CRAFT co-investment catalyses millions in private sector finance
More than 19 million Euros of sustainable finance co-investment from the private sector has supported over 266,000 farmers in East Africa as part of the Climate Resilient Agribusiness for Tomorrow (CRAFT) project. Learn about the co-investment facility.
The CRAFT project aims to improve the resilience of agribusiness value chains and increase agricultural productivity in a changing climate, and a consortium of SNV, CGIAR, Wageningen University and Research (WEnR), Agriterra and Rabo Partnerships is partnering with downside national business champions in Kenya, Tanzania and Uganda to facilitate market linkages for products from Climate Smart Agriculture (CSA) value chains and services.
About CRAFT's Climate Innovation and Investment Facility (CIIF)
To stimulate demand and growth of climate smart agricultural interventions, sustained investment is necessary especially when initiated along the CRAFT’s main work streams. The Climate Innovation and Investment Facility (CIIF) is an important tool is used by CRAFT to drive investments in climate smart agriculture.
Through the CIIF, CRAFT project investments focus on accelerating adoption of CSA technologies, practices, and services, creating an attractive environment for co-investment from private sector champions either through their own funds and resources or by commercial funding by financial institutions. The services include, but are not limited to, information and actions regarding research, climate information, enterprise selection, input selection, access to credit, land development, planting, crop protection, harvesting, post-harvest management, and market linkages.
The aim is to strengthen adaptive capacity through productivity improvements and inclusive business models that demonstrate deliberate efforts to engage women and youth.
The EUR 7,500,000 facility is an important catalyst for the project to mobilize private sector co-investments and promote CSA related innovations at farming systems and value chain level, as well as the possibilities it might provide to link up with other climate funding initiatives at the business champion level.
The CIIF contribution is not an end but rather a means for attracting commercial funding for follow-up investments and scaling. Coordination and complementarity with non-CRAFT funds (grants, equity, loans, etc.) are sourced from investees to leverage this investment even further.
Granting investment
The criteria for selection, approval, and funding hinges on improved access to superior inputs (for example seeds of improved crop varieties), inclusiveness, and training on CSA practices. Private sector actors invest their own funds and then leverage off the CRAFT grant to attract additional investment from commercial financial institutions.
Priority value chains selected include potato, sorghum, common bean, green gram, soybean, sesame, and sunflower. These value chains are generally low-margin staple food value chains, meaning that their value chains are not yet well-developed – for example, they are not well linked to actors along the value chain including smallholder farmers, input and service providers, processors, traders, and consumers.
Actors in these value chains therefore still operate informally on ad hoc relationships, lack forward and backward market linkages and climate change perspectives. This results in unstable sustainable and functional market systems. These constraints are further reinforced by low levels of transformation due to low public and private investments, limited access to financial services, and limited availability of extension services to farmers.
To address these constraints, CRAFT supports the expansion and diversification of market opportunities for selected food value chains through promotion of CSA approaches and enhancing incentives for the private sector to undertake long-term investments in the value chains. Agribusiness proposals include commitment to leverage private sector investments to support CSA.
To help achieve the desired impact, CRAFT provides capacity building opportunities on the use of CSA innovations.
By end of 2021 a total of 19,662,503 Euros had been jointly mobilized in the seven value chains, with CRAFT contributing 7,095,104 Euros (36%) in grants to 54 agribusinesses, while agribusiness champions committed 12,567,399 Euros (64%), translating into a 1:1.8 leverage ratio.
Outcomes and impacts of CRAFT co-investment
Through CRAFT, agribusiness SMEs bring promising value to assist farmers in addressing challenges, which include overcoming market barriers and accessing appropriate CSA technologies and practices. Activities that preceded project co-investment efforts include undertaking climate risk assessments, developing CSA training materials and facilitating training workshops to strengthen the capacity of business champions to execute project interventions at the local level.
Capacity building has been provided to the grantees on the use of new practices and technologies for CSA to ensure the grantees (smallholder food producers, agribusiness SME’s and farmer cooperatives) adopt appropriate CSA technologies, practices and innovations. Systemic challenges were tackled by facilitating linkages between private and public sector actors to strengthen their capacity to implement necessary technologies, practices, innovations and policies.
CGIAR-CCAFS assessed capacity building needs of all grantees on climate, policy, advocacy, and scaling for CRAFT. Before kickstarting the capacity building process with grantees, the consortium first built the internal capacity of consortium partners to deliver the services needed by the grantees. Part of capacity needs assessment targeted financial sector institutions who were to serve the grantees, to help CRAFT trainers gain a better understanding of the needs for capacity building and skills development within the financial sector for purposes of serving the grantees.
Outputs comprise:
grantee capacity in climate smart technologies, products and services developed
grantees (cooperatives and SMEs) and their contracted farmers trained on profitable climate smart practices and technologies
trainings and dialogues held on climate smart agriculture with financial service providers to the grantees
grantees develop bankable business plans for climate smart inclusive business cases
and extension services that incorporate weather information and climate risk projections instituted to serve grantees.
CRAFT is monitoring how the private sector can continue addressing adaptation through the implementation of the business proposals, looking at scalability and sustainability, through different business models. Integration of service providers of critical climate services has boosted adaptation and reduced the cost of doing business.
This model is a positive institutional innovation in marketing, by filling gaps which would otherwise cause market failure and incentivize the adoption of climate information services. The agricultural services, through the partnering agribusinesses, are designed to advise, support and guide grantees and their contracted farmers from pre-planting to post-harvest.
Implications for policy reforms
The activity links to the CRAFT Project policy of a bottom-up policy influencing strategy for agribusinesses and value chains. The capacity building events or workshops were used to sensitize grantees and their agribusiness value chain actors on climate projections, their effects on the value chains and appropriate CSA practices.
That was useful for actors to identify what needs to be demanded on the policy front, like demanding the provision of downscaled climate information services for decision making at the local level, and the easing of non-tariff barriers to trading of products in climate-resilient value chains.
Part of the policy dialogues have been channelled through Multi-stakeholder Platforms (MSPs) such as the CSA MSP in Kenya and Agricultural Non-State Actors Forum (ANSAF) in Tanzania.
More information: The Climate Resilient Agribusiness for Tomorrow (CRAFT), is a five year project, implemented in Kenya, Tanzania and Uganda with focus on three pillars; increasing adoption of climate smart practices and technologies amongst farmers and agro-enterprises; increasing investments and business growth in climate smart value chains; and creating enabling environment necessary to ensure large-scale roll-out of market driven climate smart agriculture. The project is passionate about women and youth inclusion as one of the indicators seeks to increase the number of women and youth employed in the private sector. The cross-cutting workstream for gender and youth inclusion emphasizes targeted interventions where needed, to ensure equity and inclusion through a sustainable gender sensitive climate smart service provision.