Service provider investment readiness: best practices

Agrifood service providers play a crucial role in the supply chain. They often require investment to maximize their impact on the smallholder farmers they work with, but how can impact investors gauge which are investment ready?

Creating access to finance for farmers and their direct business partners is one of the most pressing challenges of our times. It is likely to remain so in the decades to come unless we find innovative ways to make up the shortfall. Knowledge about capital supply and demand in the agricultural sector is still concentrated in the direct-to-farmer (microfinance) and the larger project and corporate finance segments.

The gap between microfinance and large-scale commercial loans

Much less is known about the market opportunities and risks of financing agricultural small and growing businesses (SGBs), and the gap between microfinance and commercial lending to larger agriculture businesses.

In response to these challenges, Solidaridad’s Impact Investment Task Force started building a pipeline of propositions for investors in 2017. By September 2019, our pipeline comprised 67 promising businesses, representing a potential investment volume of 167 million euros. We provide ongoing support to the businesses we select to ensure they become investment ready, and connect them to likely investors in our network.

Investment opportunities

In this report, we share the lessons learnt as they relate to businesses and organizations providing services to smallholder farmers in the soya, cocoa and oil palm value chains in West Africa and Asia. Our aim is to give investors and donors a better understanding of the investment opportunities represented by service providers in the agricultural sector.

There is a clear need for more support of these service providers and it will only be realised if we work together. We hope that sharing these best practices will help to bring more service providers to investor readiness, and beyond – to turn them into flourishing entities, playing their part to strengthen local, regional and global agricultural supply chains.

Best practices on investment readiness of service providers in the agricultural sector