(Ecofin Agency) - • Africa received $8.2 billion in agriculture funding in 2022, more than all other regions
• Growth driven by post-COVID recovery and Ukraine conflict
• FAO highlights funding gap for agri-SMEs across Sub-Saharan Africa

Africa is currently the leading recipient of development finance for agriculture (DFA), comprising public development aid, other official flows (OOF), and private donations, according to the report Financing for a Better Future by the United Nations Food and Agriculture Organization (FAO).

In 2022, the region received $8.2 billion, marking a 56% increase from 2021 and an 82% rise from 2015. This amount surpasses the total funding directed to all other regions combined: Asia ($4.1 billion), the Americas ($2 billion), Europe ($700 million), and Oceania ($110 million).

The sharp increase is attributed to post-COVID-19 recovery attempts and increased support from international donors in response to instability caused by the war in Ukraine, a major global grain exporter. The outbreak of the conflict in February 2022 due to Russia's invasion pushed global grain prices to unprecedented highs.

In Africa, where many countries are net importers of staple goods like wheat, there is growing concern among some observers of a potential unprecedented food crisis amidst pre-existing climate change impacts, conflicts, and reduced household purchasing power brought about by the Coronavirus pandemic.

The FAO report also emphasized the need to boost domestic funding to small and medium-sized enterprises (SMEs), vital actors in the continent's agricultural production, beyond the international support fueled by exceptional factors such as the pandemic and the Ukrainian war.

Whilst the role of African agri-food SMEs is widely recognized, accessing financial resources remains a challenge. According to data from FAO, the total financing needs of approximately 130,000 agri-sector SMEs in Sub-Saharan Africa amount to $90 billion. However, only $15.5 billion is available through formal financing channels, less than 20% of the required volume.

The majority of the funding provided comes from commercial banks that mainly target more mature agricultural SMEs, with lower risk profiles, established credit history, and solid commercial experience.