising hunger and poverty levels in the world’s poorest countries. The PSFP is a financing facility designed to promote increased investment in small-scale agriculture.
As part of the launch, the PSFP announced its first loan of US$5 million to a Nigerian-based social impact enterprise, Babban Gona. Founded in 2012, the company enables smallholder farmers to reach their full potential by providing a private sector channel for cost-effective delivery of enhanced agricultural technologies and end-to-end services that optimize yields and labour productivity, at the same time improving market access.
The social impact enterprise will use the financing package to assist 377,000 Nigerian small-scale rice and maize farmers with a training package, quality inputs, and marketing services. To create about 65,000 jobs for women and 66,500 jobs for youths by 2025, the PSFP will stimulate contributions from other investors to help Babban Gona meet its goal of raising $150 million to reach millions of small-scale producers.
According to the release, before the outbreak of the pandemic, financial service providers met only about 30% of the $240 billion rural households required in their demands for finance. Besides, the lending gap to agricultural Small and Medium Enterprises stood at about $100 billion annually in Sub-Saharan Africa.
“We can end poverty and hunger! But to achieve this, we urgently need to stimulate more private sector investments to rural areas and unlock the immense entrepreneurial potential of millions of rural SMEs and small producers,” said Gilbert F. Houngbo, President of IFAD. “With access to capital, they can attract more investors and partners, grow their businesses, and create employment opportunities - especially for young people and women,” he added.
Bridging food security and rural poverty requires investors with an extensive understanding of the agriculture sector and rural communities. In this light, IFAD sees financing small-scale farmers and rural micro, small and mid-size enterprises as one solution to tackle the needs of 440 million African youths entering the job market in the next two decades.