One of the objectives of Public-Private-Producer-Partnerships (4Ps) is to build profitable business cases that attract external investments while having local impact.
SNV and TheRockGroup launch the second of three vision papers. It focuses on the finance gap between agricultural SMEs and potential investors, and provides suggestions to close that gap.
Small and medium sized agri-businesses often are in need for external capital to upgrade their supply chain and secure their sourcing relationship with farmers. Such investments enable smallholders to produce more and with better quality, and thus increase their income. If they are properly included in a commercial value chain, investing in agricultural SMEs can be an indirect investment in smallholder farmers, that can improve their livelihoods.
In practice there is a gap between the demand for investment from agri-businesses and the willingness of financial institutions to provide it. Due to a variety of barriers they are unwilling to invest as they deem the risks too high. We believe that financial institutions and donors can play a vital role in bridging the financial gap.
On the basis of our experience from the Partnering for Value project (funded by IFAD), we provide both private investors as well as international donors with recommendations for their strategy regarding the financing of the agriculture sector. In this paper, we supply concrete suggestions to mitigate current bottlenecks, to enable profitable investments in agri-businesses and achieve impact for small-scale producers.