Continentally, the share of commercial bank lending to agriculture remains very low, ranging from 3% in Sierra Leone, 4% in Ghana and Kenya, 6% in Uganda, 8% in Mozambique and 12% in Tanzania.

It said limited access to finance is a well-known constraint for this sector and the need is even more acute for Agri-SMEs.  In an attempt to solve this problem, Fund for Africa's Private Sector Assistance (FAPA) donors approved a grant of US$1 million, to assist in the preparation, launch and full implementation of the technical assistance activities linked to the Facility for Agricultural Finance in Africa (FAFINA).

The FAPA, is a multi-donor trust fund that provides grant funding for technical assistance activities to public and private sector entities domiciled in Africa. FAPA resources are utilized to promote innovative programs that specifically support the development of SMEs in Africa.

It said during the pilot phase, FAFINA will concentrate on West & Southern African regions and will invest opportunistically on a Pan–African scale.  It said transaction sizes of between US $3 million and US $30 million will be the target market to reflect recurring demand from smaller private sector projects. FAFINA’s investment will range from US$1 million to US$10 million (maximum - 50% of total project cost).

The Report said to ensure the sustainability of the Agri-SMEs and maximise the development impact, these investment criteria will be used in high transformational impact for integrating value chains and number of jobs created.

“FAFINA intends to catalyse financing to Agri-SMEs in Africa through the use of innovative instruments. It is in full alignment with our Bank’s feed Africa strategy and FAPA’s focus on Agri-SME financing”, said Olivier Eweck, Director of the Syndication, Co-financing and Technical Solutions Department at the Bank, and Chair of the FAPA Technical Committee.

It said FAPA donors have approved 8 projects and a cumulative grant amount of US$7.4 million, since January 2018.  FAPA is one of the components of the Enhanced Private Sector Assistance (EPSA) initiative domiciled at the African Development Bank.