This technical note from the Shamba Centre for Food & Climate, in collaboration with GDPRD members, presents the detailed research, findings, and recommendations from the 2023 enquiry into sustainable finance in agrifood systems. It complements the summary report, "Unleashing the Catalytic Power of Donor Financing to Achieve Sustainable Development Goal 2," released in March 2024.
Key Findings:
- Blended finance can significantly contribute to SDG 2 by focusing on agrifood SMEs needing finance between $50,000 and $2 million.
- Every dollar of concessional finance can mobilize four dollars of commercial finance; however, the sustainable development impact of these funds is crucial for achieving both financial and developmental additionality.
- Development Finance Institutions (DFIs) are constrained by rules that discourage them from taking risks necessary to provide finance unavailable from commercial lenders.
- More research and data on the performance of agrifood SME loans from donors are needed to make Official Development Assistance (ODA) more catalytic.
Key Recommendations for Donors and DFIs:
- Increase finance flow to agrifood SMEs by scaling up priority lending programs and results-based lending incentives for domestic banks.
- Explore how donors can provide first-loss financing and commercial rate lending, with returns reinvested into similar or other blended transactions.
- Offer higher-risk loans, such as first loss and mezzanine debt, with well-defined targets on sustainable food and agriculture.
- Create a data repository on the performance of agrifood SME loans.
