Access to finance

1. Senior Financial Sector Specialist, World Bank
Access to Finance
Toshiaki Ono

2. #2022ReSAKSS #2022ATOR
Why is access to finance important?
• Optimal use of production capacity
• Sufficient investments for future business opportunities
• Response to external shocks
• Contribution to economic development – job creation, competitive agriculture value chains

3. #2022ReSAKSS #2022ATOR
Limited access to external finance
• External finance is especially critical for rapid growth and emergencies
• About 40 % of agrifood processors in 14 countries in SSA identify access to finance as a major
constraint
• Sources of capital investments – Banks (11 % of investments), Internal finance (74%)
• Sources of working capital finance – Banks (8% of working capital)

4. #2022ReSAKSS #2022ATOR
Estimating the finance gap
• Financing gap of Agriculture SMEs (all the SMEs along agriculture value chains)
Source: ISF Advisors

5. #2022ReSAKSS #2022ATOR
Missing middle – formal finance
Source: Aceli Africa and Dalberg

6. #2022ReSAKSS #2022ATOR
Formal financing for agri SMEs
• The largest finance providers for agri-SMEs in Africa
• Provide short/long-term debt to a small number of agribusinesses in organized VCs
• Mainly funded through deposits and generally lack long-term finance
Commercial banks
• Mandated to provide finance to priority sectors including agri-SMEs
• Some offer concessional loans, wholesale credit, and credit guarantees
• There are well-performing institutions, but others rely on periodic capital injections
Development
banks
• Include MFIs and cooperative financial institutions such as SACCOs
• Traditionally serve individuals and groups. Some are expanding to SME finance
• Have wider rural networks than others. Offer smaller loans with higher interest rates
Non-bank financial
institutions (NBFIs)
• Include PE and VC funds as well as impact-oriented funds
• Tend to target larger companies (inv size of at least US$3–5M) due to high fixed costs
• Some impact-oriented funds target smaller investments (from US$250K to US$2M)
Investment funds

7. #2022ReSAKSS #2022ATOR
Recent developments – digital and green
• Digital financial services (DFS) are changing the SME finance space
• New players are emerging in Kenya, Nigeria, and South Africa. Traditional lenders are
employing new technologies and upgrading their processes
• Climate finance may become a new financial source for agri-SMEs
• However, non-OECD countries receive only a small fraction of climate finance resources

8. #2022ReSAKSS #2022ATOR
Expanding access to finance for agrifood
processors
Enabling environment – Boost private sector confidence and lower transaction costs
• A stable macroeconomy and political environment for the long-term growth of the financial and
agribusiness sectors
• Rural infrastructure – Telecommunication and rural roads etc.
• Agriculture policies – Create a conducive business environment for strong value chains and vibrant
private sector participation
• Financial sector development – Financial infrastructure such as credit registries, collateral registry, and
capital markets.
Supply-side of finance – Tools for risk management (partial credit guarantees etc.), liquidity for on-
lending (especially long-term finance), blended finance including technical assistance for lenders

9. THANK YOU